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

Ladies and gentlemen, welcome to the Casino Group 2021 Half Year Results Conference Call. I now hand over to Mr. David Lubek, Chief Financial Officer of Casino Group. Sir, please go ahead.

Thank you. Good morning, everyone, and welcome to Casino H1 results conference call. I hope you are all remaining safe and well. A few words of introduction before going through our presentation. We have been living with the COVID-19 pandemic for the last 18 months. During this time, as you will see from our H1 results, we have successfully adapted and transformed our food retail business in France. Our profitability has improved and reached a satisfactory level in all our banners. With our mix of efficient urban and Proximite formats, a dynamic expansion plan and a strong food e-commerce proposition, we are now well positioned to grow sustainably going forward. As for our other businesses, Cdiscount and GreenYellow have communicated their results this week. Both have shown excellent performances in their respective high-growth markets based on secure megatrends. Tech and E-commerce for Cdiscount and energy transition for GreenYellow. In Latin America, the value of our assets has more than doubled in a year and Assai, in particular, has performed extremely well in a tough environment. All of this, as you see, warrants our confident view of the future. Our presentation starts, as usual, with a summary of our H1 financial figures. Page 2, the main results highlights. All our geographies showed increased profitability with EBITDA growing plus 11% and EBIT growing plus 24% at constant exchange rates. At the group level, we had stable sales during the semester with a negative impact of the pandemic on our sales in France more than offset by the positive impact of our transformation plans. Net normalized results and net results improved by, respectively, EUR 23 million and EUR 306 million. Page 3. Cash flows and debt. We will get back to these in detail later on. Net debt and cash flows in France will now be analyzed excluding GreenYellow, as mentioned during our full year results. GreenYellow will raise debt on its own to fund its transition to an asset-based model and does not rely on Casino for financing, which is taken into account in our new banking covenants. The main take away is that cash flows are in line with the usual seasonality of the business and close to the numbers of last year, even though sales were lower in Q2. Gross debt in France, the metric by which we track our deleveraging program, declined by EUR 438 million. Net debt in France declined by EUR 158 million. Net debt after IFRS 5 increased due to the reduction of IFRS 5 following the disposal of Leader Price. Now to the key takeaways from this semester, starting with France. Page 4. The first highlight is the success of the transformation plans launched last year in all our food retail banners. The trading profit margin increased by 81 bps in H1. This is a particularly strong performance as it happened in the context of like-for-like sales declining by minus 7% due to a strong comparison basis in H1 2020 and COVID restrictions affecting our operations in Q2 2021, such as curfews, closure of nonfood sales and the specific impacts in the Paris area with the lack of tourism and the impact of remote working. Despite declining sales due to these temporary effects, our EBIT improved again and reached EUR 166 million in H1 on the France Retail perimeter, EUR 173 million, including Cdiscount. Following the successful execution of our transformation plan, we are now well positioned for strong and profitable growth in the second half of the year. Growth is our clear priority for H2 with a more normalized basis of comparison and the increase in the size of our network. We opened 353 stores on proximity formats in H1, the sales of which will ramp up in H2, and we plan to open 400 more in H2. The second highlight of H1 is the strong growth of food e-commerce, which has increased by 103% over 2 years, significantly better than the market. We took advantage again from our key exclusive partnerships with 2 top technology players, Ocado and Amazon. The third highlight is our financial structure. After a successful refinancing of our Term Loan B, we have extended the maturity of our main revolver credit facility from 2023 to 2026 for EUR 1.8 billion and reviewed financial conditions and covenants. Our maintenance covenant at the end of Q2 was met very comfortably with gross secured debt over EBITDA covered with a margin of EUR 359 million in our EBITDA. We have also put in place a new RCF at Monoprix with, for the first time, sustainability-linked features. Finally, a word about our disposal plan. We announced 2 days ago an agreement with BNP Paribas for the disposal of our stake in Floa Bank, securing EUR 179 million of total proceeds while maintaining an exposure to future value creation in fractioned payment. We also secured close to EUR 100 million earn-out from the Apollo and Fortress JVs. Taking this into account, the total value of fund disposal increases by close to EUR 300 million, reaching EUR 3.1 billion. Page 5, Latin America. Assai published its detailed results 2 days ago. GPA's results were published yesterday and their conference call is planned for this afternoon. I will concentrate on the key highlights. First, as in France, profitability increased again significantly in Lat Am with an EBITDA margin at plus 96 bps and trading profit growing 84 bps. This led to an increase in trading profit by 33% at constant exchange rates for the whole segment. Assai has been particularly well with plus 22% sales organic growth in Q2 despite the impact of COVID in Brazil. Second, the spin-off of Assai has been a clear success. The value of Casino share in Latin America assets has doubled since the spin-off announcement in September of 2020 from EUR 1.1 billion to EUR 2.3 billion. Before going into our detailed results, let's move to review of our progress on our strategic priorities in France, Page 7. First, as mentioned in the introduction, we saw the benefit of our transformation plan launched in Q3 2020 with cost savings installed and back office of EUR 30 million per quarter in our food retail banners, increasing their profitability. Looking at the performance of our retail banners using a constant perimeter, that is French retail trading profit, excluding GreenYellow and Vindemia, the net improvement was plus EUR 49 million over H1, that is plus 50%. We have continued the digitalization of our network with 613 stores now equipped with autonomous solutions and 63% of payments in hypermarkets, 58% in supermarkets done through automatic cashier or sales scanning. This is a key edge that allows us to operate with a lower cost while simplifying our customers' experience. We have also pursued the growth of our network. 353 proximity stores have been opened in H1, above the initial target of 300, in formats such as Franprix, Vival, Monoprix, Naturalia, Spar, or Casino Shop. The ramp-up of these stores will contribute to sales growth in Q3. Food e-commerce grew plus 15% year-on-year on a very strong comparison basis. On a 2-year basis, growth is up plus 103%, far above the market. Our partnership with Amazon has been extended again with 2 new cities included in the Monoprix offer on Amazon for same-day delivery. And our Click & Collect offer targeted in 180 new stores on top of the 600 Amazon lockers already deployed. As for quick commerce, the offer is now available from 800 stores, thanks to our partnerships with Uber Eats and Deliveroo and the rollout of our Franprix's direct delivery offer. For H2, our priority is clearly focusing on growth. We have a number of brands, all of which are profitable and ready to expand further. On top of the ramp-up of the 350 stores already opened in H1, we will grow our network further with the opening of 400 new stores. We also expect further acceleration of our e-commerce operations. Combined with a more normalized basis of comparison for our stores and the impact of our commercial initiatives, we expect these elements to deliver a substantial return to profitable growth in H2. Turning to Page 8. A key feature of our strategy is fostering commercial innovation in our various banners attuned to customer needs. This slide presents a number