Earnings Call: H1 2021

Jul 29, 2021

Ladies and gentlemen, welcome to the Casino Group 20 21 Half Year Results Conference Call. I now hand over to Mr. David Teweck, Chief Financial Officer of Casino Group. Sir, please go ahead. Thank you. Good morning, everyone, and welcome to Pizino 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-nineteen 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 proximity 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, CityScout and Grinello 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 city count and energy transition for Brunello. 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 +24 percent at constant exchange rate. At the group level, we had stable sales during the semester, with the 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 23,000,000 EUR 306,000,000. 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 Grignelo, as mentioned, during our full year results. Grignelo 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 takeaway to 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 438,000,000. Net debt in France declined by EUR 158,000,000. 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. Their 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 non food sales and the specific impact 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 166,000,000 in H1 at the French retail perimeter, EUR173,000,000 including sales count. Following the successful execution of our transformation plans, 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 increase in the size of our network. We opened 3 53 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, Caddo and Amazon. The 3rd 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 1,800,000,000 and reviewed financial conditions and covenants. Our maintenance covenant at the end of Q2 was met very comfortably with gross secured debt of our EBITDA covered with a margin of €359,000,000 in our EBITDA. We have also put in place a new RTF 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 Flora Blanc, securing €179,000,000 of total proceeds while maintaining a disclosure to future value creation infractions payment. We also secured close to EUR 100,000,000 earn outs from the Apollo and Fortress JVs. Taking this into account, the total value of fund disposal increases by close to €300,000,000 reaching €3,100,000,000 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 LatAm with an EBITDA margin that's plus 96 bps and trading profits growing 84 bps. This led to an increase in trading profits by 33% at constant exchange rates for the whole segment. Assai has done particularly well with plus 22% sales organic growth in Q2 despite the impact of COVID in Brazil. 2nd, the spin off of Versailles has been a clear success. The value of casino share in Latin America assets has doubled since the spin off announcement in September 2020 from EUR 1,100,000,000 to EUR 2,300,000,000 Before going into our detailed results, let's move to a 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 plans launched in Q3 2020 with cost savings installed and back office of €30,000,000 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 Brunello and Vindimia, The net improvement was plus €49,000,000 of our 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 Frempri, Vival, Monoch, Naturalia, Spa 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 +103%, far above the market. Our partnership with Amazon has been extended again with 2 new cities included in the Monoprey offer on Amazon for same day delivery and our Click and 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 Fran P 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 3 50 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 HD. Turning to Page 8. A key feature of our strategy is fostering commercial innovation in our value 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 Monoprene, customer service has been extended to include concepts around health with personalized advice, global products from a distance of less than 100 kilometers and an offer dedicated to urban mobility. Frontry continues to expand its network with 150 openings planned over 2021 2022, especially in the surroundings of Paris with a strong emphasis on local services, including evening catering. And casino banners in high parent supermarkets are also focused on innovation with the introduction of artificial intelligence solutions in store and specialized corners rolled out with partners and start ups. 9 small share stores have been converted into casino supermarkets with an offer adapted to local needs and a significant uplift in sales. Page 9, moving to CityScout. Cdiscount has continued to actively focus on its key product growth priorities: marketplace, digital marketing and optopia. 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 the 2 years to reach EUR 199,000,000 over the last 12 months. Cdiscount's ecosystem of 14,000 vendors and 100,000,000 of SKUs is driving the success along with its top quality logistics facilities, which helps expand express delivery for 3rd party vendors. As an example, Cdiscount now has 2,200,000 SKUs eligible for express delivery compared to 1,300,000 last year. 2nd, 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 solution, Cdiscount's at retail solution caused a 100% self care advertising platform, enabling both sellers and suppliers to promote their products and brands. And 3rd, Otokya, Cityscount's new B2B business, dedicated to turnkey solutions for online retailers. Etokia offers ready to operate services to international retailers and immersions. 