Ladies and gentlemen, thank you for holding and welcome to the Sligro Food Group event call. During the presentation, all participants are in listen only mode, and later we will conduct a question and answer session. I would like to hand over the conference to Mr. Rob van der Sluijs. Go ahead please, sir.
Thank you. Thanks everyone for dialing in on this presentation on our half year figures 2020. I would like to take you through the presentation that we have made, which you can download from our website, for about, let's say 20 minutes. After that there is sufficient time for questions and answers. I would like to start on sheet number three, to explain a little bit more about the development of the net sales.
Of course, it has been a very strange first half year for Sligro with, of course, a major impact of COVID-19 and the measures taken by the local governments in the Netherlands and Belgium to address the outbreak. That had a huge impact on many of the customer segments that we service as Sligro in both countries.
In the end, we see that after the first half year, we have a 17% decline in net sales. A little bit over 20% organically because some of it was compensated, of course, by the acquisition of De Kweker that we did last year. Of course, also in the De Kweker sales added, which is now EUR 42 million. Well, without COVID-19, we had expected that to be, let's say EUR 10 million-EUR 15 million higher.
Besides the organic impact of COVID-19, of course, also in the acquired net sales from De Kweker, there is an inherent COVID-19 impact. We do see a gradual improvement in the net sales development. Immediately after the COVID-19 outbreak and the effects in the Netherlands and Belgium of mid-March, we saw that our sales dropped with 55% and is slowly recovering to 35%.
That doesn't match with the overall -17% over the first half year. That's because these percentages reflect the net sales excluding tobacco sales. Tobacco sales, which we typically have as a service product to petrol outlets, they remained at 100%, even showed a positive index. As those sales are roughly 10% of our business, that had a very distorting effect on the development.
The quality turnover was reduced by 55% back up to 35% by the end of June. Fortunately, and that's a little bit forward-looking, we see that as of July, that trend improved further, luckily, because again, a number of measures were relieved in the Dutch market, which means that the hospitality sector is improving further. I will say a little bit more about that later on in this presentation.
We saw that in the petrol segment and healthcare, the decline was limited. In hospitality, roughly 90% of the business disappeared overnight. Fortunately, at this time, we are roughly around 90% back. Only a 10% decline in hospitality. Catering and events, business catering specifically, has declined significantly, and also events, of course, and they are still to date at very low levels.
Roughly 25% of what it used to be. That's, of course, the effect that people work from home and not in the offices, and major events are not yet allowed. That part of the business is still at a very low rate compared to the levels last year. Fortunately, we are one of the players in the foodservice market that have both delivery and cash and carry in their portfolio.
The big chunk of the decline was in the delivery part of the business, so we saw minus 75% at the low point. Cash and carry more or less managed to stay afloat and today shows positive indexes compared to last year. That means that the mix delivery versus cash and carry has changed significantly compared to last year, where with 68% delivery was very dominant last year.
We see that the gap has closed to 59, 41 cash and carry. That, of course, has also a positive impact on gross margin. As mentioned, De Kweker also, of course, was hit, so the acquisition turnover would have been higher without COVID.
On the next slide, we see this in the graphical form, where we see that we started the year quite successful with turnover levels above 2019, then the major dip with the biggest impact in April, and then the recovery from that moment onwards, which fortunately, it's extended into July as well. On sheet number five, the summary of the measures that we've taken to cope with the loss in net sales.
I think we've mentioned most of these measures already in previous press releases. These measures altogether have helped us during these last few months to keep an EBITDA level above zero. Positive results, which means that we didn't have a cash outflow from the operating results. Of course, net profit was impacted severely, but our focus was not as much on profit, but more on cash.
Having a cash neutral or cash positive operation was the primary goal, and we succeeded to get to that in all of the months during COVID-19, to a large extent with diminishing impact of government support. That meant that in June, we no longer made use of the Dutch government subsidies under the NOW arrangement, and still we had a positive EBITDA.
We see that the recovery is in progress and of course, we hope that we'll be able to extend that into the second half of the year. Of course, we want to remain flexible. In the second half of the year, we prepare for a longer recovery period, further adaptation of the organization, and of course, also getting the financing in order to support that.
Well, at least preparing for a potential second wave, which could happen, and to make sure that we then have sufficient flexibility in the organization on one hand, and sufficient funding in place on the other hand to get through that period. We think we will be successful in that in the second half of the year. Moving along to sheet number six on gross margin.