of relevant examples of our innovations, each of them consistent with customer needs in specific areas and clearly aligned with our banners, values and our CSR commitments. At Monoprix, customer service has been expanded to include concepts around health with personalized advice, local products from a distance of less than 100 kilometers and an offer dedicated to urban mobility. Franprix continues to expand its network with 150 openings planned over 2021 and 2022, especially in the surroundings of Paris, with a strong emphasis on local services including evening catering. Casino banners in hyper and supermarkets are also focused on innovation with the introduction of artificial intelligence solutions installed and specialized corners rolled out with partners and start-ups. Nine small Geant stores have been converted into Casino Supermarkets with an offer adapted to local needs and a significant uplift in sales. Page 9, moving to Cdiscount. Cdiscount has continued to actively focus on its key product growth priorities: marketplace, digital marketing and Octopia. First, the marketplace, with growth of plus 10% over the semester, plus 33% over 2 years. It now represents 46% of GMV. Marketplace revenue increased by 17% over the semester, plus 39% over 2 years to reach EUR 199 million over the last 12 months. Cdiscount's ecosystem of 14,000 vendors and 100 million of SKUs is driving the success along with its top quality logistics facilities, which helped expand express delivery for third-party vendors. As an example, Cdiscount now has 2.2 million SKUs eligible for express delivery compared to 1.3 million last year. Second, digital marketing, with a very strong plus 44% in H1, plus 72% over 2 years. Cdiscount is taking advantage of the shift to retail online advertising. In particular, with its new solutions, Cdiscount, as a retail solution, caused 100% self-care advertising platform, enabling both sellers and suppliers to promote their products and brands. And third, Octopia. Cdiscount's new B2B business dedicated to turnkey solutions for online retailers. Octopia offers ready to operate services to international retailers and e-merchants. It includes all 4 key elements needed to operate a successful marketplace: products as a service; fulfillment as a service; merchants as a service; and marketplace as a service. It has shown a strong start with product as a service and fulfillment as a service growing plus 60%, while merchants and marketplace as a service, which have just begun their marketing to customers, have had a very promising start. This led to an EBITDA of EUR 49 million in H1, plus 148% over 2 years, stable compared to H1 2020, which benefited from the exceptional inflow of the first lockdown. Compared to the very high level reached in H1 2020, global -- total GMV grew plus 2%, that is a 14% growth over 2 years. In H2, Cdiscount will continue to roll out its plans for further high top line growth in marketplace, digital marketing and Octopia, delivering again significant increase in its EBITDA. On our new businesses in B2B, on Page 10, a few words on RelevanC, our data monetization and B2B retail tech business. A key recent milestone for RelevanC has been signing of a new partnership with Google Cloud and Accenture, which should provide a significant boost to establishment. RelevanC received the status of Premier Partner, recognizing its expertise and integrating its solutions within the Google Cloud B2B marketplace. In H2, RelevanC will continue to pursue this partnership strategy and plans to accelerate its growth both in France and abroad, notably through the Google partnership. Turning to Page 11. GreenYellow. GreenYellow is positioned at the heart of the decentralized energy transition market. It addresses its diversified corporate customer base with its unique model, combining energy-saving solutions and self-consumption based on local solar production. GreenYellow has been accelerating on its 2 key business lines in the last semester. Compared to June 2020, the advanced pipeline of photovoltaic projects is now up 85%, and the advanced pipeline of energy efficiency is up plus 78%. The advanced pipeline of photovoltaic now stands at 809 megawatts with an additional pipeline of opportunities of 3.5 gigawatts. In energy efficiency, the advanced pipeline has reached 350 gigawatt hours with an additional pipeline of opportunities of close to 900 gigawatt hours. GreenYellow successfully operates in 16 countries and 4 continents. It is planning further expansion, with expansion of its operation to Eastern Europe starting with the launch of the first 4-megawatt project in Bulgaria and plans for Poland and Hungary. Among its recent projects, the extension of the largest power plant in Madagascar to double its capacity from 20 megawatts to 40 megawatts. As mentioned previously, the company is pursuing its transition towards an infrastructure operating model, owning the assets on the long term. GreenYellow disclosed this week an EBITDA of EUR 37 million for H1, excluding asset disposals, that is an increase of 40% year-on-year. Further growth of EBITDA is planned for H2 as detailed by GreenYellow in their recent publication. Finally, Page 12, a few words on our CSR policy and commitments, which are an important and long-standing priority of Casino, and a distinctive feature of our group. First, we have reinforced our commitment on greenhouse gas emissions reduction. Our goal is to cut carbon emissions by minus 38% by 2030. This trajectory is in line with a well below 2 degrees scenario. Actions have been taken in all our geographies, leveraging on GreenYellow's expertise. Among the most recent initiatives, the partnership between GreenYellow and Franprix to reduce the carbon footprint of refrigeration units and carbon-neutral refrigerant gases in Carulla FreshMarket stores in Colombia. As for Cdiscount, it has now reached carbon-neutral status for its deliveries. Second, we had a strong focus on promoting responsible consumption. The share of organic products has increased by 0.9 points in France in H1. Bulk concepts are being rolled out in our various banners in partnerships with national brands. We are reducing our paper consumption with the transition to virtual discount coupons and virtual receipts as well notably through our Casino Max app. Our commitment to responsible consumption has now been translated for the first time into one of our financial instruments, with the inclusion of CSR objectives in the new Monoprix syndicated facility. The margin will be adjusted every year based on greenhouse gases emissions, share of responsible labels and share of vegetable protein products. Finally, we have continued our commitment to solidarity with a new partnership for culture in our proximity stores in rural areas in the Fondation Marc Ladreit de Lacharriere and food drives for students in financial difficulty organized at Casino stores in partnership with food banks. Moving now to our financial results. Page 14, a few preliminary comments on accounting standards. 2020 and 2021, H1 accounts have been restated following the divestments of Leader Price classified as discontinued operations for IFRS 5 standards. The gradual conversion of the stores sold to Aldi is expected to be completed by end of September. At end of July, around 400 stores were already transferred. As already mentioned in our 2020 full year results, H1 2020 accounts have been restated to take into account the decision of the IFRS Interpretations Committee on the enforceable period of leases. Page 15. The key figures of half year results are shown in this table in total change and at constant exchange rates. Net sales reached EUR 14.5 billion, stable and organic. EBITDA was EUR 1.099 billion, up 11% at constant exchange rates with good performance in all our segments. Trading profit stands at EUR 444 million, up 23.5% at constant exchange rate. Underlying net profit group share is minus EUR 72 million, which is a plus EUR 23 million improvement compared to H1 2020. The net results from continuing operations up plus EUR 306 million. Net debt before IFRS 5 was stable with a reduction of minus EUR 158 million in France. Net debt after IFRS 5 increased due to the reduction in IFRS 5 with the advance of the disposal plan. Before detailing the results, a few words on Q2 sales on Page 16. As expected, net