Casino, Guichard-Perrachon S.A. (CO) Earnings Call Transcript & Summary

Welcome to the Casino Group 2020 Half Year Results Conference Call. I'll now hand over to Mr. David Lubek, Chief Financial Officer of the Casino Group. Sir, please go ahead.

Good morning, everyone, and welcome to Casino H1 Results Conference Call. When we look back on the last 2 quarters, we take heart seeing how we faced the crisis of COVID-19. Our teams took action quickly to adapt to new circumstances. Our colleagues showed tremendous dedication to their essential duty, and we thank them again on behalf of Casino's management. We served regular and new customers in difficult circumstances, delivering strong performance on all counts. The work we did in the previous years prepared us for this, with the development centered on our best format. And as we go through our results, we will see how this translates into our growth, profitability and cash flows. Before going into the presentation of the highlights of the past semester and into our detailed results, let me start with a few words about the COVID-19 pandemic and its impact on our operations, Page 4 of our presentation. Understanding the full impact of this pandemic is important to explain our underlying performance. So I'll go into some detail on our response. First, as mentioned during our previous conference calls, we have fully mobilized our resources to fulfill our essential role during the lockdown, securing food supplies for our customers in unprecedented circumstances. We relied on the extraordinary commitments of our employees. Our priority was ensuring they were safe as well as our customers. Face masks and hydro-alcoholic gels were bought, plexiglass screens were installed in all our stores, all of this in a matter of days. Systematic cleaning in line with health guidelines, physical distancing between customers were ensured with the help of external providers within the first days of the lockdown. To avoid any shortage of essential goods, measures were taken quickly with suppliers and public authorities to ensure supply chain continuity and secure operations. Trucks had to run half-full instead of full, staffs had to work overnight and we have to adapt our supply chain in real time to changing schedules of suppliers. With the mobilization of our teams and our partners, we performed effectively during this period. We maintained our opening hours to spread the flow of customers for added safety and ensured our stores were adequately stocked. Coming to the economic impact. In short, we recorded strong growth in net sales, but also incurred significant additional costs in order to maintain our operations under exceptionally challenging conditions. These significant temporary costs no longer apply after the lifting of the lockdown. They included the following. First, additional logistic costs with extra transport costs and disruption of usual timing of deliveries. Contrary to what would happen in normal circumstances, no logistics-related penalties were applied during this specific period, as per emergency regulations. These disruptions have now completely stopped and we are back to normal. Second, additional staff costs. During the lockdown, we had to hire extra staff and paid night-time hours. Employees on sick leave or at home to take care of their children were fully compensated beyond the indemnity paid for by social security. Again, these additional staff costs have now stopped. And from end of June, we are on the trends of declining costs compared to last year. Third, additional health and safety costs. Emergency mass purchases of face masks, gloves and hydro-alcoholic gels, installation of plexiglass screens, reinforced store cleaning and security guards to regulate the distance between customers. Most of these extra costs were one-off and linked to the particular situation of the lockdown, with very little time to negotiate or optimize the cost of operation. We are now back to the normal course of business. Fourth, our employees were awarded a special one-off bonus, fully justified by their commitments during the specific period. In line with the AMF's clear recommendations, all of the one-off costs associated with the pandemic are presented in trading profit, including the special bonus, even though, essentially, all of these costs have disappeared with the end of the lockdown period. In the presentation of the results in France, which was heavily impacted by the lockdown, we will put extra care to distinguish between the recurring impact of our operational improvements, that is our underlying performance, which is the important reference point for future projections and the temporary impact of the pandemic during H1. Now going through our main highlights, starting with France on Page 5. Our priorities in France are growth, profitability and cash flows, and we have a strong semester on all these accounts. In terms of sales, we enjoyed particularly strong growth in Q2 2020. Our mix of format has met customers' needs for immediate service, whether in proximity, in urban stores or in E-commerce. On the France Retail segment, we enjoyed 6% like-for-like sales with double digits in our volume formats such as Proximity and Casino Supermarkets. Organic food sales had a particularly strong quarter at plus 15% overall, with Naturalia leading at plus 20%. E-commerce, of course, is now set on a new, even more dynamic path because this crisis has accelerated underlying trends and we have gained at least 1 year on our business plan. Food E-commerce grew triple digits in all our banners. Our automated warehouse powered by Ocado technology had a successful launch in May. Cdiscount had an outstanding quarter of growth at 25% of GMV, with marketplace share of GMV up 6.2 points to 46.3%. Importantly, the acceleration we have seen in Cdiscount's growth has endured beyond the lockdown period, with the gain of new, loyal and recurring customers. In terms of profitability in H1, EBITDA margin in France was up 9 bps at 7.2%. This number includes the full negative impacts on cost of the COVID-19 pandemic. Therefore, and we will get back to that, it shows the significant increase in underlying profitability, driven by our cost-cutting initiatives and our efficient mix of formats. Cdiscount EBITDA was up EUR 30 million, driven by marketplace growth and a better mix of direct sales, both of which we see as enduring in the coming quarters. Our disposal plan progressed well in H1, with the signature of the sale of Leader Price to Aldi France during the beginning of the lockdown period, bringing total signed deals at the end of Q1 to EUR 2.8 billion, above our initial target of EUR 2.5 billion. At the end of June, we completed the sale of Vindémia with EUR 0.2 billion, cashed in and contributing to an immediate reduction of our gross debt. Finally, this was a very good semester in terms of cash flows in France, up EUR 140 million compared to last year, and bringing free cash flows in the last 12 months to EUR 500 million. That is EUR 250 million above financial cost and dividends. This brings us at the end of June with a strong liquidity position of EUR 3.2 billion, of which EUR 2.3 billion in undrawn confirmed credit lines. Page 6, Latin America. GPA's results were published yesterday, and their conference call is planned for this afternoon. I will highlight the key items. Our operations in Brazil, Colombia and Uruguay have proven up to the challenge of the pandemic. First, sales accelerated in Brazil in Q2, Assaí's cash and carry sales grew 26.4%, with an excellent performance of new opened stores and a higher penetration of B2C sales in the context of the pandemic, with individual customers far outpacing lost sales to restaurants. Multivarejo's turnaround strategy has proven successful, with like-for-like at 15.8% and plus 20%, excluding fuel and drug store sales. As for Grupo Éxito, it has delivered 6% like-for-like growth despite restrictions of movements in Colombia. This sales dynamic translates into higher EBITDA in H1, plus 10.9% in Brazil, excluding ForEx effects, and plus 7.3% in Colombia. Before going into our detailed results, let's move to review of our progress on our strategic priorities in France, Page 7. First, we continue to focus on growth in our best-performing formats. After the sale of Leader Price and the Rocade plan, we now have a mix of formats in France, which are all profitable. This allows us to target profitable growth in all of our formats. 