Okay, we're ready to start?
Yep. Think so. Morning, Bernard?
Morning, David. Do you want to do the intro?
Yeah. Morning. Welcome to our first quarter capital market update. I'm not sure how we're doing questions. Are they going to come through?
Yeah. The options are to type questions through the chat function or the Q&A function on the Zoom webinar. If you'd like to ask your question, you can just raise your hand and I can unmute you to ask the question directly.
Okay. Thanks, Ash. Hand over to you, Bernard.
Okay. Thanks, David. Thanks, everybody. We're not going to make this too long and in-depth. We did release the trading update to the market not long ago, which I think is fairly self-explanatory and goes into a lot of detail. Since we last spoke at the end of August, quite a lot has changed, and I guess by the time we talk in February, quite a lot will change. Some jurisdictions have got better, some jurisdictions have got worse, some jurisdictions have got better then worse, some jurisdictions have got worse then better, and I guess we just need to brace ourselves for this continual rollercoaster for the next while. Hopefully, it's only months as this pandemic unfurls. We might not call whatsoever as to when it's gonna end or when there might be a vaccine or what the conclusion to it will be.
All we can talk about, once again, is what we see in our business. Once again, I can only talk with a huge amount of optimism as to the rebound in our business, as soon as we see conditions improve and confidence. During the first few months, certainly in July, we saw volumes rebound very quickly, particularly in the northern hemisphere where Europe and the U.K. enjoyed a relatively COVID-free type of summer. We were very buoyed by the quantum and the speed of the uptick that we saw in our volumes across almost every geography in Europe and U.K. Obviously, other markets have different trajectories as to where they are in the pandemic. From an overall point of view, we certainly are very confident about the future.
I think we're far more comfortable about where our business is and where our industry is than maybe we were three months ago and certainly where we were six months ago. Yeah. There was a lot of talk about the whole hospitality industry, the eating out of home industry was gonna be radically changed. It was gonna be fundamentally different. A lot of people were writing our industry off and our customer base off, and I think that's proven to be wrong. Of course, there are changes. Of course, we've had to adapt. Our customers have had to adapt. Their customers have had to adapt, and that will be a continually evolving scenario.
What we certainly have seen is that the first opportunity available, once people have a little bit of confidence, once they feel safe that they're operating in a safe environment, they go out and enjoy some eating out or related activity that we're a direct beneficiary of. We've certainly seen it in every single geography. I can't say there's one geography where we haven't seen that and we haven't seen a very positive trend. Now, obviously those geographies that go back into lockdown struggle very quickly. Very quickly the tap is turned off and the pubs are emptied out and the restaurants are emptied out, until the tap is turned on again. It is almost that analogy you see on TV the last night out before a curfew kicks in or a lockdown, the restaurants and the pubs are packed to the rafters.
The first day after, they're packed to their capacity that they'll allow them to be. If it's 20% or 50% or whatever it might be. There's certainly no great resistance to the offering of the industry that our customers are in. There are certain parts, certain segments of the industry that are absolutely decimated. The cruise ship industry, absolutely decimated. Volumes are zero. The airline industry is basically on its knees. Anything to do with an airport or the airline industry is really struggling. Workplace catering in large workplaces, in office blocks, in CBD type office blocks is absolutely devastated. Sporting events, to a large degree, are non-existent with crowds. There are places around the world that are starting to allow crowds back again. That's a positive sign. Generally, that's been decimated.
Notwithstanding those areas that are operating at close to zero, we've seen a remarkable bounce back and an over bounce back in the other segments of the market. What we've also really been surprised at is with borders closed and people discouraged from traveling or not being allowed to travel, they're spending their money domestically. I don't know how this works, but in almost every single local geography has been a net beneficiary. I'm not sure I can explain it, but people aren't making these overseas trips. They're spending their money locally. We're absolutely seeing the benefit of that or have seen the benefit of that across many, many geographies. The impact in our business is that we performed much, much stronger in the non-metropolitan, in the non-large city CBDs than in the large CBDs.
Fortunately, we've got a very, very comprehensive footprint in every country we operate, where we aren't necessarily CBD-centric, but we have a national presence. That's served us great because I don't think there's any single country we can look at where we can say there's been a huge amount of growth in the capital cities. They've done it more tough than the outlying areas, the tourist destinations, the resorts, the further flung locations. I guess that balance in the market and that diversification has worked well for us. David will talk a little bit further at some stage about our financial position, which is exceptionally strong. We've been highly cash generative. Our working capital is in a fantastic position. Not because our business is smaller than it was. Obviously, that's a factor.
We've absolutely seen an improvement in our working capital management, manifested in whatever metric you want to measure it in. There's been a wonderful improvement in that. That's also got something to do with the change in customer mix. That as we move away from some of these customers who are operating at zero, generally, they are larger customers who generally are going to operate at the lower margin end of the spectrum and who generally are going to take a longer time to pay you. I think just by default of us being focused on the correct type of customer, we've seen a change, a shift, a very positive shift in our working capital structure, which will change over time as those types of customers gain traction again, and that will happen.