sales were down in Q2 due to 2 factors: first, a very high comparison basis during Q2 2020; and second, temporary COVID restrictions in Q2 2021, which particularly affected our formats. Over 2 years, like-for-like growth is up plus 6% at group level with plus 12% in Lat Am and slightly negative in France at minus 1.2%. Let's move to Slide 17 for the detailed analysis of future sales in France. Same-store sales variations was minus 8.4% with a drop in also format that is a bit higher than in Q1. This drop results from 2 factors. First, an exceptionally high level last year with growth of plus 7.9% in France last year during Q2, including plus 6% for France Retail during lockdown. Second, importantly, tougher health restriction in fall during Q2 this year impacted some of our formats quite severely. The closure of non-essential product sections weighed on Monoprix and hypermarkets. The decline in tourist numbers and the reduction of Paris customers accentuated by the third lockdown affected Monoprix and Franprix. And finally, the curfews forced the early closure of our autonomous store by 7 p.m. instead of 9 p.m. later in the evening with a negative impact on sales. In view of these restrictions, our banners showed good resilience, particularly Monoprix and Franprix, which have clearly outperformed the Parisian market. The restrictions were, for the most part, a temporary phenomenon. And after the lifting in June, we have seen an improvement in our sales trend, as shown on the following slide. Page 18. As you can see from the table, all our banners have shown an inflection in their sales trend in the last 4 weeks compared to Q2, especially in the urban and convenience banners, with Franprix up plus 8 points and Proximite up close to 14 points. On average, our French banners have shown an improvement of 4.4 points in the last 4 weeks compared to Q2 numbers. Cdiscount has had a particularly strong rebound of 19.6 points in GMV growth. Part of it is due to anticipated summer sales, and part of it due to the structural improvements with a more normalized basis of comparison. As I expressed in the beginning of this presentation, our focus for H2, while the basis of comparison will be normalized, will be a clear return to growth, a profitable growth based on the strength of our models. Our first numbers for July clearly points in this direction. Now moving to the results in France, Page 19. Overall, France operations recorded a notable improvement in profitability with EBITDA margin reaching 8%, more than 100 bps compared to H1 2020. Trading profit was up 8.2% and reached a 2.2% margin. Its increasing profitability, which is particularly remarkable in the context of tough sales dynamic, is due to the success of our transformation plans, which have been delivering consistent improvements in our EBITDA margin since Q3 last year. Page 20, moving on to a more detailed analysis of our results of the France Retail segment. Total EBIT at France Retail increased by 8% in H1 including the negative impacts of the sale of Vindemia. Focusing on our current retail banners, that is excluding property development, GreenYellow and Vindemia, which is no longer part of the group, the improvement is even more impressive with trading profit growing plus 50% from EUR 97 million to EUR 146 million and trading profit margin moving from 1.3% to 2.1%. This reflects once again the impact of the transformation plans launched in Q3 2020 which reduced our cost base by EUR 30 million per quarter. Combined with the reduction of COVID-related costs, this plan allowed our EBITDA margin to move up 115 bps despite net sales down minus 7.3% over the semester. With the strong level of profitability in our reach in all our banners, we are ready to expand our network and take advantage of a return to sales growth to move our EBITDA even higher. Page 21, moving to the E-commerce segment, Cdiscount. I have already gone into some details on Cdiscount drivers for growth and profit. Total GMV is up plus 2% on a strong comparison basis, that is plus 14% over 2 years. The key indicator that we monitor for growth, marketplace GMV was up plus 10.5% over 1 year and plus 33% over 2 years, with marketplace share of GMV growing 4 points to 46% of total GMV. And digital marketing, again, showed a particularly strong momentum, up plus 44%. As mentioned before, we expect Cdiscount to continue to deliver in H2 strong momentum on its marketplace, digital marketing and Octopia business lines. Page 22, moving to Latin America. Assai, GPA and Exito have published their detailed results this week. I will focus on the main highlights. In short, H1 showed a strong increase in profitability in all of our business units, despite tough sanitary restrictions affecting sales in Brazil and Colombia. Total sales were up plus 6.9% in H1 at constant exchange rate, thanks to the strong dynamic of Assai. Assai managed to grow both their sales and their profitability despite lower demand from B2B customers, thanks to the strength of their offer to B2C customer and the success of the expansion plan, with 19 stores opened in the last 12 months. Assai grew plus 22% in Q2 with 9.2% like-for-like and plus 13.2% expansion. 3 stores have been inaugurated in Q2, and 25 stores are under construction in 14 states, in line with the plan. EBITDA was up plus 36% at constant exchange rate, faster than sales, thanks to the successful ramp-up of recent openings. Multivarejo's sales declined minus 6.4% at constant exchange rates due to these restrictions imposed to contain the new wave of the pandemic and the strong comparison basis in 2020. Despite these challenging conditions, GPA managed to increase its trading profit in Brazil by 32% in H1, thanks to strong operational efficiency plans. The digitalization of the business has also accelerated, with online sales growing in Q2 by 32% compared to Q2 2020. Grupo Exito net sales were minus 3.6% lower at constant exchange rates due to the closure of stores as a result of the pandemic and also disturbances caused by protests in Colombia. Despite these challenging conditions, Exito increased its trading profit by 15% in H1, driven by higher contributions from our complementary businesses, improvements in real estate and good performance in nonfood at Exito Wow, an innovative model that allows digitally connected hypermarkets to combine digital channels and brick-and-mortar services. Overall, trading profit was up 33%, that is plus 30% excluding tax credit, with EBIT margin up 73 bps. This led to a trading profit up 13.5% in euros at EUR 271 million versus EUR 239 million last year, taking into account a minus EUR 47 million of currency effects. Page 23, underlying net profit. Group share is up EUR 23 million compared to last year, mainly driven by the increase in trading profit. This result includes a negative one-off noncash impact on financial expenses of minus EUR 40 million linked to the refinancing of the Term Loan B with the accelerated amortization of the setup costs of the original Term Loan B. The new Term Loan B, which bears a lower interest, 4% instead of 5.5%, will generate recurring yearly savings in financial expenses of EUR 9 million. Page 24, net results, group share. Net result, group share, improved by EUR 306 million compared to last year, driven by the growth in EBIT and a strong improvement in exceptional items and other financial expenses. Moving on to our disposal plan, Page 25. This semester showed further progress on our EUR 4.5 billion disposal plan. The total assigned or secured disposal is now EUR 3.1 billion compared to EUR 2.8 billion at the beginning of the year. First, we secured around EUR 100 million of earn-out from the JVs with Apollo and Fortress, thanks to the group progress of the JV disposals. This level of earn-out is now effectively secured by the disposals already realized, all signed by the JVs, and has therefore been recognized in our accounts. This level is a minimum. And if the remaining disposals go according to our objectives, the actual earn-out which we expect end of '21 or beginning of '22 should be higher. Second, the disposal of Floa Bank was announced 2 days ago. We have signed an agreement with BNP Paribas, which will provide a total cash in at the closing of EUR 179 million, including EUR 129 million for the disposal of our 50% stake in Floa and EUR 50 million for