68 stores have been opened in H1 2020, in formats such as Franprix, Monop', Naturalia, Géant. Our objective is to open 300 stores by 2021 on top of the 213 stores opened last year. Continue to expand the offer in our stores in partnerships with the other retailers, with a notable example being the rollout of Hema and Decathlon corners at Franprix. In organic food, our top priority in mix of products, we have kept on expanding our offer in all our banners, leading to 14% growth in H1. As for our digital solutions, we have accelerated the rollout of our autonomous store, which allow customers to self-checkout with smartphone apps and automatic cashiers. 444 autonomous stores operate at June 30, 2020, up from 300 at the end of 2019. Half of our hypermarkets and supermarkets are now equipped with these technologies. In June, 46% of the payments in hypermarkets and 40% in supermarkets were made either through smartphone or self-service cashiers. This helps us bring better and safer service to our existing customers; contributes to recruiting new customers eager to shop outside of regular opening hours, in the evening or on Sundays; and redeploys some of our staff on higher value-added tasks and also, of course, helps take major operating costs. This is a deep evolution of our model that changes both the commercial attractiveness and profitability of our stores. Also among our digital innovation, our CasinoMax Extra subscription program now accounts for 10% of net sales in hypermarkets and supermarkets with a significant effect on loyalty and average baskets. Page 8, E-commerce, a major source of growth in the past quarters and looking forward. Food E-commerce accelerated across all banners in H1, with the deployment of Click & Collect and home delivery solutions in urban and convenience formats. This new dynamic endures beyond the lockdown period, with food e-commerce orders growing 50% to around 10,000 orders per day in the last weeks of June. We are convinced that home delivery solutions, in particular, are set to keep on growing fast in France. We have 2 ways to benefit from the sustained growth with our first-mover advantage. First, we have developed solutions from our dense network of Proximity stores in France, the largest network in the country and in partnership with operators such as Amazon Prime or with Deliveroo and Uber Eats. And second and most important, we have opened our first warehouse powered by the Ocado technology, delivering monthly goods in the Paris area covering close to 7 million customers at this stage. The sales saw a fivefold increase in the number of orders between end of May and end of June, and we are quite excited by future growth on that segment looking forward. This first SFC has a potential of EUR 500 million. Nonfood E-commerce with Cdiscount has seen a steep acceleration of its growth in Q2 with 25% GMV. With 1 million new customers and a peak of 25 million unique visitors in May, Cdiscount has also accelerated its international development with 88 websites live in 25 countries. This fast development, which is continuing beyond the immediate period of the pandemic, comes with much higher profitability, with plus EUR 30 million EBITDA in H1. We see this trend as continuing in the coming quarters as Cdiscount further expands its B2B offers to other websites and takes advantage of a sustained shift from nonfood brick-and-mortar stores to e-commerce. Page 9, our new businesses in B2B. They have continued their development in H1. GreenYellow has continued the development of its pipeline with the signing of the 100th photovoltaic contract in Thailand and a 12-megawatt photovoltaic contract in South Africa and energy efficiency contracts signed with several retailers in Brazil. The current focus on green growth is particularly favorable to GreenYellow's projects looking forward and its model of a one-stop shop for energy cost optimization and asset optimization through solar panels. This model is fully adapted to take advantage of this context. Data and Data Centers have continued their acquisition of new clients during H1. RelevanC had a solid plus 30% -- 34% growth in business volume to EUR 44 million despite a temporary downturn in the market for advertising. A new relevanC autonomous platform for managing and monitoring advertising has been set up, accelerating the acquisition of new customers. As for ScaleMax, its computing capacity was increased by 30% at the warehouse in Réau in H1, allowing the company to face increased demand for its services. One specific project worth highlighting, computing capacity was made available during lockdown for the Folding@home project for research against COVID-19. Finally, Page 10. A few words on our CSR policy and commitments, which are an important and long-standing priority at Casino. Casino was ranked first among the European retailers for its CSR policy and commitments by Vigeo Eiris, subsidiary of Moody's for CSR rating. This reflects a #1 rating among European retailers for our climate and environmental protection commitments, human resource policies and corporate governance. Casino was also rated first out of all 121 French companies assessed in any sector for its employee relations and human resource policies. This slide features a number of examples of the group's initiatives, including its strong commitment to environment, with a reduction in direct greenhouse gas emissions of minus 19.6% in France between 2015 and 2019. Moving now to our results. Page 12, a few preliminary comments on accounting standards. 