Bid Corporation Limited (BID) Earnings Call Transcript & Summary

Bernard, are we ready to start?

Yes.

Okay. To everyone on the line, welcome to our market update. Appreciate the time everyone has taken to be with us, wherever you are in the ether, that's great. And we released an announcement about an hour ago on SENS. And what we say today needs to be read in conjunction with that and also our announcement of the 14th of April. We asked people for questions ahead of the day, so we could try and focus on some of the areas that people have [ preferred ] or interest in. And we do acknowledge that there may be something that comes out of the discussion today that prompts another question or another few questions. So we will open the day for questions after Bernard has spoken. Ashley will just give you a rundown on the quick process as how to that will work. And then after that, Ashley will hand over to Bernard to take us through the update.

Hi. Good morning, everyone. I'm sure we're all quite well-versed with Zoom and how Zoom Q&As work. [Operator Instructions] Any questions that aren't answered today, we will prepare a written response and share that with attendees after the presentation today. A recording of today's presentation will be made and will be loaded on to our website within the course of today. So if you do need to refer back to it, there will be a video and audio recording available for download. I think that covers it. Bernard, over to you.

Thank you, Ashley. Thank you, David. Thank you, everybody, for making the time to listen to us today. These are interesting times we live in. They're unprecedented. And obviously, there's a lot to talk about. We did ask you for questions in advance just to make sure that, like David said, we could cover up on the major areas. And hopefully, we will do that. The one thing that I do apologize for in advance is we can't necessarily give you the absolute answers to every single question and every single granularity that's been requested, mainly because things are changing very, very quickly. So from week-to-week, we see a different situation. We operate in 35 different geographies. They're all going through a different experience. And there is a lot of dynamic change that happens from day-to-day, week-to-week. At the outset, let's just talk about the health and the employee implications. Unfortunately, we have had one fatality, COVID-related fatality in South Africa, and we extend our condolences to that person's family. He was an employee of our foodservice business in the Western Cape. To date, we've had somewhere between 20 and 30, I don't know the exact number, of confirmed positive cases in South Africa, of which most have recovered. And we've had 2 cases in Chile about a month or 2 back, both which made a full recovery. So obviously, the health and welfare of our employees, of our customers, of our suppliers is of paramount importance through this crisis. And we think we performed. Our employees have performed very well in this regard. And fortunately, the health statistics that we've experienced bear that out, other than the unfortunate incidents in South Africa and to a lesser degree in Chile. From an overview, there are -- let me just say there are a lot of experts out there who write lots of reports. I think people have way too much time on their hands. And you can read the news. You can read the experts' reports. And you'll get every theory from something way over that side to something way over that side. And who knows where the truth is? It will be somewhere between those 2 extremes. What we're going to talk about today is our experience because that's all that we understand. We can only talk to you about how we see the impact in our business, how we are facing the challenges in our business and how we see our market in our countries. We're not giving a general comment on the crisis and whether it's going to be a V recovery or a U recovery or a W recovery or whatever. All we can talk about is what we see in our business. And that's what we're going to focus on. And hopefully, you've read the announcement that we have put out today. And I guess the other thing I do just want to preface this with is it's often very easy to be biased towards your perception as to what's going on based on where you are and the reality that you find yourself in, i.e., where you're operating, which country you're in, what you're seeing happening around you. But please bear in mind, like I said, we operate in 35 different countries to various different degrees. And they all are experiencing different -- they're all having a different experience with how they've tackled the problem, where the problem is at the moment, where the crisis is, where the health crisis is and where the economic recovery and opening up of the economy is. So I'll talk to each jurisdiction and obviously focus more on the larger ones and the more meaningful statistics. Overall, we certainly know -- we feel we're in a far more comfortable place than we were a month ago or 2 months ago. Certainly, the blind panic isn't necessarily there. We can see -- we believe that the peak is well and truly passed in terms of the economic impact on our business and that there is a recovery happening, more so in certain jurisdictions than others. Where -- and I think the easiest way to do it is go region-by-region and probably some color as to where we see that. So overall, our sales, at the low point, we were at about 38% compared to prior year on a week-to-week basis at the beginning of April. And we're currently sitting at about 67% compared to prior year. Now that's in totality across the whole business. So we've recovered from 38% to 67%, which is a whole lot better. However, it's not 100%. And there are implications, yes, when you aren't running at the levels that you were, and we'll talk about what we've done about it and where we see the trajectory. The pleasing thing that we are seeing is certainly when economies start reopening, the upturn in our business is relatively quick. And it's probably quicker than we anticipated and it's larger than we anticipated. So we are very buoyed by that. And we think that's a good sign for the future. That doesn't mean that this thing is going to end in a month or 2 months or 3 months. I just think our view is that the recovery will be shorter, whatever shorter means, than maybe we anticipated it a month or so ago. And we believe the extent of the recovery will be greater than we thought. If we go geography-by-geography, and maybe we should start with emerging markets and talk about the China experience. Where we are in China at the moment is that our volumes are actually in excess of where they were a year ago. And I'm talking on a week-on-week basis. In some weeks, you have distortions, which we mentioned that in the announcement. But generally, we're now tracking at last year or better than last