the new partnership put in place with BNP Paribas. On top of that, Casino will remain associated with the successful development of Floa's fractioned payment activity through a 30% stake in future value created by this business through and on out in 2025. This partnership also secures the current conditions for the financing of Cdiscount's customer finance. As mentioned before, we are committed to the completion of our EUR 4.5 billion disposal plan in France. Page 26. This page shows the evolution of net debt by entity as usual. In France, net debt excluding GreenYellow declined by EUR 210 million compared to last June. Cdiscount's net debt increased slightly by EUR 52 million due to temporary working capital impact. GreenYellow's net cash position decreased by EUR 115 million, in line with the ramp-up of its investments financed by its own resources. We now monitor Casino France net debt and cash flow excluding GreenYellow since GreenYellow does not rely on Casino for its financing and has been excluded from the computation of our new RCF covenants. Page 27, moving to the detailed cash flow in France in H1. Structural improvements in our free cash flow generation is a key focus for us, and we have taken a number of actions to that effect. This is evident in our H1 numbers where cash flows from continuing operations, including lease payments, improved by 51%, driven both by an improvement in EBITDA and the reduction in nonrecurring expenses. This is our key metric to monitor the structural improvement of our business. We expect this improvement to accelerate in H2, with the strong profitability of our banners combined with a return to sales growth and the end of our transformation plans translating into lower exceptionals. Free cash flow in H1, after CapEx and working capital, was at minus EUR 346 million, in line with the usual seasonality. The difference versus 2020 of minus EUR 70 million in working capital relates mostly to Cdiscount, which recorded an exceptionally high level of net sales last year in Q2 2020, boosting its working capital compared to the usual seasonality. This is a temporary effect that should normalize in our full year results. The rest of the France business delivered a good working capital performance compared to the strong 2020 basis despite lower sales in Q2, thanks to tight inventory management and the recovery of fuel working capital. As for our CapEx, we are close to the level of last year as we keep controlling the level and concentrate our expansion in franchise. Overall, we are clearly committed to sustained free cash flow generation in France driven by the good mix of our business, tight exceptionals and constant inventory management. Page 28. This table sums up net debt variation over the semester. As usual, the variation in H1 reflects the seasonality of cash flows. Overall, change in net debt, excluding IFRS 5 and disposals, stands at a level close to the one observed last year, with a EUR 70 million difference explained by the temporary gap in Cdiscount working capital just mentioned. Our cash financial expenses decreased by EUR 63 million as a result of our 2020 buybacks. One word about the noncash variation number of minus EUR 458 million. It includes, first, the variation of minus EUR 149 million in the segregated accounts, offset by an equivalent positive flow recorded in other net financial investments. Second, it includes the negative cash flow of Leader Price, minus EUR 288 million in H1 2021. This number includes the usual seasonality of this business and the operational losses recorded before transferring the stores which were aggravated by the pandemic. We expect the conversions to be over at the end of September. And after that, all of these in discontinued activities will also be over. Page 29, going through our bond maturities. Two main observations. First, our bond schedule, which used to be heavily concentrated, is now more normalized with maturities spread between 2024 and 2027 following our buybacks and our 2 successful refinancings. Our Term Loan B maturing in 2024 was refinanced this year with a new 2025 maturity and an interest rate reduced by 1-1/3 from 5.5% to 4%. We also issued a new unsecured bond maturing in April 2027. The second important observation is that our near-term maturities in 2022 and 2023 are now totally covered by the amounts available on our segregated account dedicated to debt repayment and the disposals already signed or secured. This means we have no effective debt maturity before January 2024, which is the maturity of our Quatrim secured bond. This bond will be callable as of next November. All of this, combined with the successful refinancing of our RCF, puts us in a very good position to deliver on our disposal plan in an efficient way. Page 30, a focus on our liquidity at the end of June. Total liquidity in France stood at EUR 2.6 billion as of June 2021, including EUR 2 billion undrawn credit lines available at any time and EUR 528 million of cash and cash equivalents. On top of that, our segregated account's dedicated debt repayments amounts to EUR 339 million. The bottom of the slide shows the credit lines as of June 2021. The average maturity was 2.2 years. It has been extended to 4.6 years, as is shown on the following slide, Page 31. Our RCF now matures in July 2026 for EUR 1.8 billion. To that must be added the new Monoprix RCF maturing in January '26 for 138 -- for EUR 130 million. Our liquidity is therefore secured for the next 5 years. On top of the maturity extension, the new Casino RCF has a lower cost of utilization and the covenant's computation have been reviewed to take into account the improvements of our financial structure and the business plan of GreenYellow. The new debt over EBITDA quarterly covenants are computed on the French perimeter excluding GreenYellow, taking into account only the secured debt. As you will see on the next slide, this new competition leaves us with a very comfortable headroom. As mentioned earlier, the new 2026 Monoprix RCF now includes CSR [indiscernible] margin adjustment based on greenhouse gas emission reduction, share of responsible sales and share of vegetable proteins. This is the first important step for us in sustainability-linked financing consistent with our long-standing CSR commitments. Page 32. This slide shows the headroom available with the new quarterly maintenance covenants. The secured debt-to-EBITDA ratio stands at 2.1x at the end of June, comfortably below the 3.5x limit, which gives us a EUR 359 million headroom in EBITDA. The other ratio of EBITDA of financial expenses was also comfortably met with a EUR 199 million headroom in EBITDA. Page 33. To conclude, let me sum up our outlook for H2 in line with our clear priorities. In H1, we continued the successful repositioning of all our formats in the challenging context of the pandemic. In H2, with a more normalized basis of comparison, we will take advantage of this positioning to grow profitably. First, we will focus on growth in profitable formats via the expansion of the store base and the acceleration of e-commerce. We target 400 new stores in H2 in formats such as Franprix, Vival, Naturalia, Monoprix and Casino Shop, mostly in franchise, which will bring the total opening to 750 this year, all in profitable and successful formats. We also target an acceleration of our e-commerce operations, thanks to the exclusive partnerships with Ocado and Amazon and specific solutions deployed in our French network of urban and Proximite stores. Second, our high-growth businesses, Cdiscount, RelevanC and GreenYellow, will continue their development. GreenYellow and Cdiscount have already communicated on their plans to finance an acceleration of their growth, which could include market operations. These companies are successful operators, taking advantage of secular mega trends, and they have a lot of opportunities to create significant value through the effective deployment of additional capital. Third, we will maintain an intense focus on cash flow generation with continued EBITDA growth and a sharp reduction in nonrecurring expenses in H2. We will also maintain our discipline in CapEx, focusing our growth on convenience franchise formats and e-commerce. These priorities are clearly set and 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 ready to take your questions.