2019 H1 accounts have been restated following the divestment of Leader Price, classified as discontinued operations per IFRS 5 standard. Also importantly, and as mentioned earlier, all costs associated with the pandemic have been presented in EBITDA and trading profit in our consolidated accounts, in line with the clear recommendations of the AMF and the French National Association of Auditors for the treatments of COVID-19 cost. This for all one-off costs, including the special bonus for employees. Page 13, the key figures of half year results are shown in this table in total, change and at constant exchange rate. Net sales reached EUR 16.1 billion, up 5.9% at constant exchange rates compared with 2019. EBITDA was EUR 1.060 billion, up 4% at constant exchange rates with good performance in all our segments. Excluding the one-off bonus, EBITDA would be up plus 8%. Trading profit stands at EUR 386 million, down 3.6% at constant exchange rates due to the impact of one-off costs linked to COVID-19. Trading profit, excluding the one-off bonus, would stand at plus 7% at constant for us. Underlying net profit group share is minus EUR 87 million. This change compared to last year is mostly due to COVID-19 impact and ForEx effects. Net debt increases by minus EUR 131 million group level, with a net impact of ForEx and the reorganization of our activities in Latin America. Lastly, net debt in France was EUR 2.8 billion, slightly down compared to last year. As we will see, this reflects the impact of positive net cash flows and disposal proceeds, which allows the repayment of Segisor debt and the unwinding of TRS and forward derivative instruments. Page 14. Going into more detail in our consolidated numbers, which stands out with the impact of our cost savings plan on our cost ratio. In H1, distribution costs improved by 50 bps overall despite the impact of additional costs linked to the pandemic. This mostly offset the temporary increase in logistic costs due to the disruption of the supply chain during lockdowns. Excluding the exceptional bonus for employees, distribution costs improved by 80 bps. In all our geographies, we are rolling out cost-saving initiatives, leveraging the digitalization of our operations contributing to sustained improvement in EBITDA margin. Page 15, let us move on to trading profit by segment, starting with the France Retail segment. First, a focus on future sales. As mentioned before, sales were particularly strong in Q2 in France, with plus 8% like-for-like, including Cdiscount, and was 6% in brick-and-mortar banners. Urban and convenience formats posted double-digit growth with 11.8% at Casino Supermarkets, plus 14.7% at Franprix and plus 18% at Convenience. Monoprix had strong sales in food at plus 7.6% during the quarter and plus 2.9% overall, with nonfood sales picking up from mid-May after the end of the lockdown. As for Géant, it posted stable like-for-like sales in the context of a declining performance of hypermarkets in France. Total sales in France were impacted by downturn in fuel sales, which represented minus EUR 157 million or minus 4.1 points, and by a reduction of space following the impact of the Rocade plan in hypermarkets and supermarkets. After this rationalization of the network is fully annualized, we are looking at the resumption of growth, driven by our high-performing urban, premium and convenience formats, the acceleration of expansion and of Click & Collect and home delivery. Cdiscount, as mentioned, posted strong GMV at plus 25% and strong sales at plus 20%, both during the lockdown and after, even after taking into account the postponement of summer sales to mid-July instead of mid-June last year. Overall, in France, the key takeaway from the last quarter is that after the work done in the past years, we have an optimized mix of business that gives us an edge for sustainable and profitable growth looking forward. Page 15. Underlying results on the France Retail segments reflect the strong improvements of our mix and our cost-cutting plan. The EBITDA margin was 7.2% of net sales, an improvement of 9 bps. This reflects, first, a sustained improvement of our cost base of 50 bps, driven by the improvement of our mix of stores through the Rocade plan and by the cost-saving plans developed in all our banners. Second, this improvement was partly offset in H1 by the net impact of the COVID-19 situation. We estimate the effect of additional activity on commercial margin at plus EUR 80 million, which was more than offset by temporary additional costs related to the period of the lockdown. These emergency measures were detailed at the beginning of the presentation and include logistic costs, EUR 27 million, with no invoice to suppliers for supply deficiencies; staff reinforcements for EUR 28 million; emergency, protection and security for EUR 38 million. In addition to these impacts on operations of minus EUR 13 million net impact, we paid an exceptional bonus to our employees of EUR 37 million, which brings the net impact of the health crisis to minus EUR 50 million in H1 2020. Excluding the exceptional bonus for employees, retail trading profit was up 2%. Looking forward, permanent cost savings will remain and will be amplified in the coming quarters with the digitalization of our stores and the optimization of our administrative costs, whereas one-off costs just mentioned have essentially disappeared since June. We are, therefore, looking at a sustained improvement of our cost ratio in the coming quarters and increased profitability of our business in France, coming with the edge already mentioned in growth. This makes us quite confident on the outlook for the coming quarters. Page 17. Let us move on to the E-commerce segment, Cdiscount. Cdiscount delivered outstanding results in H1, both in growth and profitability. Growth in GMV averaged 12% over the semester, with a strong acceleration from the end of Q1 and has proven sustainable beyond the lockdown period. Cdiscount gained 1 million new customers, thanks to its operational excellence in this period, with all warehouses fully operational at all time. EBITDA margin is up 302 bps to 4.5% in H1, with an increase in gross margin of 2.8 points. The sustained improvement in profitability was driven by 2 factors that we also see enduring in the coming quarters. First, the strong performance of the marketplace, which accounted for 46.3% of GMV in Q2, plus 6.2 points versus last year. Second, an evolution of the product mix towards higher margin and recurring products, such as gardening, sport, daily shop and tools. Overall, with a solid business model, driven by commission-based revenues and further expansion of its business in Europe, the outlook for Cdiscount is particularly exciting. Page 18, moving to Latin America. H1 was an excellent semester for growth and profitability in all our banners and countries. As these results will be commented in detail today by GPA, I will sum up the main highlights. In all countries, we are looking at profitable growth, with an acceleration of trends in Q2. Multichannel, multi-format strategy has proven adaptive to client demands and new consumption conditions. Net sales increased by 16% at constant exchange rates. GPA sales in Brazil were up 16.9% at constant exchange rates. All banners accelerated during the semester. Assaí once again delivered stellar growth, reaching 26.4% in Q2 in organic and plus 10% in like-for-like. Hypermarkets rebounded strongly at plus 22%, with the success of the new commercial strategy since the beginning of the year. E-commerce was particularly impressive, with sales multiplied by 3.7, representing 5.6% of food sales and 15.3% at Colombia Éxito. The Éxito Group's net sales increased by 9% at constant exchange rates despite restrictions on the circulation in these countries of operations, especially Colombia. The highlight was the growth of the innovative format Éxito Wow with 15.3% in Q2 and Carulla Fresh Market with 27.6%. Total EBITDA for the Latam segment was up 9.9% at constant exchange rates, with all geographies posting strong performance. The cost base was well controlled in all formats. Finally, the negative impact of currency effects came to minus EUR 62 million. Page 19, underlying net profit. Two factors mostly explain the evolution of net profit in H1. First, trading profit was impacted by the nonrecurring additional costs associated with COVID-19, including EUR 47 million of exceptional employee bonus at the total group level and by a currency effect of EUR 55 million. Second, an increase in financial expenses was recorded following the refinancing of the