Gross margin as a percentage of sales has declined, specifically because of all the mix impacts, but also because we had an extra amount of shrinkage. Of course, we have a lot of fresh products in our supply chain, and with a certain drop in sales overnight, of course, before we have the supply chain in order, that takes a while, and that led to an additional EUR 3 million shrinkage as compared to last year.
Looking to other operating income on sheet number seven. Not a lot of big items in 2020. We sold off some real estate objects, some which were in a sale and lease back. We have a cost in the future, but also we sold three locations that were on our assets for sale list which we were able to divest. On two of the items, we had a book profit of around EUR 1 million, which is presented here on the other operating income.
Of course, in the comparables last year, in the first half of the year, we still received a fee for the services that we paid or received from the consortium that bought EMTÉ, which is now as of the second half of last year, completely gone. In the comparables, that's a EUR 5 million difference.
Looking at the operating costs, we have to bear in mind it's on sheet number eight, of course, that we have a consolidation effect of De Kweker, which adds roughly EUR 11 million in cost, specifically on employee expenses. You can see that we were able from that level to reduce costs significantly. Combination of subsidies in the Netherlands and Belgium.
On the other hand, severe measures that we've taken to scale down staffing costs, flexible staffing, and also transportation costs. One impact of course here is also the provision for bad debt. An amount of EUR 3 million was added additionally to that provision as a result of the position of the current receivables and loans with customers.
We are not too disappointed about that level as we try to facilitate our customers whenever possible to give them some delayed payment terms to first be able to recover their business before they started to pay the old balances with Sligro. We see that we get a lot of appreciation in return, and also that most of our customers are able to fulfill the repayment schedules that we have agreed.
We see that the money is coming in, and we don't run into huge problems. Of course, a EUR 3 million additional provision is quite a lot of money still, but much less than we anticipated at the start of this crisis.
We then go through depreciation and amortization, we put some of the software in Belgium, old software in Belgium out of use, and we have successfully launched our new web environment on SAP, which means that the old environment will be put out of use. We have some remaining book value of that, which is now fully amortized in the first half of the year.
On the other hand, we see an increase of the lease-related expenses. Of course, in the last couple of years, we've done quite a lot of sale and leaseback transactions, and of course, that increases the lease amounts in this part of the P&L.
On the other hand, this year, of course, an extraordinary item is the impairment on Belgium, and I want to go to the next slide to explain a little bit more about this. Does this mean that we don't have any confidence anymore in Belgium? No, I would say on the contrary, we think we can be very successful in Belgium.
Strange as it may seem, we think that the after effects of COVID-19 and the impact it will have on the market and the competitive landscape will put us in a better position eventually. Of course, we also have to do the impairment analysis on a technical basis. We knew at the end of 2019, as explained in our annual accounts, that the headroom in Belgium was quite limited.
We see, of course, that with the impact, specifically on the short term of COVID-19 and the recovery phase in 2021, in combination with an increased risk profile and as a result of that, a higher WACC. The outcome of the impairment calculation is that we are not able to recover the full investment base in the next five years.
We will eventually, we expect, but of course, we have to take the impairment into our accounts based on the outcome that we have today. That leads to an impairment of some of the elements in Belgium. It is mainly goodwill. The full goodwill that we paid for JAVA ISPC is now impaired, including also the other intangibles on customer relationships.
The other intangibles on the locations that we have in Belgium and the brand names remain and will be amortized through the P&L in the next years, as we have done so in the last couple of years. That doesn't, of course, mean that we are happy with this. It's not only a technical effect. Of course, we fully realize that we still have to prove that we can get Belgium to a profitable situation.
We think we are doing the right things to get there, but the results so far are not on the level that we expected, but we think that we will manage that in the right direction in the next couple of years. On page number 11, a number of remarks on the financial income and expenses. Not a lot of strange things.
The fiscal position with a hit in the result is also a little bit atypical as presented here. This includes also a release of a deferred tax liability related to the impairment that I just elaborated on. For the rest, no specific items to be mentioned on this slide. On sheet number 12, we put in an EBITDA bridge from reported to the NOW we used for our covenant calculation.