[Operator Instructions] Your first question from Arnaud Joly from Societe Generale.

David, I have 2 questions, please. The first one, do you see scope to first cut costs in France at half year, so second half of this year? And if yes, in which fields? And the second question, do you see a risk of a fundamental decline in the food retail market in Paris with the potential decrease in the number of inhabitants and homeworking? And have you already seen any negative impact from the development of [indiscernible] in particular for your convenience format in Paris?

Thank you, Arnaud. On cost reduction, of course, we always work on cost reduction and optimization. We still have some opportunities for reducing costs in our -- by making good use of our technological tools. We've done most of the work, of course, in the stores already with the development of automatic cashiers and self-scanning. We are deploying artificial intelligence tools that will allow us to optimize costs further in the back office. And we are also continuing to move on the integration of back-office costs between Franprix and Monoprix. So we'll still have some further opportunities to reduce costs. But of course, we've done a lot of work already. And now when we see the H2, we will come from the high level of profitability already reached. And on that level, we think we can add a lot more, thanks to high growth. The fundamental decline of Paris, that's another way we see things. There has been, in the recent past, yes, a decline of people in Paris, but these are people that temporarily moved during the remote working period. The inhabitants are still there. And if we look at the recent trends, we are actually seeing a very strong uplift to Franprix and Monoprix in the recent weeks. So we see Paris fundamentally as a very sound market. Our positions there are very good. And as I mentioned, we did far better than market. So the fact that there are -- there might be openings [indiscernible] or things like that, that do not seem to affect our offer. Importantly, for Monoprix and especially for Franprix, we expect a lot of growth to come not just from Paris but from the outskirts of Paris, the suburbs of Paris, which are growing in population, clearly. In the past years, it's been clear that the growth of population is not from Paris, it's from the outskirts of Paris. And there, as mentioned, we have 150 openings planned for Franprix, mostly in this area. And we think this -- we have models that are particularly adapted to these areas. So actually, we see a lot of room to grow in the outskirts of Paris and return to normal that should happen in the next 3 quarters in the inside of Paris.

Next question is from Xavier Le Mene from Bank of America.

Just one question, actually -- or 2, if I may, sorry. The first one, just looking at the French free cash flow, so we have not seen many improvements actually in the first half, and I understand that there is some working capital impact. But what are you expecting going forward into H2? Should we see a significant acceleration? Or are you still a bit cautious there? And the second question is looking at your like-for-like in France overall, so I understand that you had tougher comps. But what should we expect heading into H2? Is there a point of time where you believe you can start to develop positive like-for-like again in France?