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 Merchant 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 €49,000,000 in H1, plus 148% for 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, total GMV grew plus 2%. That is a 14% growth over 2 years. In H2, CityScout will continue to roll out its plans for further high top line growth in marketplace, digital marketing and Tokyo, delivering again significant increase in its EBITDA. On our new businesses in B2B, on Page 10, a few words on relevancy of data monetization and B2B retail tech business. A key recent milestone for Revency has been a signing of a new partnership with Google Cloud at Accenture, which should provide a significant boost to its development. Relevancy received the status of premier partner, recognizing its expertise and integrating its solutions within the Google Cloud B2B marketplace. In H2, Relevancy 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. Renewalu 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 Gigawatt. In Energy Efficiency, the advanced pipeline has reached 350 gigawatt hours with an additional pipeline of opportunities of close to 900 gigawatt hours. Grenada successfully operates in 16 countries and 4 continents. It is planning further expansion with extension of its operation to Eastern Europe, starting with the launch of its 1st 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. Brignardo disclosed this week an EBITDA of €37,000,000 for H1, excluding asset disposals, that is an increase of 40% year on year. Further growth of EBITDA is planned for H2, as detailed back in yellow in the 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. 1st, we have reinforced our commitment on greenhouse gas emissions reduction. Our goal is to cut carbon emissions by minus 38% by 2,030. This trajectory is in line with a well below 2 degrees scenario. Actions have been taken in all our geographies, leveraging on Graniello's expertise. Among the most recent initiatives, the partnership between Graniello and Grand Prix to reduce the carbon footprint of refrigeration units and carbon neutral refrigerant gases in Clairolia Fresh Market Store in Colombia. As for city count, it has now reached carbon neutral status for its deliveries. 2nd, we have 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 TESINOMAX 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 monoclonal 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 Foundation Marchered de la Chagiere and food rights 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. 20202021 H1 accounts have been restated following the divestment of Lidar Freight, classified as discontinued operations for our first five standards. The gradual conversion of the stores sold to Aldi is expected to be completed by end September. At end 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 Interpretation Committee on the enforceable periods of leases. Page 15. The key figures of half year results are shown in this table, the total change and at constant exchange rates. Net sales reached EUR 14,500,000,000, stable and organic. EBITDA was EUR 1,000,000,000, up 11% at constant exchange rates, with good performance in all our segments. Trading profit stands at EUR 4.44 4,000,000, up 23.5 percent at constant exchange rate. Underlying net profit per share is minus €72,000,000 which is a +23,000,000 improvement compared to H1 2020. The net result from continuing operations up plus €306,000,000 Net debt before IFRS 5 was stable with a reduction of minus €158,000,000 in France. Net debt after IFRS 5 increased due to the reduction in IFRS 5 with the events 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 two 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 net time 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 all store formats that is a bit higher than in Q1. This drop results from two factors. First, an exceptionally high level last year, with growth of +7.9 percent in France last year during Q2, including +6 percent for France retail during lockdown. 2nd, importantly, tougher health restriction in fall during Q2 this year impacted some of our formats quite severely. The closure of nonessential product sections weighed on monofin and hypermarkets, the decline in tourist numbers and the reduction of Paris customers accentuated by the 3rd lockdown affected monofil and country And finally, the curfews forced the early closure of our Ojganano store at 7 p. M. Instead of 9 p. M. Or later in the evening with a negative impact on sales. In view of these restrictions, our banners showed good resilience, particularly Monotri and Conferry, which had 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 Frontiers plus 8 points and Proximity 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. Cityscount 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 to the structural improvements with a more normalized basis of comparison. As I stressed 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. In 2019, overall, France operations recorded a notable improvement in profitability with EBITDA margin reaching 8% up more than 100 bps compared to H1 2020. Trading profit was up 8.2% and reached a 2.2% margin. This increase in profitability, which is particularly remarkable in the context of trough sales dynamic, is due to the success of our transformation plan, which have been delivering consistent improvements in our EBITDA margin since Q3 last year. Page 13, 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 Vindimia. Focusing on our current retail banners, that is excluding property development, Green Yellow and Vindimia, which is no longer part of the group, the improvement is even more impressive with trading profits growing plus 50 percent from €97,000,000 to €146,000,000 and trading profit margin moving from 1.3 percent to 2.1%. This reflects once again the impact of the transformation plans launched in Q3 2020, which reduced our cost base by €30,000,000 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 percent over the semester. With the strong level of profitability now reached in all our banners, we are ready to expand our network and take advantage of the return to sales growth to move our EBITDA even higher. Page 21. Moving to the e commerce segment, city discount. I've already gone into some details on city discount 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 percent over 1 year, 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 as per the 4% plus 44%. As mentioned before, we expect SeaDiscount to continue to deliver in H2, strong momentum on its marketplace, digital marketing and Atopia business lines. Page 22, moving to Latin America. Assa, GPE and Exitou 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. Multivisors sales declined minus 6.4 percent at constant exchange rates due to those 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 have 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 rate 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 profits by 15% in