It's a question that we received a few times from various investors and analysts. We thought we would include it here in the presentation to show how we get from reported EBITDA to the one we use for the covenants calculation. On sheet number 13, I think, of course, the summary of net profit and how that translates into earnings per share.
We already announced and was also confirmed during the general meeting that we won't pay the closing dividend for 2019, and that we stick at the interim dividend that we paid out during 2019. We also communicated with an update on the financing that, well, on the one hand, as a result of the new financing agreement, we would not pay an interim dividend in 2020. We also already announced that we do not see a basis in the results of 2020 to pay a dividend altogether over 2020, also not in 2021.
I think the results that we've presented at the mid-year support that remark. We give full priority to recovery of the financial position. Of course, as we will recover again in the course of 2021, we will see what the opportunities for dividend will be going forward.
Maybe to, in these times, the more important table to show, which is the cash flow statement on sheet number 14. There we clearly see the impact of COVID-19 and the impact of our efforts. On the one hand, of course, we see that the cash flow from operating activities is down significantly as a result, of course, of the lower operating results.
We managed working capital more or less at a stable level compared to a half year ago. No big changes in that. Of course, we also used the opportunity to defer payment of wage taxes and duties. We will pay those in the months of July and June. For the rest of the year, we won't make use of any delays. By the end of the year, we will have paid all amounts due.
Another important point is, of course, the investment. We have reduced the investment levels to the maximum extent, but of course, we have finalized a number of projects that we were working on. On the one hand, of course, all the distribution network changes that we required for the Heineken Sligro integration. That is now almost finalized, which means that the CapEx program related to that is also almost finalized.
In the first half of the year, we still spent EUR 20 million on that, which is, of course, recovered to a large extent by the divestment of these assets in the Sligro and HeinekenSil and Wiesberger transaction. It means going forward that, also in light of recovery from COVID, but also planned regular business going forward, the CapEx levels of Sligro will come down to much lower levels as compared to the last three years going forward.
That, of course, will help in the further recovery of our financial position going forward. On the next sheet, there is a segmentation of the cash flow. I think there's not a lot to add to that statement. It's just a split up between the Netherlands and Belgium. On sheet number 16, a few words on the financing side. Of course, when we saw what happened to our business mid-March, we made new forecasts and anticipated with the knowledge at that time that we could run into issues on the covenants that we have in our financing agreements. We immediately started discussions with our banks and our financing partners to get some more headroom in case these forecasts would materialize.
Before the end of the first half of the year, we came to an agreement with both the banks and the USPP financing partners to have at least some more headroom available in case we would break through the covenants. Fortunately, the efforts we put in and the measures we took to safeguard the financial position have paid off to such an extent that in the end, we did not need this extension.
We ended up at a leverage ratio of 2.5, where in the original agreements, the level was a maximum of 3.0. We did not need the extended headroom that was provided. We are very happy and grateful to the funding partners that they were willing to support us to this extent.
Of course, there's still a lot of uncertainty to come, but with the current visibility, we also expect that we can stay within the limits of the covenants by the end of this year. Of course, still a lot can happen in a short period of time as the first half of 2020 has shown. We are not too pessimistic about that.
It also means that we have sufficient liquidity available to fulfill our repayment obligations by the end of the year, which is the repayment of EUR 75 million on the USPP deal that we did in 2010, and a scheduled repayment term of EUR 10 million on term loan. We have sufficient liquidity to cover for those repayments.
In the second half of the year, we are going to revisit the funding structure that was already planned pre-COVID-19. We're going to finalize those discussions in the second half of the year to have a more structural midterm funding structure in place. Again, that also supports the ambitions of Sligro Food Group. In the next sheet, we see the segment figures.
I think I will skip that and go on to sheet number 18. A short update on where we are in view of the claim that was put forward by Jumbo and Coop, the consortium that bought EMTÉ. I think the positioning is well known to the market. We had a preliminary hearing session a few weeks ago in which we were able to confirm our position. We feel that we have a strong position in this case.
We don't expect that there is a chance for the consortium to put their claim forward successfully. This is also the reason why we have not provided for any amounts in our results, because we think in the end, this claim will not be successful. Going to some more information on what we've done in the Netherlands.
On sheet number 20, you could see the, for us, most relevant economic indicators, consumer confidence, and unemployment. Of course, COVID had a major impact on consumer confidence, and we see a turn in the trend line of the unemployment rate. We think this will also be a factor going forward in our markets after the big impact of COVID. It's something that will, of course, have an impact on future development of the market.