Yes. Thank you, Xavier. On free cash flow, the first, the structural improvement will -- comes from EBITDA improvement and exceptional cost reduction. That is already obvious in H1 with a 50% improvement. And we expect this to continue on a higher basis, so higher numbers, presumably in H2, both higher EBITDA and reduction of exceptionals. The other items, CapEx, they should be stable over the year, as we mentioned. So the -- from one year to the other, the difference between H1 and H2 may change a bit, but over the year, we clearly said that we intended to control the CapEx at least below last year's number. That is clear. And for working capital, there are also always variations between H1 and H2. As mentioned, we actually did very well. We could have expected a lower variation of working capital compared to last year on the French retail business because last year was exceptionally well -- exceptionally good with very good Q2 numbers. We managed to recover some of the fuel sales, so that compensated the fact that sales were a bit lower in Q2 this year. And we expect -- of course, we continue to work on tight inventory management, and we expect to have a contribution of working capital. But the key improvement, as stated at the beginning of the year, and we confirm that, is we expect a strong contribution to cash flows, thanks to EBITDA growth and reduction in exceptionals. That proves sustainable cash flow generation. In like-for-like, yes, we are already seeing actually positive like-for-like on Proximite actually in the last 4 weeks. Monoprix is already close to 0. So it's minus 1 in the last 4 weeks. So if it keeps on improving, it will -- it should get positive, some points during -- in the very near future. The other banners are also improving, so it's difficult to inform the exact time when each of the banner is going to turn positive, but that is clearly the goal. And if you look at the recent market share data, it's interesting to see that we were losing a lot of market share 2 months ago. We were losing minus 2 points. And it has been increasing period after period. In the last period, we are actually in line with the markets. We're not losing market share anymore in most of our formats, except the hypermarkets. So I think this is clearly the goal, and I can confirm that to you.

Next question from Andrew Gwynn from Exane BNP Paribas.

I'm going to be changing gear for 3. So just on the trading, is it possible to give us a 2-year stack or just an indication of whether or not a 2-year stack of like-for-like in France has improved? Second question would be, is there an earnings impact from any of the recently announced disposals just for -- just to help us with modeling maybe in the second half and next year? And then the final one, just on the discontinued operations, obviously, Leader Price made a loss and you're partly responsible for that. Can you pull that out for the first half and also maybe the expected impact in the second half?

Yes. On like-for-like, what we're monitoring right now is -- of course, the reason why the like-for-likes were so negative in Q1 and Q2 is because we had a very high basis of comparison. So as the basis of comparison normalized, the like-for-like is up. So that's what we're monitoring, and that's why we're looking at the 4-week data on a 1-year basis because that's going to happen. When we move period to period, the basis format normalizes, and that brings our like-for-like compared to last year up. And that's what we're looking at, plus the fact that the restrictions are lifted. So the target is to get to these positive like-for-like banner by banner, progressively each of them getting to positive, and it's already the case of Proximite. So that's the way we're looking at it now. It's -- really on a 1-year basis, was clearly negative in Q2. It's getting less negative and even positive in some of the banner in the last 4 weeks, and it should get positive with the normalization of last year plus the impact of our -- the lifting of the restrictions. The impact of the disposals on our results. Of course, the EUR 100 million that we're getting from -- which will be actually, I think, a higher number. EUR 100 million, this is a bare minimum that we have to report given what's been done. This is a pro plus. It doesn't entail any additional rents since we're already paying the rents. The real estate has been sold in 2019 to the JVs. The JVs resell these to final buyers, and we get the earn-out. But we're already paying the rent, so it's a real estate disposal that does not bring any additional rent. So it's a pure positive impact and will, of course, allow us to decrease our financial costs. As for the disposal of Floa, it doesn't impact our EBIT or EBITDA. Floa is not recorded in our EBIT or EBITDA. It had a small net result impact, but of course, this will be more than offset by the reduction in financial cost with the cash-in that we have here. As for discontinued operations, we mentioned there was Leader Price discontinued losses in H1. These were due to the stores that we are keeping to operating just until we transfer the stores to Aldi. As mentioned, this is mostly over. We had 400 stores already transferred at the end of July, that means less than 200 still remaining. And we expect by the end of September that all the stores will be transferred. So after that, there'll be no more losses. We have just to finalize the restructuring of this. So we lost EUR 288 million in H1, as mentioned, on Leader Price. And the number in H2, it should be much lower, of course, because instead of having 400 stores in 6 months, it will be 200 stores in 3 months. So if you want to make a calculation, if you divide the number of H1 by 400, you would get, I think, a reasonable estimate of what that could cost us in H2. And after that, it's over.

Next question from Maria-Laura Adurno from Morgan Stanley.

This is Maria-Laura. I've got 2 on my side. The first one, would you be able to provide us the COVID cost that you incurred for the first half of this year and how it compared versus last year? And the second question, so your net financial charges came down for France. Just wonder what's the main driver behind this.

Yes, Maria-Laura. COVID cost, as mentioned, since Q3 last year, we only had about EUR 5 million per quarter of COVID cost. So that's EUR 10 million for H1. Of course, it's much lower than last year. Basically, it's about EUR 120 million less than last year. So that, of course, contributed to offset the decline in sales. And if you look at the growth of our total EBIT, it's basically -- the loss of sales was compensated by the loss of the -- the reduction in COVID cost. And the improvement in EBIT is explained by our cost reduction. We can basically model it that way. Financial charges, yes, financial expenses as recorded in net results increased, but I mentioned, it's mostly noncash one-off impact linked to the refinancing of the term loan. When we refinanced our term loan in April, we accelerated the amortization of the cost of the original term loan of 2019 and recognized an expense -- a nonrecurring expense of EUR 40 million. That's included in our net results, it is detailed on Page 37 of the presentation. This is mostly noncash element. The cash was already spent in 2019. And the recurring impact of this refinancing is actually a saving of EUR 9 million per year. So that means next year -- in H1 next year, it will have an improvement of basically EUR 50 million of financial costs compared to H1 of 2021. And it's, of course, a very satisfactory refinancing for us since we managed both to expand the maturity and to reduce the cost of this term loan.

Next question from Clement Genelot from Bryan Garnier.

I would have 3 from my side. The first one is on the ease of the covenants. So why did you ask the bank to adjust [indiscernible]. Of course, I understand that GreenYellow needed some fresh money to carry out its plan. But you could have just excluded GreenYellow from the calculation. My second question is whether -- on net debt, so why is the net debt in France [ and Cdiscount almost half the ] goal in Q2 year-on-year? I mean when we look at the numbers given in the covenants page, so that's, of course, that's minus cash, that's almost stable in Q2 year-on-year while, in the same time, you did almost EUR 700 million of disposals over the last 12 months. My final question is whether on fixed asset sales in France, have you received any expression of such interests in overall assets in France? Of course, that's overall assets than just GreenYellow.