H1, driven by higher contributions for our complementary businesses, improvements in real estate and good performance in Northwood at Equitable, 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 credits, with EBIT margin up 73 bps. This led to trading profit up 13.5% in euros at EUR 271,000,000 versus EUR 239,000,000 last year, taking into account a minus EUR47,000,000 currency effect. Page 23, underlying net profit. Group share is up EUR 23,000,000 compared to last year, mainly driven by the increase in trading profit. This result includes a negative one off non cash impact on financial expenses of minus €40,000,000 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 €9,000,000 Page 24, net results group share. Net result group share improved by EUR 306,000,000 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 €4,500,000,000 disposal plan. The total assigned or secured disposal is now €3,100,000,000 compared to EUR 2,800,000,000 at the beginning of the year. First, we secured around EUR 100,000,000 of earnout from the JVs with Apollo and Fortress, thanks to the good progress of the JV disposals. The level of earnouts is now effectively secured by the disposals already realized off time by the JVs and has therefore been recognized in our accounts. The sale is a minimum and if the remaining disposals go according to our objectives, the actual earnout, which we expect end of 2021 or beginning of 2022, should be higher. 2nd, the disposal of Flua 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 €179,000,000 including €129,000,000 for the disposal of our 50% stake in FLOWA and €50,000,000 for the new partnership put in place with BNP Paribas. On top of that, Casino will remain associated with the successful development of Fluoraz fraction payment activity through a 30% stake in future value created by this business through and earn out in 2025. This partnership also secures the current conditions for the financing of Finiscount's customer finance. As mentioned before, we are committed to the completion of our €4,500,000,000 disposal plan in France. Page 26. This page shows the evolution of net debt by entity as usual. In France, net debt excluding Brunnillo declined by €210,000,000 compared to last June. CityScarf's net debt increased slightly by EUR 52,000,000 due to a temporary working capital impact. Greenheur's net cash position decreased by EUR 115,000,000 in line with the ramp up of its investments financed by its own resources. We now monitor Casino France's net debt and cash flow excluding Grignelo, since Grignelo does not rely on Casino for its financing and has been excluded from the competition of our new RCF conference. Page 27, moving to the details of 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 a reduction in non recurring expenses. This is our key metric to monitor the structural improvements 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 €346,000,000 in line with the usual seasonality. The difference versus 20 20 minuteus €70,000,000 in working capital relates mostly to SeaDiscount, 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 French business delivered a good working capital performance compared to the strong 2020 basis despite lower sales in Q2, thanks to CHI's inventory management and the recovery of fuel working capital. As for our CapEx, they 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 condensatory 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 five and disposals, stands at a level close to the one observed last year, with a €70,000,000 difference explained by the temporary GAAP in fee discount working capital just mentioned. Our cash financial expenses decreased by €63,000,000 as a result of our 2020 buybacks. One word about the non cash variation number of minus €458,000,000 It includes first a variation of minus €149,000,000 in the segregated accounts, offset by an equivalent positive flow recorded in other net financial investments. 2nd includes the negative cash flow of Lidarfeis minus EUR 288,000,000 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, losses 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 maturity spread between 20242027 following our buyback and our 2 successful refinancings. Our Chang Lung B maturing 2024 was refinanced this year with a new 2025 maturity and an interest rate reduced by around 1 third 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 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 Quadstream 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 €2,600,000,000 as of June 2021, including €2,000,000,000 undrawn credit lines available at any time and €528,000,000 of cash and cash equivalent. On top of that, our segregated accounts dedicated debt repayments announced to EUR 339,000,000. 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 RTF now matures in July 2026 for €1,800,000,000 To that must be added the new Monoprix RTF maturing in January 26 for EUR 130 1,000,000. Our liquidity is therefore secured for the next 5 years. On top of the maturity expansion, the new casino RTS has a lower cost of utilization and the covenants computation has been reviewed to take into account the improvements of our financial structure and the business plan of Green Yellow. The new debt of our EBITDA quarterly covenants are computed on the French perimeter, excluding Brunello, taking into account only the secured debt. As you will see on the next slide, this new computation leaves us with a very comfortable headroom. As mentioned earlier, the new 2026 Monofia CF now includes CSR criteria in margin adjustments 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 headwind 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 EUR 359,000,000 headwind in EBITDA. The other ratio EBITDA over financial expenses is also comfortably net with EUR 199,000,000 Hebron 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. 1st, 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 each doing formats such as Pantry, Lival, Naturalia, Monop and Casino Shop, mostly in franchise. This 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 tense network of urban and proximity stores. 2nd, our high growth businesses, CityScout, Relevancy and GreenYellow will continue their development. GreenYellow and CityScout 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 megatrends, and they have a lot of opportunities to create significant value through the effective deployment of additional capital. 