On sheet number 21, we've summarized the most important developments, what did we see happening in the first half of the year. The shift from foodservice to retail, so people no longer eating in restaurants but eating at home. This had a big impact on the supermarket development. We've played a role in this for a short period of time.
We opened up our cash and carries for the public, shut down again once the hospitality sector could reopen on June 1st. The measures we've taken, I already addressed those in the previous sheet. I think also important that during the last couple of months, we did put a strong focus on continuing the most important strategic programs, and we could even accelerate the integration of De Kweker we planned to integrate in the first quarter of 2021.
We will now be able to do that in October of this year. Also the integration of Heineken premises was at a higher speed, which meant that last week we closed the last Heineken distribution center. Now all of the old locations of Heineken are integrated in the network of Sligro.
As soon as business starts picking up again, and we see this already happening in June and July, we expect to benefit from the fact that it's all integrated already. Of course, we spent also considerable time and effort on the SAP implementation on two ends. One, the online environment, which is migrated to SAP Hybris, that has gone live as planned around the half year.
The first customers are onboarded and in the second half of the year, all of the customers of Sligro and also the combined customers of Sligro and Heineken will be onboarded in the second half of the year on this new SAP platform. That was the first big go live under SAP, which was done successfully.
On the other end, we see that the preparations on the ERP landscape, and the next phase, which is the preparation for go live, requires our people to be available also on premise, and that in these times of COVID is very difficult. As a result of that, we have postponed the go live to next year.
On the other end, I think we have been very successful so far in the build of the system, which is almost finalized for the first prototype, and we will now start to work on integration and testing. On the other hand, we have prepared our business in terms of process alignment already to fit the new way of working in SAP, which are a few very important elements of change that are already in progress in the organization pre go live.
We expect to go live with our ERP landscape in the second quarter of 2021, and then have the full rollout in Belgium around summer completed. If we then look at De Kweker also there, as mentioned, sheet number 22, we were able to speed up the integration process.
One other thing that has changed is, in first instance, we kept the transportation capacity to ourselves in the acquisition of De Kweker because we believe that in the end, it would be good for Sligro to have at least a portion of the transportation owned and not just hired with external partners. We still believe that is a good strategy, but not at this moment, because hanging on to the equipment of De Kweker transportation would have meant a significant CapEx.
We're replacing roughly 50 trucks this year, and it also involves 45 people that, of course, in these times, do not have a lot of work. We decided to transfer these employees to two of our transportation partners, and at a later stage, we will see about setting up our own transportation component, if that still suits our strategy.
We had a different point of view on this in relation to COVID. Well, on the Heineken partnership, I think I've already told quite a lot. On sheet 23, you can read some of the steps that we have taken and will be taking in the course of this year. On sheet number 24, we see that the rollout and the integration is done as planned and also finalized.
The last three elements are in the center of the Netherlands, in Vianen, we are opening a new distribution center, and then we will have some optimization, and we will transfer our slow mover and account only facilities from Den Bosch to Nieuwegein, which is also more or less in the center of the Netherlands. As explained, we will have the greater integration into our delivery center in Amsterdam.
These are still scheduled for the rest of the year, but all the Heineken distribution centers, as mentioned, with Oss, the last one was integrated. On sheet 25, we can see the network development of sites. As mentioned, we postponed the cash and carry refurbishment to the 3.0 in Heerlen and Arnhem to next year, probably also we will postpone that one year further.
On the delivery service, we finalized Soest and Amersfoort , Maasvliet and Breda, and we are in the final stages of finishing Vianen, which is already a leased location, which we are now preparing to make it a delivery service of Sligro. That's still to be planned. The main changes related to the Heineken integration, the CapEx program is finalized. On the next sheets, we give some more insights on where we are with our cash and carry next generation project.
Of course, ongoing trend in the market is that market is moving towards delivery and moving away from cash and carry. Of course, at some point that will get to a halt, but we know that we have to change the setup of the cash and carry stores to meet that new future. It means implementing areas of digitalization, implementing areas of delivery from the cash and carry location, but also changing the setup and infrastructure in number of square meters, product range, et cetera.