group. This is a temporary effect as proceeds from 2020 disposals will be used to reduce the debts and, therefore, financial expenses. None perceived at this stage for this year include around EUR 900 million from the disposal of Vindémia and Leader Price and the decline of financial costs from the coming debt reduction is not reflected yet, of course, in H1 results. Page 20, a focus on free cash flow in France. As you know, sustained improvements in our free cash flow generation is a key objective for the group. H1 clearly delivered in that regard. Free cash flow generation improved by EUR 140 million during the semester, driven notably by strong working capital variation compared to the usual seasonality. This improvement was driven by sales dynamics and ongoing efficiency plans despite a negative effect from fuel sales. We were able to effectively manage CapEx with a reduction of 14% compared to last year. This was done in a time of fast deployments of our autonomous store concept and it shows how we are able to focus on investments on our priority formats in an efficient way. Given the usual seasonality of cash flows, notably in working capital and EBITDA, we can expect strong positive variation in H2, which should lead to a good number at the end of the year. As it is, over the last 12 months, free cash flows already stand at EUR 500 million. Overall, we are actually committed on sustained free cash flow generation in France, driven by the good mix of our business and tight oversight of CapEx, inventory management and costs. Page 21. This table sums up net debt variation over the semester. As usual, the variation in H1 reflects the seasonality of cash flows. Comparing to last year, change in net debt, excluding disposals, IFRS 5 and the settlement of the GPA TRS, improved by EUR 232 million, driven by cash flows and the other reduction of financial cost, dividends and other financial investments. To visualize the impact of these dynamics on our debt position, the evolution on the 12-month rolling basis is the most relevant. This is shown on Page 22. As mentioned, over the 12 months to June 30, 2020, the group generated EUR 507 million of free cash flow in France, excluding disposals and Rocade plans. That is a net cash flow generation of EUR 254 million after financial expenses and dividend. This is a good number and a key metric to follow in the coming semesters. As I mentioned before, all of the key elements are in place to keep on growing and generating significant net cash flows at the same time. In the same 12-month period, we have cashed in EUR 469 million of proceeds from our disposal plan and repaid EUR 555 million, including EUR 200 million of Segisor debt and EUR 367 million of derivative instruments, GPA forward and TRS. These EUR 555 million would have been recorded as debt in leverage ratio computed by the rating agencies. So by retaining them, we have reduced our gross leverage while simplifying the financial structure of the group. Reported net debt at end of June '20, taking into account the simplification of our structure, stands in slight reduction compared to last year at EUR 2.821 billion. Page 23 sums up the net debt by entity as usual. I have already commented the reduction in France Retail net debt. Cdiscount's net debt was virtually stable during the last 12 months, while Latam Retail debt increased by EUR 187 million. This reflects the impact of the reorganization of our Latam operation mitigated by ForEx effects. Page 24, going through our bond maturities. As outlined at the beginning of the year, the upcoming maturities of 2021 and 2022, which total EUR 1.050 billion, are substantially covered by disposal already signed and partly cashed in, Vindémia and Leader Price for EUR 900 million, and by the earn-outs from the Fortress and Apollo deals. These earn-outs are forecast between EUR 150 million and EUR 200 million, with disposals accomplished so far in line with the business plans of these JVs. We have repaid our March '20 bond, and the proceeds from the Vindémia deal have been allocated to our escrow account dedicated for debt repayment. We will use this cash as well as the cash from the Leader Price disposal this year to repay all buyback debt in the most efficient way, taking into account market conditions. Page 25. This slide shows our strong liquidity position at June 30, 2020, of EUR 3.2 billion, including EUR 2.3 billion fully undrawn and committed credit lines, on top of which EUR 186 million are held in the segregated account just mentioned. Page 26, a few words on the covenants attached to our 2023 RCF. We have ample headroom at the end of June with a EUR 764 million headroom in debt, debt-to-EBITDA ratio, and the EUR 350 million headroom in EBITDA in our EBITDA net finance costs ratio. Gross debt as measured for our covenants, including France, Cdiscount and Segisor, stands at EUR 5.8 billion. This is a reduction of EUR 0.6 billion compared to the end of Q1, thanks to cash flow generation in Q2 and the closing of the Vindémia deal. The leverage ratio stands at 6.6%. And taking into account the sale of Leader Price, which can be fully allocated to the segregated account at the closing, would improve that ratio by 0.8%. The ratio should, of course, further improve with impact on our EBITDA of the reduction of our cost base and further reduction in gross debt due to disposals and cash flow generation. Page 27. I will conclude on our priorities and perspectives on the French perimeter, given that this afternoon, GPA will present the results. We have clear and consistent strategic priorities, focusing on Proximity, urban and premium formats, E-commerce and new B2B businesses. What the recent period shows is that these choices are the right ones as they answer customers' needs. All our banners in France are now profitable, cash flow generating and poised to deliver growth on buoyant segments of the market. This positioning is a key edge looking forward. Based on this situation, our outlook for H2 is the following. First, we look at profitable growth, in E-commerce particularly, with the strong position of Cdiscount in nonfood and our unique partnership with Ocado in food. And also in physical stores with the expansion on our buoyant formats, such as Franprix, Monop', Naturalia, Casino Supermarkets and Proximity. Second, we will continue to increase our profitability with the rollout of our cost savings plan, accelerating our initiatives in stores, logistics and headquarters. One-off costs linked to the period of the lockdown and our key over and cost ratio are declining over all banners. We're looking at the sustained improvements in our cost ratio with a positive impact on our EBITDA margin. Third, intensification of initiative that generates operating cash flows. We maintain a tight management of inventory to keep on improving our working capital and we focus our CapEx on our priorities, which allows us to roll out our innovations such as autonomous stores within a reasonable budget. Fourth, continue to reduce the gross debt to optimize our financial structure. All our proceeds from signed disposals will be allocated to debt reduction, and we plan further progress on our disposal plan for nonstrategic assets in France. We maintain the total target of EUR 4.5 billion, of which EUR 2.8 billion are already signed. These priorities are clearly set and the advance on our plans are tightly monitored. So we have a lot of confidence going forward on our perspectives. Thank you for your attention. I'm now happy to take your questions.