year's volumes, which we think is hopefully a good sign for the other jurisdictions as we follow through. The -- our industry has opened up relatively well in China. But it's fair to say that certain segments, and with this will be echoed throughout the world, certain segments haven't opened or to the same degree. Anything that's impacted -- that's connected with travel hasn't really opened yet. Hotels haven't really opened yet. Anything to do with huge gatherings of people, like sports stadiums and huge conventions and huge conferences, hasn't happened. But notwithstanding that, we're still doing volumes that are in excess of the prior year. So those volumes have been backfilled by other avenues of business that have expanded at a greater rate. And we spoke about the elasticity of people's memories. And we see that they are going back to restaurants, they are going back to takeaways, they are going back to cafés. And we saw a relatively quick and comprehensive rebound in the China business. The one issue we are facing in China is a supply issue, that traditional supply chains have been disrupted to a degree. All our product in China -- almost all our products is imported. Europe hasn't been able to produce at the same rate that it was before and a lot of its manufacturing capability was transferring to retail, which experienced a mini-boom over the period away from foodservice. So we are seeing a little bit of strain in those supply chains coming back to normal. We don't anticipate that to be a long-term problem. It's a month or 2 or 3 problem until that starts normalizing again. And we'll see the China business continue to grow well as we replenish those stocks. We're not really too concerned as a group in terms of our supply disruptions because most of our businesses source the majority of their product from local or regional suppliers as opposed to import and it's only some of our emerging markets that are almost totally dependent on import product. And hopefully, that will be a short-term trend. So China, we've seen a relatively quick bounce-back, very pleased with that. Hong Kong, we're running at about 20% below prior year. That's not unexpected. That actually follows the trend of where we were before the crisis, bearing in mind that they've had the protest action that happened before that started to flare up again. Macau hasn't really opened yet. Although Macau is open, it's not open to any Chinese tourists, so the casinos are basically still closed. So we think a 20% reduction in Hong Kong is a reasonable outcome. Through the rest of emerging markets, through the rest of Asia, we're seeing a relatively strong recovery. Singapore had a second wave, which they're now seem to be on top of and are opening up again. We're running at about 70% of volumes. Malaysia, we're running over 100% volume. And Vietnam, small operation, they've got the crisis relatively well under control and volumes are doing fine. In South America, it's a bit more challenging. Chile seems to have a great deal of problems controlling the outbreak, so our volumes are relatively depressed there. Brazil, you can read the newspapers. We're not really sure what's happening there. And our volumes are running at about 50% to 60% normal. And Argentina is a similar type of situation to that but relatively small for us. Middle East also has been through a rough time. But they have opened up the markets in the last week or 2 after the end of Ramadan, and we have seen quite a nice pickup in sales. And in fact, last week, which once again is 1 week in isolation, Saudi was almost at 100% of prior year volumes, which is a good position. In South Africa, we are fortunate that we've got a bit of diversification in our business that we've got not only the foodservice business, but we've also got the bakery and the Crown Ingredients business. The bakery and Crown Ingredients are selling primarily into manufacturing and retail channel and haven't been severely impacted at all by the crisis. The foodservice channel in South Africa obviously has been severely impacted. I think our volumes are running currently at about 45% to 50% of where they were. And we're also involved with some local government feeding initiatives, which are supporting those numbers. But the market remains relatively depressed. Turkey also went through a rough time of multiple lockdowns and false attempts to get out of it. But the last week or 2 have shown far more promising results. And we're seeing quite big increases on a week-on-week basis. So the emerging markets basket, you've got the extremes of China that's come out of it totally to South America, South Africa that seems to be struggling a little bit more with the recovery. If we move to Australasia, you can see we were down to 35% in the early dark days of April. We're now running at 83%. And yes, for our core foodservice business, I think the Australasian experience, this probably gives us the key learning to where we think the rest of the traditional foodservice market will happen. In New Zealand, we're currently running at between 90% to 95% of last year's volumes, and this is probably closer to 95%. Bearing in mind, they've been fully open for 1 week. They were almost fully open for the week or 2 before that. And before that, they were in various stages of lockdown. But it's bounced back very, very quickly. And once again, I'll repeat the same observation we saw in China. Those areas that are directly impacted by international tourists remain subdued, hotels and the like. Anything airport-related remains very subdued. Any large event remains subdued, conventions, conferences, et cetera. But it's more than made up for in traditional business. Australia, we're currently tracking at about 80% after being down in the 40% in early April. And that's -- there are multiple stories in Australia because each state is operating as an independent country with border restrictions between the states, and they're at various different levels of opening up and social distancing and various different interpretations of capacity square meterage, total numbers allowed in restaurants, et cetera. But still, we've seen a very rapid improvement. And it's a week-on-week improving trend that looks very positive going forward as long as -- and I don't want to dwell on it, as long as there's no second wave, but I'm no epidemiologist, so we don't need to talk about that. Let's just look at the facts of what we know. The U.K. is probably not a great story. We've gone from 30% to being about 60%. There's 2 components to the U.K. business. Bearing in mind, the logistics business was discontinued and was sold at the beginning of March, that doesn't impact these numbers at all. So this is purely the traditional Bidfood business and the Bidfresh business. The Bidfresh business is currently traveling at about 15% of volumes because almost all its customer base sits in