The whole of that is under the umbrella next generation cash and carry, which you can see in the next couple of slides. We'll quickly run through them. Maybe on sheet number 28, you can see that how we are going to approach customers in true omnichannel setup.
Customer orders online or customer purchases in the outlet, it still means you can have different variations in either collect or get delivered from either of the elements in the network. That looks very promising. On the next sheet 29, you see that already in half of the cash and carry outlets, we have implemented delivery from the cash and carry outlets, which is embraced by our customers.
Delivery on a structural basis is done by the delivery service. Every week an order or every week two deliveries or more, that is done through the specific delivery network. We also have some customers that have the bulk of their shopping in cash and carry, but every three, four weeks need a one-off big delivery. We don't do that in the delivery service, we do that from the cash and carry environment.
That's welcomed by our customers warmly, and we see that this is developing in a positive way for Sligro. We will keep on moving ahead in this direction. On the other end, we see that we can be more optimal in promotions by the use of online, which we show in sheet number 30 and beyond. I will, in view of the timing, move towards Belgium, which is presented from sheet number 37.
I think similar patterns in the economic parameters, consumer confidence down, unemployment, we don't have the figures yet of Q2, but it is to be expected that unemployment will go up in Belgium as well as a result of COVID and the post-COVID economic circumstances.
In Belgium, we saw on sheet number 38 that in Java, which is care and cure segment, more healthcare related, the net sales were not dropping to the extent as we saw in the Netherlands. On the other end, on the Sligro-ISPC side, which is of course more hospitality and catering related, there we saw big chunks of the turnover diminishing.
Of course also, fortunately, in Belgium, the recovery has started. In Belgium, the cash and carry areas are open to the public at least until September 1st, so a bit longer period than the Netherlands, and that helps in the recovery of the business in Belgium as well. On the next sheet, we see that we have done the styling updates in Ghent and Liège. We didn't do the full makeover of the outlets.
We will await the SAP implementation first and then do the full remodeling of Ghent and Liège to the look and feel that we already have in Antwerp available. We finalized the headquarters refurbishment in Rotselaar, and we decided to sell off our premises in Bruges. We were not confident that we would get a permit to establish a cash and carry on those premises, so we were able to sell it off at book value. We will look for other opportunities going forward.Rotselaar
Those are specifically mentioned at the bottom of the sheet. In 2020, 2021, we will look for the delivery service outlet in the area of Ghent, so that in the combination of the former Java warehouse in Rotselaar and a new delivery set up in Ghent, we will be able to cover most of the geography in Belgium, specifically Flanders.
On the other end, we are looking for cash and carry environment in the area of Leuven and Brussels in Belgium. Although we have a tight lock on CapEx, we will make our choices very specific. We know that growth in Belgium is essential to establish a profitable and a good position in Belgium.
We will be looking to expand the network if a good opportunity, a good location comes along. We have a few sheets on the update on SAP, but I think in a more general sense, I've already explained the most important elements of it, including the last few pages from 43 onwards on the new online environment.
With this new online environment on SAP, we are able to have a faster, more customer-friendly interaction, but also from a commercial perspective, by integrating the Sligro website and the ordering site into one portal, we will have a renewed force to help our customers and also to bank on the integration of Heineken and Sligro as already planned. Sheet number 46, you can see the rollout that we planned for the rest of this year.
By the end of the year, almost all customers of Sligro and Heineken combined will be on the new platforms. The last sheet I want to highlight is the outlook for this year. It's on sheet number 48. We think there will be continued pressure, although it is diminishing as we speak, on the markets.
Of course, we also have to take into account that there might be a second wave, but we do expect that the measures taken will not be as severe as the ones we've seen in the first half of the year. Of course, that has some uncertainty in it. On the other hand, we also know that after the COVID-19 crisis, we will roll into a more of an economic downturn, which of course will have its impact on consumer confidence and unemployment, which will also have an effect on our market.
That's why we also think that we'll take at least until the second half of 2021 before we see a recovery of turnovers to the levels before COVID-19. We will adapt our organization in view of this, so we will see where we can make the organization smaller and more flexible.
It also means that we continue in the tight cost control and targeted investment, so keeping CapEx at the lowest possible level, but invest in the opportunities we really believe in, and have also an impact for the longer term profitability. We will also further look for integration opportunities of work done in the Netherlands and Belgium, and we already announced that by the end of last year that in view of the reduced growth levels in Belgium, we would look for opportunities to combine Belgium and Netherlands activities on IT.