[Operator Instructions] We have one first question from Mr. Xavier Le Mené from Bank of America. We have the next question from Mme.Maria-Laura Adurno from Morgan Stanley.

Yes. I actually have 2 questions to start with. So the first one, I was just wondering if you could provide us with an update with respect to the latest -- what's the latest update with respect to the sales of hypermarkets in Leader Price? And then the second question that I have is with respect to working capital in the quarter. Perhaps if you can talk a little bit more about the underlying dynamics.

Okay. So the first question was about the disposal plan. As you know, we never comment on ongoing disposals. So we have no specific comments to make on disposals ongoing. What we are doing is, as you've seen, we have signed -- we have completed EUR 2.8 billion in 2 years, so EUR 1.4 billion per year on average. We comment on disposals that are done, but we don't comment on ongoing disposals. That remains our policy. On the working capital dynamic in Q2, you have seen in Q1, we had published numbers that showed that we had already a strong improvement in working capital, linked to the dynamic of sales, of course, and we maintained that in Q2. So basically, if you compare our working capital variation to the average seasonality or even to last year, which was already a good year in terms of working cap since we had launched initiatives to maintain tight control in stocks, you see a very good number in H1. In Q2, there was a negative impact of fuel. We mentioned minus EUR 150 million of sales. This translates into roughly minus EUR 100 million in working capital in -- at the end of June, and we will recover that, of course. We are already recovering that, started to recover in June and July. I mean by the end of August, we think this EUR 100 million will be recovered. So we maintain a very tight focus on working capital. It's a very high priority for us. And we make sure that we maintain the advantage that we have.