restaurants, hotels, events, like Wimbledon, like Epsom Derby, like the Chelsea Flower Show, et cetera. Pubs and very little sits in the institutional type of business. So that's been relatively hard hit. In our Bidfood business, we've been very fortunate to have won a contract with the government to provide care packs, I think they're called shield packs, to vulnerable members of the community, which is basically a home delivery of food. That certainly enabled us to keep the wheels turning over and has helped our revenue in U.K. Our Bidfood business does have an element of institutional business, quite a large element of institutional business, which has helped us as well. So it's not purely focused on restaurants and clubs. Can I just -- I'm just going to talk about the institutional business segment for a while or the nontraditional HoReCa segment because there are a few anomalies that we need to just explain there as well. What we have experienced is that our volumes into hospitals have declined over the period. And that's because, by and large, hospitals have shut down all elective surgery and are basically operating in a mode of anticipating a COVID rise, which in most countries hasn't happened to the degree that they thought it would happen. Most of the field hospitals have been closed out. So the core hospital business for us is actually operating at volumes that are lower than usual. That will pick up and has picked up in those areas where elective surgeries are being allowed again. In the nursing home segment, we've also experienced a decline because nursing homes are in lockdown, and they're not doing the functions and the parties and the social events that they normally do and are actually just consuming less food than they normally do because they're in lockdown and the residents are getting meals -- in general, meals delivered to their units. And there's just far less -- not far less, but there's less consumption going through aged care and nursing homes than there was before. So there might be a misperception that, that business should be -- should really be going strong, but it isn't. The other component to it is education, where we sell to universities, schools, et cetera. And once again, that business, to a large degree, has become a whole lot smaller because most schools, universities, tertiary colleges, et cetera, are closed down. Also, on the institutional side, you have catering, commercial caterers in office blocks. Needless to say, that's down because office blocks are generally uninhabited and people are working from home. And you also have industrial canteens in factories, places of work, in mines, in remote areas, et cetera, which generally also are operating a little bit lower. So I don't want to be negative on that. All I'm saying is even the institutional side of the market has got anomalies, which hasn't made it as -- maybe as buoyant as some of you would have thought based on the questions that were asked. So that certainly hasn't made up for the volumes on the other side. In fact, they've seen some declines in volumes. Moving over to Europe. It's a story of many, many countries. Western Europe is probably slower on recovery than Eastern Europe. The Baltics were the first to open up. And we saw sales ratcheting up relatively quickly there. Germany was the next to open up. We saw the sales ratcheting up relatively quickly there as well, although they still are only at about 65% to 70%. The Czech Republic, we were fortunate that we do have a business that sells to retail. We manufacture product, including ice cream. And we saw the retail business perform very strongly during the crisis, during the shutdown, didn't offset the decline in the HoReCa market, but it did offset some of the problems. That's now stabilizing a little bit, and we're seeing the retail come down and the HoReCa going up by more than the retail is coming down. Poland, we were down to about 10% of their volumes at worst. And we -- they opened up a few weeks ago, and we're running now at about -- I think we're up to about 65% to 70%. Italy has been a very difficult experience. We were down to about 10%, 10% to 15% of volumes. Primarily, we are based in the north of Italy. We're actually based in Brescia, which is one of the hardest-hit areas from a coronavirus point of view, Bergamo and Brescia, that were hardest-hit. So we really saw demand go to almost nothing. We did sell to -- we did have customers -- we do have customers in the institutional hospital, nursing home, health care, et cetera, field, and that supported the business a bit. They started opening up a few weeks ago, and I think we're currently running about 50% of where we were on a last year comparable basis. But week-on-week, we see sales increase quite quickly in Italy. And I think the scars in Italy maybe run a little bit deeper than in a lot of other countries. Similar for Spain, we were down to 10%. We are only at about 30% at the moment. What we did, what we have outlined in the announcement is we are taking some steps to streamline, to simplify our business in Spain. We have highlighted before that, that business hasn't been performing adequately, that it was in need of a change. And we're going through that process at the moment and streamlining a little bit and simplifying and changing the structure of that business a little bit, which will put us in a much stronger position once we normalize out of this crisis. Belgium sustained its volumes quite well through the dark days because it's got quite a diversified customer base, a fair amount in institutional. The HoReCa business dropped to almost nothing. The institutional business held up very well. The QSR business dropped to nothing and then came back as they allowed more -- as they allowed drive-through and then takeaway. And now they've opened up in June as well. And the HoReCa business is starting to recover in Belgium as well. The Dutch business was also very -- was severely hit because it was very strongly focused on HoReCa and have done a fantastic job in the past few years of refocusing that business on HoReCa. And obviously, they saw a big decline. And that's also coming back relatively quickly, bearing in mind, Poland, I think, has only been open for a week. I think that covers all of the U.K. -- sorry, all of Europe and that covers all of the geographies. Just to touch on a few observations that we have. There were a lot of comments made that this is the death of a restaurant, that this is the death of a café, et cetera. And what we're seeing in those countries that open up is that the first to come back are the smaller cafés and the smaller restaurants. I think they're more nimble, they're more flexible and more adaptable, that can change to the circumstances. And those volumes have bounced back very, very quickly, very strongly. The chains are a little bit slower. I think they've got more bureaucracy to go