This was already the intention on supply chain. We see more and more opportunities, but also on the level of purchasing and format management. We think we can do a lot more in a more Belgium-Netherlands approach instead of separated for Belgium and The Netherlands, which will have a cost benefit going forward.
If it is required to cope with another wave, then at least it's in place. If the second wave does not come, we will use this situation to recover faster and improve our position going forward. We also expect with an increased volume to bank on the Heineken integration and the delivery and new setup of the ordering website as we have launched it recently.
We won't make any forecasts for the full year results, but in general, a few things to say about this. We have seen a recovery during the second quarter of the year. We expect that will extend in the month of July, and then we will be at a level of roughly, we think 80% of the levels we saw in 2019, so minus 20.
We will think that will be the level for the third quarter of the year in terms of sales. Then we expect only limited improvements until the end of the year. By the end of the year, we expect to be around, let's say, between 85% and 90% of 2019 levels. Then we expect that for 2021, it will take until the end of the year before we get back to 100.
That doesn't necessarily mean that the market will go back to 100, but we do expect that as a result of the impact of COVID, which was severe for Sligro, which is severe for Sligro, but is also severe for all the other competitors in the market, that in the course of next year, the competitive landscape will change significantly, either by withdrawal or bankruptcies of a number of competitors, and maybe there might be acquisition opportunities.
Anyhow, we think we can benefit from further consolidation in the market, which for Sligro means that we will have some recovery out of those areas as well in the course of 2021. That concludes my presentation, and I would now like to give you the opportunity to ask any questions you may have. Please go ahead.
Ladies and gentlemen, we will start the question and answer session now. To be registered for the question and answer queue, please press star one. The first question is from Mr. David Vagman, BNP. Go ahead, please, sir.
Thank you very much, good afternoon. Some questions on your statements that you just made. Could you comment perhaps on how trading conditions in June and July so far compared to your initial estimates, your forecasts? Second question is, if I'm not mistaken, you earlier on, say a couple of months ago, you said that Sligro intended to raise prices in 2020, partly because of cost inflation.
Did you already succeed in increasing prices? If so, could you please share some of your experiences on that? Third question is, do you, considering also the July trend in hospitality, which was improving. Do you have any updated thoughts on the hospitality industry possibly being permanently weakened, or do you consider chances to have diminished? Thank you.
Okay. Thank you. Well, on the first question, how does the trends relate to our initial estimates? Of course, we have been adjusting and readjusting our estimates month after month. If we look at what we thought would happen in the second part of March, early April period, then the recovery as we see it in June and July is faster than we expected.
We saw a more gradual improvement from the -55% stepwise to more increased levels in the end of the year. We see that with the relief of the measures by the government that the impact is bigger and more positive in June and July. That is at least a promising outlook.
On raising prices, if I recall correctly, we specifically mentioned that, of course, we see that in the supply chain as a result of shortage and of course increased ask for certain specific products like gloves, cleaning materials, et cetera, that our suppliers are also increasing prices. We made the choice that we follow those prices and then increase. We did not implement or put forward a general price increase overall.
On those elements, and specifically of course, product sourced from Asia, which were limited available or specific product groups where we've seen month cost price increases there we followed, but we did not do a general overall price increase. Your third question, yeah, we see that the hospitality sector is improving significantly.
From -90% at the start of the COVID measures, it is now we think at around the level of -10%, which is promising. Of course, we see that a big shakeout is going on amongst our customers there. A number of outlets is not able to cope with the COVID crisis. Others are. In the end, it's all about the volume that consumers are willing to spend in the out-of-home market.
That is much more determining how that will work out for Sligro, because in the end, of course, with our market share, if one outlet stops then the volume will move to another. There, of course, a recession scenario and pressure on the overall market, of course, will have some impact.
We do think that in the next couple of years, the next 12 - 18 months, there will still be some impact of a recession following COVID-19, on this part of the market. For us, the main market to watch in that respect is the catering market and especially the business catering market, because there, of course, we see that there's no big recovery yet in that segment, which is also a big segment for us, because many people are working from home and not in the offices. Also not enjoying lunch in the offices.
We don't know how behavior will change going forward and how sustainable the working from home will be and what the impact eventually will be on the catering market. That's still one to watch, which has some uncertainty in it for us. I think I covered your questions with that.