Next question is from Mr. Xavier Le Mené from Bank of America.

Yes. Hopefully, you can hear me this time. Yes?

Yes, Xavier, yes.

Yes, just back on actually the previous question. I understand that you don't want to comment on your disposal, but do you see change pre- and post-COVID for potentially the appetite of your assets, especially in France? That would be the first question. Can you also, second question, give us a sense of what GreenYellow and the Data profit were in H1 just to have a sense of what the retail profit did in the first half? And the last one, can you explain the gross margin which was down for the group in H1, where it's coming from specifically?

Yes. So again, on disposal, we can't comment on the ongoing discussions. But if you ask me what I think of the value of our assets, I think, if anything, this crisis has shown that our assets are very valuable. And we don't see any reason, quite the contrary, why their value would not be maintained. You -- so a very specific example was that we managed to sign a deal in the midst of a lockdown, that was not easy, of course, with Aldi. And we think that the performance that we've delivered in the past quarters, if anything, enhanced the value of our assets. So no change there. If there is any change, I think, it would be on the positive side. GreenYellow and relevanC, we don't detail their results at H1 level. You've seen that relevanC had good dynamic in terms of sales. So this translates with -- we had the number of EUR 44 million of sales of relevanC. That's plus 34% compared to last year. So this is the number we give, we don't give more detail at this stage. Gross margin, gross margin evolution. In H1, overall, we had a decline in gross margin. This is linked largely to impact logistic costs. Logistic costs are in the gross margin as we published it in the slide that you've seen. And the logistic costs, I mentioned we had trucks running half-full, which is quite costly. We had to work overnight, et cetera, et cetera. So this period was quite exceptional. And what we see looking forward is basically return to normal and so is the case naturally.

Next question is from Mr. Clement Genelot from Bryan Garnier.

Two questions from my side, if I may. The first one is the impact on your EBIT in H1. Do you think some financials received may have impacted also your EBIT just beyond the one-off cost related over the virus? And the second question is related to your disposal targets. You reiterated the amount of EUR 4.5 billion, but not with timing of -- not the timing of Q1 2021, why? And an additional question, could we just have some more colors regarding the trading in July and especially in the France and in south of France regarding the low tourist inflows?

Okay. Thank you, Clement. Financial services, we don't have financial services in our EBIT. So there's no impact there. Our financial services in France are mostly done with Banque Casino, which is in the share of associates. By the way, Banque Casino had a very good semester. And we are quite happy with the very strong business that we have with payments and consumer credits, which is tightly monitored, particularly at Cdiscount. So Cdiscount has improved -- has actually declined the share of sales done with credit during this time and improved the quality of the credit, and that is, I think, a very positive trend for Cdiscount also. Disposals. Disposals, yes, we maintained the EUR 4.5 billion objective, as I mentioned. As far as detailed dates or detailed projections, you remember, in March, we stated that in the current context, as a matter of prudent financial communication, we have stopped giving precise forecast or precise date at this stage. But it doesn't change anything on our objective, which is to complete this plan. And I think we have shown in the past semester that we are quite dynamic in that regard. On average, EUR 700 million disposals per semester. And most recently, I take the opportunity to say that again, we have of course, closed the Vindémia deal. And also in June, in this period, we closed deals to -- in the JVs, the Apollo and Fortress JVs, which contribute to secure the earn-outs of EUR 150 million to EUR 200 million that we expect next year. We sold the walls of Monoprix to Aldo Garay. It's a public information. Current trading. So current trading in this period, it's, of course, a bit more difficult to read than usual. We had several movements. First, the summer sales period usually starts mid-June. And this year, it was postponed to mid-July. This, of course, had an impact at the end of June on Cdiscount, also on the business units like Monoprix or hypermarkets. Also between mid-June and mid-July, as been flagged by some observers, there was less flow of foreign tourists coming into France. What we've seen since mid-July is first summer sale have started and French tourists are also -- are staying in France. So you have a reduction of the flow of foreign tourists, but you have an increase in the flow of French tourists. And what we've seen in the last 2 weeks is a significant uplift in sales compared to the 4 weeks between mid-June and mid-July. This is true, particularly in the touristic region. We've seen uplift of 5 to 10 points in supermarkets and hypermarkets in regions such as [indiscernible]. We've seen significant uplift also at Franprix and Monoprix since mid-July. So basically, our tracker on trends are in line with our budgets. We have a budget for Q3. And at the end of July, we are in line with our budget, and this is a budget that gives us an increase in EBITDA in Q3 compared to last year, a significant increase in EBITDA compared to last year. So -- so far, we are quite confident at the end of July that this trend are consistent with our projections.