through. There's more thought process. There's more boxes to tick. And the recovery out of the larger chains is probably a little bit slower than the smaller restaurants. We're still seeing no activity whatsoever in the travel industry, in the airline caterers, in anything to do with an airport, it's all pretty depressed. The next issue that obviously is getting a lot of attention from you guys is the accounts receivable situation. And what we are seeing is a whole lot less bad than we anticipated. And that is that the majority of customers are paying or are making an effort to pay or have payment plans in place. So I can't give you accurate numbers, but almost all of our customers in those areas that have reopened, which is a lot of the geographies now, almost all the customers are giving it a go to reopen. And they are reopening. Whether they all succeed or not remains to be seen, but they all are opening. They're all giving it a try. And they're all either paying their debt, have paid their debt or are entering into payment plans, reasonable payment plans to pay their debt. There are very, very few circumstances that we have where customers have just closed up and said, "This is all too difficult; we're packing our bags and going to do something different," or that, "We've incurred actual bad debt." There are some circumstances, but they're very, very small at this point in time. Also, bear in mind, a lot of our debt is insured. We haven't called on the insurance policies yet because they're not bad debts. They're still a work-through process and that's ongoing. So we've been very pleasantly surprised with the attitude of our customers. They all want to reopen, and they generally want to make an attempt to pay their bills. And I think what people do, experts sitting in rooms writing reports, is I think they forget about the human element of these people that own businesses. And this is their livelihood, this is their lives. And they're doing whatever they can to come back, they need to. This is their business. This is what they do. And they're being creative. They're being entrepreneurial. They're being innovative. They're trying different things. And I'm very optimistic that as long as the virus threat goes away, we're going to see a relatively quick bounce-back in our industry. And maybe we are fortunate that we're on the lower end of the amount of money that gets spent from a consumption point of view. But we certainly are seeing some very good volume increases. And we're relatively buoyed by that and are positive about that. The other questions that were raised, related to inventory and what our inventory obsolescence is. We've taken the knock of inventory obsolescence as it happens. Fortunately, very little of our stock is exceptionally short-dated. You're only talking 1 or 2 or 3 days. So when the shutdowns were happening, that stock was moved on relatively quickly. Then you get on to chilled product, which has a life of 7 days to 30 days, 60 days, which we've worked through. So wherever stock has needed to be written down, written off, dumped, whatever, we've had that experience. And now that things are opening up again, the stock is starting to turn. Also bear in mind that going into the crisis, we did only have between 3 and 4 weeks' worth of stock. So with sales getting back to 70%, 80%, maybe we've got 5 or 6 weeks' worth of stock. But it's not a major issue that stock is starting to turn relatively quickly now. Also, the stock that's being bought now isn't different to the stock that was being bought 3 months ago or 4 months ago. Tastes haven't changed. Menus have been simplified. But the core ingredients haven't changed to any great degree. We're still selling meat and we're still selling cheese and we're still selling milk and we're still selling all those wonderful things that we sold before. So we don't see a major inventory problem. In terms of profitability, we've outlined what our EBITDAC is. So if anybody wants to use EBITDAC, you can. But please credit Mr. Cleasby for being the inventor of the term, which takes into account the noncash COVID-related items that we provided for, which is basically some debtors exposure as we saw that happening in the piece and some restructuring provisions for a few of the businesses where we need to restructure, move some depots around, move some people around and make some changes. And that number was ZAR 317 million worth of adjustments in April, ZAR 177 million in May and it will be lower than that in June. Other than in June, we do our full debtors provisioning. And we might have a better understanding of where our debtors are at the end of June than we did at the end of May. But we're not expecting anything hugely significant. But we will need some extra debtors provisioning. But it's not the scary numbers that some of you are anticipating. And yes, it might be double what our previous write-off was, but that wasn't a huge number. I think our previous debtors write-off ran at somewhere in the region of 0.01% to 0.02% of sales. So even if that doubles or trebles, yes, it's a lot of money, but it's not a hugely monumental amount of money, and we're relatively comfortable with the way the cash is coming in. On the issue of cash burn and what's happening on the cash side, one of the numbers that I'm most proud of is our cash balance as of the end of last week. Our overall group -- sorry, it's not a cash balance, it's a debt balance. Our net debt at the end of last week was GBP 50 million better than it was 1 year ago on the exact same comparable week. So we have done a phenomenal job before the crisis of reversing some of the inefficiencies we had in working capital. And even through this crisis, our guys have done an absolutely phenomenal job of managing net working capital. And what we saw in April was an outflow, which, if you'll humor me, I'll just try explain it as best I can. We weren't selling any inventory. We weren't collecting a whole lot of debtors. But yet we had to pay our suppliers. So we saw an outflow in creditors. In May, that number was quite a lot lower because we started getting some debtors' money in, we started selling more stock and we paid less creditors because we paid a whole lot in April anyway. Where we are at the moment is our credit is a lot lower than they were before, which means we've got a whole lot of inventory that's now fully paid for. And you've got debtors who are coming through the cycle again and are paying. And our debtors' cycle is shorter than our creditors' cycle. So overall, we believe we'll get back into in a reasonable cash-generating position relatively quickly, which we've already seen in the difference between April to May to June. So the cash burn number is nothing. We're not generating a huge amount of cash at this stage. But that will -- I think that will start happening. Allied to that is CapEx. And the CapEx for the year was