Thanks, Clement. The covenant adjustment first. It was, of course, necessarily it excludes GreenYellow from the computation of the covenants since GreenYellow will raise debt to fund its growth. They have a very ambitious plan that -- and they've communicated the plan which is to invest EUR 1.9 billion in the next 5 years, part of which will be financed by their cost operational cash flows, part of it from the new equity and the rest by debt raised at GreenYellow level. So we have to exclude GreenYellow. And when we got to this covenant computation, we discussed it with the banks and we looked at the situation of the group. We -- the assessment was that there was basically no more debts in Casino in the next 2 years. And the protection that the banks needed was the protection for the security of the debt, not the protection on the overall leverage, which is well under control. And the right way to look at it was to look at secured leverage. For the bank, it's important since they have a secured RTF to ensure that we do not raise additional secured debt instead of unsecured debt -- to replace unsecured debt, I mean. So we moved to secured debt covenants. They meant much more -- they make much more sense. Of course, we still have the old covenants. This has not moved on our dividend restrictions. It's still the same. It's 3.5 gross average. Total EBITDA over -- total gross debt/EBITDA that has moved in all our instruments and that protects all the lenders. We cannot add more debt to pay dividend from since it's impossible. We also have restrictions on the debt that we can raise. Basically, we can raise debt only mostly to repay existing debt. So the lenders are very well protected. And they feel that the situation has much improved compared to 2019 when we put in place the First Cobalt financing. So it makes a lot of sense to move to the new covenants. Of course, the consequence of these secured covenants is that they have much more leeway on the -- much more headroom, and that gives us, of course, total flexibility in realizing the disposal plan in a very efficient way because when you discuss with the buyer, it's much better not to be pressed by an immediate liquidity issue or immediate covenant issue. And you can do it in a very confident way, and you can get much better terms with the buyers, and that's what we do. That does not mean we will slow down the disposal plan, of course. We are still very committed to do it as fast as we can and reduce the debt to reduce our financial costs. But when we discuss with the buyers, we are clearly under no pressure, and that gives us a big advantage, and the banks can see that as well. As for debt, as explained, when we look at H1 versus H1, if you look at the net debt in France, I think that's the simplest way to look at it, excluding GreenYellow and just from the France [indiscernible] from June to next June. So you're right, that is not -- that is less than, of course, the total disposals that we realized during this period. Basically, our goal is to cover our financial costs with our operational cash flows -- our recurring operational cash flows, and that's mostly what we did in the last 12 months. There may be a little gap due to the working capital of Cdiscount, as mentioned. But mostly, we're already there, very close to that point at the end of last year. And that's mostly where we are at the end of June. However, there are other things that comes below the cash flow, and that explains that the reduction of EUR 200 million is not equal to the total disposal that we made. A big part of it, of course, is still the cash burn from Leader Price during that period that we still had to bear. I mentioned the EUR 288 million in H1 this year. There was, of course, a number last year that's probably close to that as well. So that puts us at around EUR 400 million over 12 months. To that, you have to add EUR 70 million last year of unwinding of the TRS Mercialys. We mentioned that, of course, at the time. And that was a net cash cost. And basically, that explains the decrease of the cash position between last year and this year and the gap between the 2 periods in terms of debt. But what matters is that now all these losses are behind us. As I mentioned, Leader Price is mostly over. By September, all the stores will have been transferred, so this is done. There isn't going to be much out to unwind or anything like that. So when we're looking forward, we see cash flows covering our interest costs with a margin that will grow over time and should be -- it should allow us to deliver organic deleverage and generate net cash flows after financial costs. That's the way we see things. French asset sales, do we have any expression of interest? Yes, we do. Of course, we don't give any details on these, on any discussions that we have or any incoming calls that we get, but I can confirm that we get incoming calls, we get discussions. And we will not communicate on anything before we have a deal signed with someone. So that's always what we've done. The recent deals that we announced, we have not communicated on them before. We have just said that at the beginning of the year, we were under discussions. They were under, the work process is going on. We think we did a very good deal with Floa because we maintained -- we sold our 50% stake above the equity value significantly. We got EUR 50 million more as part of our new agreement with BNP, and we get a 30% earn-out on the value creation of fractioned payment, which is a booming market. You probably heard of [indiscernible] and companies like that. And we think with BNP, there's a clear potential to be -- to do something very effective there. And we got 30% of the value created by 2021, so we -- '25 without having to invest in more. So it's a very good deal. And the next deals that we'll get, we think, will be good deals as well. But of course, I'm not going to disclose who calls us, for what assets. But I can confirm that, yes, there is interest for our assets, clearly, and not just the assets that you mentioned.

Next question from Nicolas Champ from Barclays.

I have 3. First one is I would like to come back on the working capital outflow in France on Page 27. I mean I think you mainly explained this by Cdiscount's negative contribution. Could you be more precise and quantify the impact of the working capital outflow for Cdiscount so that we can compute the working capital variation for French retail activity only? On table on Page 36, also, I would like to come back on the significant swing regarding the one-off charges. I mean it seems it basically stems from a significant shift regarding the disposal plan. There was a EUR 101 million charge in H1 last year that moved into a EUR 151 million profit this year. Could you elaborate on this item, on this significant swing? And the last question, I will make another try regarding asset disposal. I mean you had roughly EUR 800 million, I mean EUR 797 million to be precise, of assets classified under IFRS 5 for French Retail division. Could you elaborate a bit on the nature of these assets? Are we talking about real estate assets? Or are we talking about stores? I mean hypermarkets or supermarkets are included in these numbers? Could you elaborate a bit on this big number of EUR 800 million?