Thank you.
The next question is from Mr. Marc Zwartsenburg , ING. Go ahead please.
Thank you for taking my question. I have a question regarding the recovery in Belgium versus Netherlands, as the government measures have been different in both countries. Are there differences you are noticing in both markets? That is one. Secondly, also I would like to know how are you able to improve your position in the market due to COVID-19, on the Belgian market. Thank you.
To start with the first question, I think if we look at big chunks, the development in the markets in Netherlands and Belgium has been more or less similar. Of course, in the Netherlands we already, in all geographies in the Netherlands present and in a wide variety of customer segments.
There we see a more even dip, but also more even recovery. In Belgium, of course, the big chunk of the turnover, specifically half more or less is Java. Java is more for the institutional market. There we saw less of a decline in Sligro-ISPC. Antwerp and Ghent and Diegem, we saw a bigger decline and now also a slow recovery.
The measures in place by both the Dutch and Belgian government more or less have similar types of effects. We do see, however, that in Belgium, we have a big chunk of our business in some of the big cities in Belgium, which also depend significantly on tourism, which is really low at this moment. If we look at it today, we see that recovery in Belgium is a bit slower than it is in the Netherlands, as we feel. If we look at the competitive landscape in Belgium, we see there's still a big variety in players. Only a few bigger players. We see that the impact on Sligro is, of course, severe. Also on Sligro in Belgium, the impact is severe.
Of course, Sligro in Belgium can benefit from the strength of the group in that sense, and will survive and will stay afloat, which I doubt will be the case for all of the competitors in the market. We anticipate that not only among our customer base, we will see a shakeout, but this COVID-19 crisis and the economic downturn following this crisis will, in our view, cause also a shakeout on the supplier side. Which is then a potential opportunity for us to pick up the business and strengthen our position in Belgium.
Ladies and gentlemen, if there are any additional questions, please press star one. There's another question from Mr. David Vagman. Go ahead, please, sir.
Yes. Thank you, operator. One question on the refinancing, or actually two or three questions maybe. In today's results presentation, you mentioned that you agreed a temporary new covenant level for your net debt ratio, 4 instead of 3 previously. Earlier, you previously didn't disclose that in the press release of July 1st, when you published the new financing agreement.
Was this adjusted ratio the only change in the covenants, or have there been any other changes in conditions that have been agreed upon? The second question related to this refinancing is the stretch ratio, just to be sure on that, the stretch ratio of 4, was that only in place for the half year covenant test? Will Sligro therefore have to comply at year-end to a ratio of 3? Thank you.
Yeah. Your first question. Indeed, it was a temporary increase for the 30/6 period, and that had a lot to do with the effect that, of course, for many of the USPP note holders, repayment is scheduled for December in this year. That means that their horizon does not go beyond 31/12. You are correct that for the remaining USPP holder that we have, the covenant is still at 3.0.
By the end of the year, under the current circumstances, we have to comply with 3.0. In our current outlook, we expect to be able to do so. Still, we want to continue the discussions with this partner, also with our banks, to make sure that if something would happen in the second half of the year unexpected, that we could cope with that.
That's why we will have ongoing discussions in the second half of the year. With the banks, it is already agreed that we can go up to 3.5, going forward. That is increased from 3 to 3.5. With the USPP financing, and of course the lowest is the most important one, because that's effectively where you measure yourself against. That is still at 3.0 at 31/12.
That's something that we still have to discuss about. You asked about other specific conditions. Well, I think we mentioned that before paying dividend to the shareholders or making huge investment decisions, then the USPP holders in the 2010 deal would ask for repayment of their position first. These were taken into account. For the rest, there were no specific other limitations entered into the contract. Let's see.
I think I've then answered most of your question.
There are no further questions at the moment.
Okay. I would like to thank you all for joining in on this call. On October 22nd, and in a previous version of the press release, it was stated October 23rd on Friday, but it should be October 22nd on Thursday, then we will publish our Q3 trading update with more news on the development of our sales in the third quarter. For now, thank you all. Enjoy your holidays for those who still have to do that. Hope to hear from you again. Thank you.
Ladies and gentlemen, this concludes the Sligro Food Group event call. Thank you for attending. You may now disconnect your line. Have a nice day.