largely committed anyway by the time April came along. So we're going to end the year on a CapEx number of about 2.4% of sales. Bearing in mind that these numbers move a little bit because you've got the rand weakening by 25%, 30%, so exchange rates, there are a whole other things. Also, your revenue number is coming down. But in absolute terms, our CapEx for this year will be a similar number to what it was last year. And we believe that our CapEx next year will probably be about half of what it is in the current year. We put all major projects on hold. We won't -- we probably won't restart them until later next year until we've got greater clarity. So we see next year's CapEx being somewhere in the region of our depreciation charge, which is somewhere in the region of ZAR 1.5 billion as opposed to the hard ZAR 2 billion that we've spoken about that we experienced over the last few years. David will talk a little bit about liquidity and headroom, et cetera. But I just did want to talk about the fact that we're not burning cash and our cash position is better than it was a year ago, which is very pleasing. I'm not sure it would be the same at the end of June. That remains to be seen because you don't have a big creditors' number. And also, you don't have the same relationship with customers. With larger customers, their balances are much smaller because they've repaid them, so you might have a little bit of a distorting effect at the end of June. So overall, where we remain very optimistic about the business. Yes, it's knocked us around. It's knocked everybody around. It's really not a pleasant experience for any of us. We don't believe we need to change our business to any great degree. We've seen a very strong bounce-back in our core markets. We did play around the edges with some nontraditional business, with some home delivery, which we executed on very, very well, but it's not our core. It's not what we do well. And what we found very quickly is customers might love our service, they might love our pricing, but they don't really have a requirement for 10 kilograms of 7 portions. They prefer to go to the shop or supermarket and buy 3 or 4 200-gram portions, even though that's more expensive than buying our 10 kilogram. So there is a difference between foodservice and retail, which we're happy about because we're in the foodservice component. We can see the customer base jumping -- bouncing back a little bit quickly. We are seeing customers paying their bills. We have paid our creditors. Our liquidity is not a problem. Our net debt is not a problem. And we see a positive future ahead once economy starts opening up. What we're also seeing is, and I'm just giving you some overall trends, is although international tourism is dead in most countries, that's being replaced by domestic tourism and is being replaced by government-sponsored programs to spend money domestically. And there's even a theory that says a domestic traveler spends more money in our market than maybe an international tourist does. So we are seeing that in quite a few countries. I think a country like Turkey will almost probably struggle, maybe the Middle East in Dubai might struggle a little bit, where it's a net importer of tourists. But by and large, the other economies aren't really huge net importers of tourists. And if the locals don't go overseas and they spend their money locally, that sort of takes up that slack in the system. So we don't think that's a major issue. In terms of competitors, it's way too early to tell if competitors are going to make it or not. There's lots of rumors out in the market. And I'm sure there are lots of rumors about us as well. We don't know. But we're very alert for any opportunities that will arise. We don't believe now is the time for any big deal. You can't get around to do a transaction. You can't do due diligence. You can't do a whole lot. So anything large is off the table or a new country opportunity is off the table at the moment. But what will happen are the smaller in-country opportunities. We're currently finalizing one in the north of Italy. And more of those will happen, where basically, yes, a small competitor unfortunately won't make it through and you'll pick up the pieces for relatively little. But there's no major change to the landscape. In closing, before I hand it back to David to talk you through a few areas, I just do want to pay tribute to our staff around the world. We've got a fantastic management team, very, very experienced. And there's no doubt that our decentralized and entrepreneurial flair came through in this crisis. The ladies and gentlemen of our management team have performed absolutely remarkably in very, very tough circumstances, very isolated from the rest of the team. They've all done what's direct in their jurisdictions. And not only the management team, but all the way down, our staff have been at work all through the crisis. We do sell to hospitals. We do sell to nursing homes. We have been involved in the distribution of food to the population, to the disadvantaged, to the vulnerable. So our staff have really been frontline workers. And they haven't let us down and they haven't let the communities down, so it's a huge shout of gratitude to them for what they've done. And we are very, very appreciative of the efforts and contribution that, that made in these very difficult times. There has been government assistance in various different geographies to various different degrees. That is included in our numbers because that's just the way it works. If you get a subsidy from the government, you'll offset that and you'll record that as income. But the counter to that is we haven't -- those schemes are designed to maintain employment. So we've kept the employees engaged, and as far as possible, preserved as many jobs as we can, utilizing the government assistance in those jurisdictions where it has been available. And obviously, as that assistance winds back, you hope that the business winds back to where its position should be and the 2 balance each other out. And you've got a workforce who are motivated, engaged and are ready to carry on with the challenge that lies ahead out for them. So overall, we're feeling confident about the future. We certainly see it as a week-on-week-on-week improvement. It is very difficult to get depressed and down about things. It's very difficult sometimes when you're reading all the negative things to try and focus on the good stuff. But we see in our business, there are a lot of good stories. There's an absolute light at the end of the tunnel. It's getting better. It's getting better week-by-week and much quicker and in much bigger increments than we could have hoped for a month or 2 ago. So overall, that's -- from our point of view, that's a good story and hopefully that continues. So I'm going to hand over to David just to talk you through a few issues.