Next question is from Mr. Arnaud Joly from Societe Generale.

Yes. David, I have 2 questions. Just 1 follow-up regarding the impact of tourism. Just in the Paris area, do you have an idea of what is the part of your sales in Paris generated with foreign tourists? And the second question regarding your pricing policy. Do you plan any change in the balance between EDLP promotions and the loyalty rewards? And what's your view on food inflation in the coming months? Any reason to expect an acceleration on that?

Thank you, Arnaud. So in Paris area, we -- of course, we do not ask our customer where they come from, so it's a bit difficult to know who are foreign tourists and all. But big baskets are not done by foreign tourists, obviously. So it's an impact on the smaller baskets and snacking. What we have seen recently is that the average basket has kept on increasing. So we may have a reduced flow of foreign tourists, but the residents have increased their purchases, which makes sense since we have a shift from eating out to eating at home. Restaurants are now open. But still, there remains an overall reduction of eating out in the current -- even now. And this, I think, more than makes up or makes up the -- any reduction in foreign tourist flow. The average basket from residents and the average basket from our customer has shown a significant increase, and it's still the case. Pricing. Pricing and loyalty. We think we have the right mix. We are -- we've been monitoring that for quite some time now. What we are doing is pinpointing and increasing even more the targeting of our promotions and loyalty programs. You've seen the 10% share of sales in hypermarket and supermarket related to the subscription program, which we think is a very good thing because it increases the loyalty of the customers, makes for average -- higher average baskets. And we use relevanC to optimize permanently the type of promotions that we will target to particular customers through the smartphone app. That's more our current focus. And so of course, we monitor the prices to make sure that our permanent prices are okay and consistent with each of our banners' positioning. And so far, we think we are good. In terms of inflation, we don't see much inflation. The only inflation that's been recorded recently was on fresh food due to more focus on fresh production, as you all have known. We don't see much inflation coming in the coming quarters, to be frank. No deflation, by the way. But overall, I think we -- each banner now has a good model. And what we can optimize even more is the use of data to optimize the return on investment on each promotions. And we've been doing that, and we still have, I think, some more upside there because we're learning over time. And of course, the share of sales done through the smartphone apps increases, which allowed us to pinpoint in a more increased the ROI on these promotions.

Next question is from Mme. Fabienne Caron from Kepler Cheuvreux.

Two questions from my side. The first one, David, could you help us and give us what should we expect for forward cash flow in terms of CapEx and change in working capital for the full year? And secondly, can you confirm that you could meet your covenant of December of 5.75 without selling additional assets compared to what you've announced so far?

Yes. Thank you, Fabienne. CapEx and working capital. CapEx, they are down compared to last year in H1. We gave -- our objective is to maintain the CapEx level at or below the level that we were before, last year, I mean. We reduced the CapEx a lot last year. We explained that this was perfectly consistent with the maintenance of our network. And I think H1 shows that, and we'll continue to do the same. So basically, no change there. And we think this is a good level of CapEx that allows us to roll out our innovation. So it's good. And in change in working cap, we will continue in H2 to do what we've done in H1. So continue to monitor tightly, especially the inventory in promotions, tightly monitor the order that we make for each promotions to avoid any other stock. And if things go as they have come so far, we are quite confident that working cap in -- for the full year will be a good number. But I don't give a precise guidance at this stage for the reasons already outlined in March. But you see with the EUR 140 million improvement in H1 and fuel being a drag on working cap of minus EUR 100 million in H1 and reverting during the summer, we're in a very good position. For our covenants, as you've seen, we have ample headroom at the end of June. If you subtract from the covenant at the end of June the value of the Leader Price deal, we get basically to the target at the -- by the end of the year. And we are with -- I won't detail everything, of course, but with everything that we have in place so far and what we plan in terms of EBITDA and in terms of disposal, of course, we will need these covenants in December, no doubt about this.

Next question is from Mr. Rob Joyce from Goldman Sachs.