Yes, Nicolas. Working capital, actually, Cdiscount has published their net results and their cash flows this -- recently. If you look at their press release, you will find the cash flows in H1 compared to last year. And you will find that they have a change in working capital compared to last year that's roughly the same amount that the variation that you see in the table on the France including Cdiscount. So it's [indiscernible] I think it's about EUR 60 million gap -- EUR 70 million gap. Actually, yes, if you look at their press release, last year, there were minus EUR 114 million; and this year, minus EUR 183 million, so it's exactly actually EUR 70 million gap. So if you correct from that, you will see that France is basically the same as last year. On Page 36, the ARPU, yes. Last year, we had some depreciations of some assets. This year, in H1, what we did is, first, we recorded as exceptional benefits the EUR 100 million from JVs Apollo and Fortress. It's a profit in the sense that -- well, it's -- in accounting, it's an exceptional profit. It's recognized because the facts -- the disposals that have already been made make this payments certain. We don't have the cash yet, but it's already -- can considered -- can be considered as an asset already. So we recognize this in the accounts of the profit, exceptional profit. And apart from that, we have some provisions that we took last year, and we took these provisions back because of the revaluation of some of our assets. This is linked with the last question that you asked. And of course, the point is that last year we had some depreciations, and this year, we don't have any. So there's the both. Last year, there was a negative, and this year, there's a positive. On asset disposals, in the EUR 800 million, of course, there's Floa. Floa was under IFRS 5. So it will get out of the IFRS 5 once the deal is closed in a few quarters. There are other aspects, but unfortunately, as usual, I can't disclose much more because we don't disclose what's there. But I can say it's a number of different things. We have noncore assets that are -- that we can sell. Floa was part of them, there are others. And we can have -- yes, we can have some real estate, again, it's from specific assets. But I'm sorry, I can't tell you more because we don't disclose more than the assets that we announced when we sell them. So we're not Floa -- we didn't say that Floa was under IFRS 5 before we announced the sale, but it's now, of course, clear. And it's booked in our -- in the detailed accounts. That's the only asset that we revealed is in the IFRS 5 because we don't want to show our hands to the buyers. But of course, these are our assets where there is an ongoing process, and we expect these to be sold. Importantly, these assets that are under IFRS 5 should not impact significantly our EBITDA when we sell them, either because at Floa they are not recorded as EBITDA at all or because they are not a big contributor to our EBITDA. That's what I can tell you.

And last question from Robert Joyce from Goldman Sachs.

I'll go with 3 as well. Just on the French free cash flow, a few definitional changes. I'm just wondering if you could give us the equivalent 12-month number for the EUR 346 million you give for the French free cash flow? Just so you said your goal on a 12-month basis was to cover the finance costs. So if you could -- if you have that number handy on 12 months, that would be helpful for us. The second one, just to understand Leader Price, it's a little different to how I understood it. Am I right in saying you had a sale price of EUR 648 million. You said you covered cash out of around EUR 400 million to date, expect another EUR 70 million out, and I think you bought back stores around EUR 55 million. Is that the way to think about it? Or will this leave you with a sort of flat sale price? And then the third one is just on the asset disposals. Just to cover the gap between, I think, what we've guided to EUR 4.5 billion -- hoping EUR 4.5 million, and you've got about EUR 800 million in the IFRS 5. Is there anything you can say on the assets beyond that? Would you look outside of France for asset disposals?

Thanks, Robert. The last 12 months, I don't have the numbers right here, but you -- I think you can compute that actually when you look at -- we published net debt last year end of June and this year end of June. And you have the financial costs. So from that, I think you can basically compute them. Of course, we will give the numbers at the end of the year. But I can say that you can compare to last year, the gap is mostly on working capital, as I said. And the improvement is on the recurring cash flows. So we expect that this year that on this perimeter, we will improve. And last year, [indiscernible] GreenYellow is not a contributor to our cash flows. So in the end, when we look at French retail including GreenYellow, the goal is, of course -- French retail excluding GreenYellow and including Cdiscount, which has -- should have a small positive cash flow generation as we did last year. The goal is to cover the financial costs. That's the clear goal. And we think that the H1 number actually confirmed that we are on the right track for the goal since we increased the operational cash flow by 50%. And this is the key driver because, in the long term, we know we can target working capital slightly positive if we grow the sales. But we've done most of the work in inventory management. We can do some more. We have some more inventory reduction to do. But if we look at the mid- to long term, we need high operational cash flows to be -- to have net financial -- net cash flows after financial cost positive. And that's clearly the goal. But we think the numbers that we showed here are perfectly consistent with that. On Leader Price, I think your question related to basically what I already said. But yes, we have some cash burn on Leader Price because we -- as part of the deal, of course, we still have to bear the cost of operating the stores before they were transferred to Aldi. And they are transferred by batch so that Aldi can convert these stores to Aldi stores. By next September, it will be over, so there will be no more stores to operate and no more Leader Price structure. We have -- we just keep the franchise business, but this franchise business is profitable, so there's no issue with that. And of course, we have to buy back the franchises, but that's been done last year. So it's not an issue anymore. And to some of that, I would say that, really, we were very happy to have sold Leader Price at net EUR 600 million; EUR 650 million that we got from Aldi and EUR 50 million that we had to pay the franchises to do that, because it's a business that was clearly bleeding cash more and more. And if we haven't sold it, we have had to close this business, and it would have cost us a lot. So getting EUR 600 million for this business was really an excellent deal. And now from now on, looking forward, of course, there will be no more source of cash burn below our operational recurring cash flows, which means that if we reach the target, which is clearly to cover the financial costs, we'll be able to deleverage organically. As for asset disposals, yes, we have EUR 3.1 billion. We have EUR 800 million under IFRS 5. Other assets are not under IFRS 5, which means that there is no ground to date to classify them as such. To classify an asset as IFRS 5, you need to have an ongoing clear process to dispose of them. We have a number of opportunities, but as mentioned in our full year results, we have additional flexibility now to realize the EUR 4.5 billion because we have a number of valuable assets in France. In some of these assets, we have flexibility. We can keep control of some of the assets while monetizing part of them. That is a possibility, for instance. But to be clear, the EUR 4.5 billion does not include anything outside of France. So the goal is to reach the EUR 4.5 billion by selling assets or part of assets in France. And we are fully confident that the value of our Latin American assets, which we plan to keep, so they are not part of the EUR 4.5 billion, to be very clear again. I think this concludes the discussion. If there is no more question, then we wish all of you a happy vacation for those who take some in August. And thank you for your attention.

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you all for your participation. You may now disconnect your lines.