Thanks, Bernard. You've covered off the main areas. To really to add, from a liquidity perspective, we've been working quite hard to increase the headroom across the group and we've done that. And you can see that we currently sit with about ZAR 17.5 billion worth of headroom across the group. So we're comfortable that we've got enough resource and the capacity to meet what we see ahead of us. I think just to note that the businesses, as Bernard noted, they have done a fantastic job at managing the cash in the context of quite trying circumstances. Just on the debt covenants, we just set them out. They haven't changed. And we don't believe that certainly the group would breach those as we see this going forward for the current year-end. Dividend, we just put some clarity in there, which is, I guess, no clarity because we had a few questions around that. But no decisions have been taken at this particular point in time. So that's really what I would add. We have added a trading statement in there. As soon as we have more clarity as to the exact impact, we obviously will put out a further announcement once we've got that clarity. Other than that, I don't really have anything else to add.

Are we going to open up for questions? Ashley, have you had any questions?

Bernard, there haven't been any questions that have come in through the Q&A or through e-mail. So I'm not sure if there are questions from -- any questions from [indiscernible].

Just to see if anybody wants to shoot a question through. Just give it a few moments.

Could someone raise their hand on the system? Here we go. There's a question in from Nick Webster. Other than Spain, are there any other regions you're looking at restructuring?

Yes. There are. Thank you, Nick. The fresh business in the U.K. is being restructured as well, and we're moving some cost out of that and some duplicate infrastructure we have and also making some back-office changes to get some synergistic benefit from economies of scale with the Bidfood business. So we don't want to change the sales' front end. The fresh business is different from the Bidfood business. But there are some significant cost savings that we are implementing at the moment, primarily in the back office and simplifying the back office as well as taking out some duplicate branch infrastructure that we had in the fresh business that will help that. So the fresh businesses in the U.K. is getting some very, very close attention. Also, in Germany, we are closing down one of the regions, one of the warehouses, the satellite warehouses to focus more on Munich and the Austrian business and get the core business back to where it should be. And we're significantly down the path on that. And the German business looks a whole lot better now than it did a few months ago. So we're very happy with the progress that's been made there. The other point I do just want to make is, yes, there's a cliché that says, "Never waste a good crisis." And what this has forced us to do is, in all our businesses, look at how efficiently we were doing things before. And there's no doubt, however good we thought we were, we actually found out there were -- once the chips were down and really got tough, there actually are smarter ways of doing some things. There actually are more efficient ways of doing some things. So although we're not restructuring all our businesses, there are some tweaks and changes we are making in lots of places to try to do things a little bit smarter, cost-effectively, simpler, more customer-centric, less inwardly focused, et cetera. So hopefully, there's an enduring benefit out of that, that we end up with a business that's maybe a little bit more nimble and leaner and simpler than even it was before, even though we thought we were doing a very good job, a very reasonable job before.

Thanks, Bernard. There's a question from Rowan Goeller. If menus scale down pricewise, will there be deflation in foodservice going forward?

Look, I don't know that menus are scaling down in price. I'm not sure that, that's -- I don't know -- we haven't seen that. What we see is menus are scaling down in choice. So restaurateurs are focusing on probably the products that are simpler for them to manufacture in the kitchen, make in the kitchen maybe that give them higher margin. So we're not necessarily seeing too much of a down-trading in the customer base yet, other than fine dining is probably way more impacted than the levels below fine dining. But fine dining is a very, very small subset for the HoReCa market anyway. Whether there'll be deflation or not, I actually -- I'm not sure. Yes, it all goes back to is there going to be an overall reduction in demand? And we're not seeing that in the markets that have recovered so far. So we really don't see that the consumer demand is less. Is there going to be product deflation? I really don't have a clue. We actually don't have a clue and nobody has a clue because there are a lot of moving parts that are happening at the moment with processing plants being shut down, with Brazil not being able to export a whole lot of food commodities it normally exports. With overall demand being down, you would expect that supply goes up and that prices are going to come down. Yes, that's going to happen. But that's a short-term issue. Like I said, there was a shift into retail product away from foodservice product, which has created shortages in foodservice, which has been inflationary, not deflationary. So there's no one discernible trend we can find out amongst this. Yes, I think there will be -- and this is just my gut feel. I think there will be some demand put on us by our customers from a pricing point of view as they recover to -- they might be looking a little bit closer at their costs. But having said that, it's no different to what we've been through before or continue to have gone through. We've lived in an environment of no inflation for the last many years or very, very little inflation and a very cost-conscious customer. So there might be a slight acceleration in that. But I think time will tell. We have to wait and see.