3rd, we will maintain an intense focus on cash flow generation. With continued EBITDA growth and a sharp reduction in non recurring expenses in H2. We will also maintain our disciplined 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. First question from Arnaud Jolie from Societe Generale. I have two questions, please. The first one, do you see scope to 1st Circuit costs in France as of the 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 under home working? And have you already seen any negative impact from the development of the drive piton, in particular, for your convenience format in Paris? Thank you. Thank you, Arnaud. On cost reductions, of course, we always work in cost reductions 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 features and cell 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 calls between Fab Chem and Ophir. 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 higher growth. The fundamental decline in Paris, that's not the way we see things. There has been in the recent past, yes, a decline of people in Paris, but these are people that temporarily move during the remote working period. The inhabitants are still there. And if we look at the recent trends, we're actually seeing a very strong uplift to the front end of the fleet in the recent weeks. So we see Paris fundamentally as a very strong market. Our positions there are very good. And as I mentioned, we did far better than markets. So the fact that there might be openings of like Couture or things like that, That does not seem to affect our offer. Importantly, for Monoprix and especially for Grand Prix, 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 Fontaine, mostly in this area. And we think 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 next few quarters in the inside of Paris. Next question? Next question is from Sergey Seminar from Bank of America. Please go ahead. Yes, good morning. Just one question actually 2, sorry, I'm sorry. The first one, just looking at the French free cash flow. So we have not seen many improvements actually in the first half. I understand that there is some working capital impact, but what are you expecting going forward into H2 to 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 give a positive like for like again in France? Yes. Thank you, Xavier. On free cash flow, the first the structural improvement 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 from 1 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 was 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 a 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, to continue to work on tax 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 strong contribution to cash flows, thanks to EBITDA growth and reduction of exceptional that proves a sustainable cash flow generation. In like for like, yes, we are already seeing actually positive like for like on proximity actually in the last 4 weeks. Monopoly 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 at some points during in the very near future. The other banners are also improving, so it's difficult to pinpoint the exact time when each of the banners 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 the market share 2 months ago. We were losing minus 2 points, and it has been increasing period after period. The last period, we are actually in line with the markets. We are not losing market share anymore in most of our formats except the hypermarket. So I think this is clearly the goal, and I can confirm that to you. Thank you. Next question from Andrew Kummin from Exane BNP Paribas. Please go ahead. Yes. Good morning, David. I'm going to Chi can go for 3. So just on that trading, is it possible to give us a 2 year stack or just an indication of whether or not the 2 year stack of like for like in France has improved? The second question would be, is there an earnings impact from any of the recently announced disposals 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? Thank you very much. Yes. On like for likes, 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 from last year 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 opportunity. So that's the way we're looking at it now. It's really on a 1 year basis. It was fairly 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 €100,000,000 that we're getting from which will be actually, I think, a higher number €100,000,000 which is the 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 outs, but we're already paying the rent. So it's a realistic disposal that does not bring any additional rent. So it's a pure positive impact and it will, of course, allow us to decrease our financial cost. As for the disposal of FLOAR, it doesn't impact our EBITDA. FLOAR is not reported in our EBITDA. It had a small net result impact, but of course, this will be more than offset by the reduction in financial costs with the cash in that we have here. As for discontinued operation, we mentioned there was a little price discontinued losses in H1. These were due to the store that we are keeping to operating just until we transfer the store 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 office. We have just to finalize the restructuring of this. So we lost €280,000,000 in H1, as mentioned, on the other 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, you can divide the number of H1 by 4 and you would get, I think, a reasonable estimate of what that could cost us in each year. And after that, it's over. Thank you. Next question from Maria Oona from Morgan Stanley. Please go ahead. Hello. Thank you very much for taking the questions. This is Maria Oona. So just 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 wondering what's the main driver behind this? Thank you. Yes, Mariano. COVID cost, I've mentioned since Q3 last year, we only had about €5,000,000 per quarter of COVID cost. So that's €10,000,000 for H1. Of course, it's much lower than last year. Basically, it's about €120,000,000 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 reduction in COVID costs and the improvement in EBIT is explained by our cost reduction. We can basically model it that way. Financial