Three from me. Thanks for the commentary on the July trading. Just to clarify that, does that mean Monoprix and Franprix are positive same-store sales growth in July? And second one is just in terms of -- I know you don't want to give specifics on the disposal program. But just to help our understanding, I think you had EUR 1.4 billion of property on the balance sheet at year-end. Are you able to sell as part of the disposal program? Or is that part of the place to the loans? And if so, how much is place to the loans? And then the final one is, is there anything in the second half similar to the TRS pay-down in terms of cash-outs that you think we need to be aware of?

So in July, I won't give, of course, the monthly numbers for our business units, we don't do that. But as I explained, Franprix and Monop' beginning of July, especially end of June, beginning of July, Monop', there was the sales -- summer sales impact. Since mid-July, things are going well. And the current trends are in line with what we expected. I think what we see, and it's important, is that we've seen an increase in the average basket that endures. So overall, we're in line with our budget at Franprix and Monop' and, of course, in the other business units as well, as I mentioned. And this budget again leads to a growth in EBITDA in Q3. Disposals. Disposals, well, we don't comment on what we will sell again. But on the specific question that you asked, yes, we have the -- we have as security in the bond, the question bond, EUR 1 billion of real estate. We are allowed to sell it. The only restriction is that if we sell some of these real estates, it will go to repay this bond. That's all. But we are allowed to sell it, of course. And the TRS, the TRS has been repaid end of June. There's no more TRS, no more forward, no more derivatives, nothing. So the debt we see at the end of June is the debt that will be used to compute the leverage on the agency viewpoint, nothing to add there, such as derivative or features or anything. And looking forward, and no cash-out to expect from any of these deals. And actually, a savings since last year, we had interest to pay on the CMS, of course. On the forward, on the TRS, we paid interest every year. So this is a reduction of debt actually and a reduction of financial cost for the -- for H2.

Next question is from Mr. Nicolas Champ from Barclays.

I have 3. Regarding your property development gain included in the French EBIT line, it is down quite significantly in H1. I understand you don't want to provide any target regarding asset disposal, but at least for this property development, could you give us some color regarding the level of property development we should expect for this year in France? The second question is also about property development because I think there is a component of this property development that is included in your working capital in France. I think you provided the breakdown in your interim report that is not yet available on your website. But could you give us some indication regarding the evolution of the inventory related to the property development in H1? Just wanted to understand whether property development impacted or benefited the evolution of your working capital in France in H1. Third question and the last one is that in your Q1 sales publication, you said that EBITDA in France for the French Perimeter plus E-commerce was up EUR 67 million in Q1. In H1, if I do the math correctly, EBITDA for this perimeter is down by minus EUR 7 million. So could you please confirm that EBITDA in France, again, for this perimeter has declined in Q2? And could you please give us a bridge of this evolution, of this decline in Q2 to help us to better understand why it has declined so significantly in Q2?

Yes. Okay. Nicolas, Property development, yes, there was nothing in terms of property development in H1. So no impact on EBITDA and no impact on working cap since there was nothing happening, it was not a semester conducive to property development operations. We don't give guidance. But as you have seen, property development is now quite a small part of our trading profit and EBITDA in France. Given the disposals we've made so far in our real estate and the projects we've done, it's not something that we rely on for our EBITDA. We rely more on top of the retail business, what we have on top of that, is more new businesses, the GreenYellow business and the relevanC, the Data, Data Center. On property development, nothing more to say other than the fact that in H1, nothing, no in working cap, no in EBITDA. And it's not a significant part now of our profitability. Your question between Q1 and Q2. Yes, we had different dynamics. In Q1, we had a very dynamic sales with basically very, very little cost incurred because this came very, very fast. And it was -- basically, we sold a lot of our inventory, our warehouse inventory and our store inventory at the end of Q1. And after Q2, in Q2, all the additional costs from COVID came kicking in. So the bridge that we gave on H1, the sales bridge that we gave on all the additional costs that more than offsets the additional margin, you can see that additional margin was basically split between Q1 and Q2, this EUR 80 million, that's the logistic. And in Q2, we had the positive margin, the positive impacts of our cost-cutting plans, also all the additional costs that we mentioned. And on top of that, so the logistic costs, the additional reinforcements during lockdown, the protection, et cetera. And on top of that, we had to pay a special bonus in Q2. And I insist again that the AMF's clear recommendation, very clear recommendation, is that this special bonus be treated in EBITDA, which is the case, of course, in our accounts. So this basically explains the dynamic between the 2 quarters. What matters is that all these exceptional costs are now over by the end of June. No more logistic extra costs, no more reinforcements, protection and security is now basically a small number included in everyday operation, nothing like what happened in April. So we are now on a path where the efforts that we've made and the declining cost base that we show will have the full impact in the coming quarters. I think that's what matters.

Thank you, sir. We have no other questions. [Operator Instructions] We have no other questions.

Okay. So there's no more questions. Thank you for attending the session. Good day.

Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.