Thanks, Bernard. There have been a couple of questions related to similar sorts of topics. I'll read them out together and then you can maybe just close off this discussion. Nick Webster asks some of the other channels you've managed to tap into, are any of these future revenue channels or potentially more meaningful opportunities? [indiscernible] asks, have you seen competitors marking down prices? And Vikhyat Sharma asks, assuming a recovery to lower than pre-COVID levels, what sort of cost-saving opportunities other than people and wages do we have below the line within the business?

Okay. Sorry, it's late at night here and I'm only with 3 questions. The first one was from Nick. And what was that about? Just remind me.

The opportunities that we've opened up becoming future revenue channels or meaningful opportunities.

They've been very, very small. It's been home delivery, B2B, click and collect, very, very small, not our core business. Our core business really is foodservice. We've worked that out. We'll continue to focus on that. So no, we don't believe any of them can or will be meaningful channels. There is some meaningful work at the moment from the government on the government care packs and feeding schemes. But that's absolutely short term related to government response in certain geographies. And it will end in the next few months as they open the economies up. So no, we don't see a whole lot of long-term change in what type of business we're in. We're still absolutely focused on what we do. And as the markets that have opened up have, I think, proven is we're on the right channel because -- we're in the right channel because we've seen ourselves improve very quickly in the right target area. Then there was a question about have we seen competitors lower pricing? Not really. Obviously, when people were trying to quit stock, date stock -- dated stock and generated a little bit of cash a month or 2 ago, there was a little bit of pressure. But no, nothing of any real consequence anywhere. And I think that's borne out in the fact that our gross margins have remained consistent. So we haven't seen any real downward pressure in our gross margins overall. And there was a third question which was?

The cost-saving opportunities other than people and wages.

Wages account for 65% to 70% of our costs. The next biggest item is most probably our occupancy cost. We own most of our facilities. There's relatively little we can do about that. On distribution, there is a degree of variability on that. Each of the business is only at 90%. You only need 90% of your vehicles and 90% of the fuel and 90% of the drivers, et cetera, on that. So once you take out wages, electricity, some type of occupancy cost and some type of distribution cost, there's very little left at the end of the day. So it really is at the end of day about wages. Wages are the key driver in the business, 65% to 70% of the cost base. And that gets down to efficiencies. A fair amount of that wage cost is actually variable, if you can vary it. I know that sounds ridiculous. But if the new normal is going to be 90%, we will get the wage cost down to 90% or better than what it was before. And that is the prime -- it's the prime cost driver in our business. So there aren't any huge, easy, low-hanging fruits that we could pick and make huge cost savings. It's really the tough work in the wage cost and in the distribution cost and doing things a little bit smarter and more efficiently. Also, what we have seen on that is customer behavior has changed a little bit for the better. That service demands maybe aren't as tough as they were. There wasn't the need for as much instant gratification as there was historically. But I believe that's going to be short-lived. And once things get back to normal, customer demands will be back to normal, which will put the same amount of cost back into the business required to run the business. If you've got somebody ordering at 9:00 at night, you expect it at 8:00 in the morning, that comes at a certain cost. And that's the model that we run to.

I think related to that is a question from Zinhle Mayekiso. Have management successfully renegotiated property rental reductions and fleet dehires?

We own 80% of our property. So there's no saving to be made on that 80% because fortunately we do own them. On the other 20%, we absolutely have negotiated reductions of various different degrees in various different geographies with our landlords. And I must say that full credit to our -- to most our landlords. They have been willing to contribute a little bit. They do appreciate us as a long-term tenant and have come to the party. But once again, that's not going to be a long-term -- it's not a long-term situation. We've had some short-term relief. But business needs to get back to normal. And their return has to get back to normal as well. And we understand that and appreciate that. But only 20% of our property portfolio is third party. On the fleet, on the motor vehicle fleet, we also have a substantial proportion. I think it's about 80% is owned as well. And that will tie to the CapEx program that we won't spend CapEx replacing and we might retire some of the fleet as we go along. So it's not really a case of dehiring; it's just the case of mothballing or disposing of vehicles as we go. We did make a comment that our original anticipation was maybe 75% to 80% of existing volumes would be the new normal. Our view is that it's better than that. Based on what we've seen in China, what we've seen in Hong Kong, what we've seen in New Zealand, what we've seen in Australia, what we've seen in Eastern Europe is it's bouncing back a lot quicker, yes. But we can't give an accurate number because we just don't know. And we hope it's as high as possible. But we really are anticipating over 90% now in the next few months if the virus can be contained and we don't have the second wave and all those horrible, negative things that they talk about.