charges, yes, the financial expenses as reported in net results increased, but I mentioned it's mostly non cash 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, recognized an expense, a non recurring expense of €40,000,000 that's included in our net result. It's detailed on Page 37 of the presentation. This is mostly non cash element. The cash was already spent in 2019. And the recurring impact of this refinancing is actually a saving of €9,000,000 per year. So that means next year, in H1 next year, we will have an improvement of basically €50,000,000 of financial costs compared to H1 of 2021. And it's, of course, a very satisfactory refinancing for us since we managed both to extend the maturity and to reduce the costs at this time. Thank you. Next question? Thank you. Next question from Clement Gianello from Bryan Garnier. Please go ahead. Hi. I will have my side. The first one is on the covenants. So why did you ask the banks to adjust the calculation of Novant. Of course, I understand that Guinee alone need some fresh on more need to let's say carry out its plan. But you could have just excluded a green yellow of the local coalition. My second question is whether on the net debt. So why is the net debt in France and a discount almost as high ball in Q2 year on year? I mean, when we look at Vietnam, that's given in the covenants pages, so that's gross debt minus cash, That's almost stable in Q2 year on year, while in the same time, you did almost €700,000,000 of disposals over the last 12 months. And my final question is whether on structure assets sales in France. Have you received any expressions of interest in other assets in France? Of course, that's other assets than just a green. Laurence, Francois. Thanks. Thanks, Laurent. The covenant adjustment, first, it was, of course, necessary to exclude Brunello from the computation of the government since Graniello will raise that to fund its growth. They have a very ambitious plan that and they've communicated the plan, which is to invest EUR 1,900,000,000 in the next 5 years, part of which will be financed by their, of course, operational cash flows, part of it probably by new equity and the rest by debt raised at granular level. So we have to get to granular. And when we got to these covenant competition, 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 debt, as you know, in the next 2 years. And the protection that the banks needed was a 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 covenant. They meant much more and it made much more sense. Of course, we still have the old covenant. This has not moved on our dividend restrictions. It's still the same. It's a 3.5 percent gross leverage. Total EBITDA over total low growth debt over EBITDA that has moved in all our instruments and that protects all the lenders. We cannot add more debt to a pay dividend, for instance, 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 saw 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 these new covenants. Of course, the consequence of these secured covenants is that we 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 common 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 doesn't 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 green yellow. And just from the French referendum, we declined by €200,000,000 in net debt, excluding our first target 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 Siniscal has mentioned. But mostly, we're already there, very close to that point at the end of last year, but mostly where we are at the end of June. However, there are other things that comes below the cash flow and I've explained that the reduction of €200,000,000 is not equal to the total disposals that we made. A big part of it, of course, is the still the cash burn from needle price during that period that we still had to bear. I mentioned the €288,000,000 in H1 this year. There was, of course, a number last year that's probably close to that as well. So that puts us above around 400 over 12 months. To that, you have to add €70,000,000 last year of unwinding of the TRS Casselles. 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 two periods in terms of debt. But what matters is that now all these losses are behind us. As I mentioned, the price is mostly over. By September, all the stores we have been transferred, so this is done. There is no TRS 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 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 had 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 in the discussions, there were processes going on. We think we did a very good deal with Florent because we maintained we sold our 50% stake above the equity value significantly. We got €50,000,000 more as part of our new agreements with BNP and we get the 30% earn out on the value creation of fraction payment, which is a booming market. You've probably heard of Klarna and the companies like that. And we think with BNP, there's a clear potential to be to do something very effective there and get 30% of the value created by 20 21, so 'twenty five, without having to invest anymore. So it's a very good deal. And the next deal that we'll get, we think will be good deal 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 assets clearly and not just the assets that you mentioned. Thank you. Next question from Nicolas Chaum from Barclays. Please go ahead. Good morning. Thanks for taking my questions. I have 3. First one is I would like to come back on the working capital out flow in France on Page 27. I mean, I think you mainly explained it by sales counts, negative contribution. Could you be more precise and quantify the impact of the working capital outflow for sales counts 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's basically stemmed from the significant shift regarding the disposal plan. There was a €101,000,000 charge in H1 last year that moved into a €151,000,000 profit this year. Could you elaborate on this item, on this significant swing? And the last question, I will make another trial regarding asset disposal. I mean, you had roughly €800,000,000 I mean EUR 797,000,000 to be precise EUR 1,000,000 of assets, EUR 35,000,000 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 800,000,000? Thank you. Yes. Because our working capital actually, sales