Okay. Simi has asked, there is reported resurgence of cases in Beijing from imported salmon. Do you expect more stringent testing on imported food to impact your business? And would such costs be borne by ourselves or our suppliers?

Look, whether it comes from imported salmon or not, who the hell knows? You just don't know. The salmon travels either by plane and it's fresh or it's frozen and it's been at CSA. That's the first I've heard that it's come from salmon. I know it came out of a food market, the outbreak came out of the food market, and they've closed down 8 neighborhoods very strictly and very quickly and they're investigating the source. Yes, I'm not sure that you -- I don't know how you test product for coronavirus. They're struggling to test people for coronavirus. I'm not sure how they're going to apply that to food. So I really can't comment on that. I don't know that it's true. I don't know the accuracy of that report and whether it's from that or whether it's from something else or whether it's just a recurrence. But the authorities in Beijing certainly have taken a very strict approach and have shut down some neighborhoods very, very quickly.

Okay. There have been a couple of questions on the working capital. From [indiscernible], can you maybe clarify what the cash burn in March, April and May was? The number includes January and February, which I assume was strong. And then Dino asks how much of the ZAR 494 million COVID adjustment is related to bad debt provisioning versus restructuring costs. And Anthony Geard...

Okay. Stop there. No, no, no, stop there. I can't remember more than 2 things at once. On the cash burn, I think in March, we generated cash. In April -- and I'm going to give it you in pounds because the rand got smashed during the period as well. So I'm just converting it back to pounds. I think in April, we saw a net outflow of GBP 41 million. In May, we saw a net outflow of GBP 17 million. And in June, we anticipate seeing an inflow of cash. So the numbers haven't been hugely significant. Bearing in mind, April was the worst month, very low sales, very low receivables money coming in, very high payables going out. And the second question was?

Of the ZAR 494 million COVID adjustment relating to -- how much relates to bad debt versus restructuring?

It was probably -- and I don't have the accurate number, David might have a better number. But I estimate about 70% of it relates to doubtful debts. Not bad debts, it's doubtful debts. And that remains to be analyzed and ascertained as time goes on. And about 30% to restructuring, which is primarily a people-related cost. Yes?

Anthony Geard was asking whether the net debt at the end of May included the rights-of-use liabilities.

No. Sorry. We ignore that because that's some type of accountant, fictitious nonsense. We just focus on real stuff at the bank. Sorry.

Right. Sharat Dua -- we'd answer the last 2 questions. So the second last, can you give us an idea of the quantum of support from government employee schemes to date?

No, I can't because it's a little bit all over the place. And it also needs to be offset against the fact that you've retained your staff even though you haven't had any work for them. So I actually don't know what the quantum is, David. And some of it was received in a lump sum. New Zealand received theirs in a lump sum. Australia received it in a weekly basis. Hong Kong, we haven't yet received it. I think the Dutch receive it on a weekly basis. In Belgium, it's received on a weekly basis. So David might be able to look at that. But no, I can't answer that question.

I can't answer it off the top of my head.

Okay. And the last question we have from [indiscernible], do you foresee any structural changes that will keep you from getting back to pre-COVID operating margins?

No. I mean basically, it just depends how long the recovery takes. We're not seeing anything in those markets that are recovering that's any different to where the business was and the challenges and the opportunities from a few months ago. Fundamentally, when they open restaurants, people seem to go back. And it might take a week or 2 for confidence to resume. And they might only be operating at 50% capacity or 80% capacity, whatever it might be. But generally, there -- the restaurants, the cafés, the whatevers are getting back to business relatively quickly and people's confidence resumes relatively quickly. And that's why we're seeing these week-on-week-on-week improvements happening. So we don't see that there has been any major structural change. The customers' requirements are the same as they were before. They're buying the same product. Their pricing expectations are very similar as to before. They're looking for a similar type of offering. So no, we don't believe there's anything structural. Other than to say, maybe markets might be a little bit thinned out. Maybe some of the smaller competitors or maybe some of the larger competitors will have different issues to contend with, which might impact their ability to operate in the market, which might help us. So now we -- at this stage, we're not seeing anything that's majorly structurally different. And like I said, we remain relatively confident about the way the future looks as long as they get the virus under control and confidence resumes again. As soon as that confidence comes back. Things are good in New Zealand on the weekend. There was a rugby match that was played in front of a full stadium at Eden Park. I don't know how many that takes, 60,000, 70,000 people. It was a full stadium. The confidence is back. People are spending money. And that will happen through the rest of the world. It's only just a question of when.

Thank you, Bernard. I think that's all the questions that we have.

Thank you, everybody. Thanks for your time. And if anyone does have any other questions, shoot them through to David. So thank you very much, everybody. Good morning, good evening, whatever it might be. And we'll talk to you in a month or 2.

Thanks very much, Bernard.

Thanks very much.