count has published their net result 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 front, including C and L. So it's a bit by memory, I will call it, I think it's about €60,000,000 GAAP €70,000,000 GAAP. Actually, yes, if you look at their press release, last year, they were minus €114,000,000 and this year minus €183,000,000 So it's exactly actually €17,000,000 gap. So if you correct on that, you will see that France will be basically the same as last year. On Page 36, the ARPU, yes, last year, we announced the depreciation of some assets. This year in H1, what we did is, first of all, we recorded as exceptional benefits the €100,000,000 from JV, Apple 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 fact the disposals that have already been made make this payment certain. We don't have the cash yet, but it's already considered can be considered as an asset already. So we recognize this in the accounts as a 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 questions that you have. And of course, last point is that last year we had some depreciations and this year we don't have any. So the book the last year, there was a negative, and this year, there's a positive. On asset disposals, in the 800, of course, there's floor out. Floor out was in IFRS 5, so it will cut out of the IFRS 5 when the deal is closed in a few quarters. There are other assets, 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 non core assets that are that we can sell. Fluor will start with them, there are others. And we can have yes, we can have some real estate, we can have some 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 announced flaw. We didn't say the flaw was in IFRS 5 before we announced the sale, but it's not clear and it's put in the detailed account. That's the only asset that we reveal is in the IFRS side because we don't want to show our hands to the buyers. But of course, these are all assets where there is an ongoing process and we expect these to be sold. Importantly, these assets that are in the first half should not impact significantly our EBITDA when we sell them, either because at SOR they are not supported as EBITDA at all or because they are not big contributor to our EBITDA. That's what I can tell you. Next question? Thank you. And last question from Rob Joyce from Goldman Sachs. Please go ahead. Hi, good morning, David. Thanks for taking the questions. I'll go with 3 as well. Just on the French free cash flow, few definitional changes. I'm just wondering if you could give us the equivalent 12 month number for the SEK 346,000,000 you give for the French free cash flow. Just like you said your goal on 12 month basis was to cover the finance costs. If you have that number handy on 12 months, that would be helpful for us. Second one, I think to understand leader price, it's a little different to how I understood it. Am I right in saying you had a sales price of €6.48 You said you covered cash out of around €400,000,000 to date. Expect another €70,000,000 out. And I think you bought back share stock stores around £55,000,000 Is that the way to think about it? It almost leaves 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 4.5 hoping 4.5 percent, and you've got about 8 100 percent in the IFRS 5 percent. And then you can say on the assets beyond that, would you look outside of France for asset disposals? Thank you. Thank you, Roel. Last 12 months, I don't have the numbers right here, but happy you can compute that actually when you look at we published a 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 it 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 parameter, we will improve. And last year, the Petrobrasian, Greenlow is now a contributor to our cash flows. So in the end, when we look at France retail excluding Green Yellow, the goal is, of course, France retail excluding Green Yellow including fee discounts, which has a should have a small positive cash flow generation as it did last year. The goal is to cover the financial cost. That's the clear goal. And we think that the H1 number actually confirm that we're on the right track for the goal since we increased the operational cash flow by 50%. And this is a clear 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 cash flow after financial cost positive and that's clearly the goal. But we think the numbers that we show here are perfectly consistent with that. On needle price, I think your question related to basically what I already said, but yes, we have some cash burn on the price because we as part of the deal, of course, we still had to bear the cost of operating the stores before they were transferred to Aldi, and they are transferred by batch that Aldi can convert the stores to Aldi stores. By next by September, it will be over, so there will be no more stores to operate and no more legal 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 had to buy back the franchisees, but that's been done last year. So it's not an issue anymore. And as you saw on that, I would say that was really we're very happy to have sold at the price that's in that €600,000,000 €650,000,000 which we got from LVNV 50 that we had to pay the franchisees to do that because it's a business that was clearly needing cash more and more. And if we haven't sold it, we would have to close this business and that cost us a lot. So getting €600,000,000 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 reparation of the current 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 SEK3.1 billion. We have SEK800 1,000,000 under IFRS V. Other assets are not in IFRS V, which means that there is no ground to date to classify them as such. To classify an asset as an FRS five, 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 4.5 because we have a number of valuable assets in front. And in some of these assets, we have flexibility. We can keep control of some of the assets while monetizing part of them. That is possibility, for instance. But to be clear, the 4.5 does not include anything outside of France. So the goal is to reach the 4.5% by selling assets or parts 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 4.5 to be very clear again. I think this concludes the discussion. If there is no more question, then we'll 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.