At the moment, to ride through this crisis, the shift has certainly helped us in terms of working capital movements, cash generation. Our CapEx program has been curtailed. We haven't stopped because we're very optimistic about the future. We just haven't taken any big decisions. We're also harvesting some asset sales, which aren't COVID-related, and they're not knee-jerk reactions. They're absolutely long-term strategic decisions in terms of positioning our property portfolio and exiting those that are approaching end of life. It's just part of our long-term asset management plan. If we just run through the geographies very, very quickly, just to give you a bit of color as to where they are at the moment. I think what's happened in the first quarter is now absolutely irrelevant. All we can talk about is where they are now.
I suppose we do need to make reference to what we saw in the first quarter, but that's certainly no indication of what's going to happen going forward. If we start in Australasia. Between Australia and New Zealand, they're basically tracking at 100% of revenues now compared to last year. Victoria in Australia, which is the second-largest province state, was in lockdown for four months, and they've came back online about three weeks ago. They're still only operating at about 30%, 40%, 50% capacity. Notwithstanding that, we're seeing both Australia and New Zealand operating at 100%. Sporting stadiums are starting to fill up again. Tomorrow night there's a rugby league game where I think they're going to have a world record crowd. In the COVID era, I think it's 52,000 people. It does show you that life does carry on.
People go back to their old habits and go to sporting events, et cetera. In the Australia-New Zealand business, we're running almost at 100%. Some weeks is at 100%, some weeks it's slightly below. Generally, we're tracking where we were a year ago, and things are looking relatively stable, relatively good. If we move on to emerging markets, that's obviously a combination of a lot of different countries with very different dynamics. If we start off in China, we've seen continual growth in China from about April onwards. They have had some scares when Beijing went into lockdown. Qingdao went into lockdown a few weeks ago. They're relatively small, short, sharp, and highly effective. We're seeing consumption really taking off in China, and our sales are strong.
Through the rest of Asia, we're seeing a return back to normality, and we're probably running at between 80%-90% through Hong Kong, Singapore, Malaysia, Vietnam. They're all subject to rolling lockdowns and different changes. Just recently in Hong Kong, I think they limited the number of people at a table in a restaurant from six down to four, just as a precaution, which obviously has an impact on demand. People are learning to live with that. The one market that hasn't recovered is Macao, which is absolutely tourist dependent and remains exceptionally depressed. Asia seems to be well on the way. They seem to be coping with their waves relatively okay. We're quite confident about the Asia component of the business. If we move to South America, very small in our portfolio, and they had it really, really tough for many, many months.
Their lockdowns or their attempted lockdowns, their movement restrictions, their dining out restrictions went on for a very long time. We're seeing a very, very strong resurgence in volumes through all three of the countries we operate in Brazil, Chile, and Argentina. I think that they've had six months or more of it. I think their case numbers are relatively under control and aren't spiraling out of control, and they've learned to live with what they do. We've done a very good job, I believe, in South America, of expanding our product categories that we're strong in and have used this as an opportunity to grow, particularly in the protein category, meat, seafood, across Chile and Brazil. We're seeing sales numbers in those geographies greater than last year now, not because of existing customers buying existing products, but because of range diversification.
When the rest of the market comes back, I think we'll have a relatively good position. South Africa, we've seen a very good, steady improvement. Each week we're seeing an improvement on sales numbers. Our Crown business continues to perform very well, but they've got a large exposure through the retail market with the products that they sell. It's a very similar story with the Chipkins bakery business. In the food service business, we are seeing consistent week-on-week gains as restrictions ease, as confidence returns. The majority of our customers are open again in some form. We're not unhappy with the trend that we are seeing overall in the South African market. It's no pleasure cruise. It's not easy. The teams are working very, very hard and are seeing that growth and certainly don't have a negative outlook as to where it's going.
They're pretty buoyed by the fact that they are seeing this consistent improvement. If we move to Europe, we had a very good July, August. September wasn't bad either. I think they had a really good domestic summer, and they're probably paying the price for that now in terms of the lockdowns. The lockdowns came very quickly and very severely. We've seen volumes that were, in the weeks in July and August, at 90% of previous year's levels, back down to about 50% of previous year's levels. Quite honestly, I don't think that's going to change until spring. Hopefully, there's a vaccine or something else by that time. I just don't think it's going to improve and we're adapting to that reality of it's going to be a long, dark, cold winter.
We did indicate previously that we did see a risk with outdoor dining being the major driver of a lot of demand in the summer months, and that when that disappeared, the demand would disappear, and I think it's a little bit more serious than that. All our businesses, with the exception probably of Spain, are in reasonable shape. We'll ride it out, no problem. We won't make a whole lot of money in Europe, but fortunately, the winter months aren't our dominant months in terms of financial performance. Europe is more of a seasonal business skewed towards the summery type of months. Christmas is an important period, and we're not really sure that there will be a Christmas this year in terms of the impact on our business. The U.K. is a very similar story. The care pack business continued in July till the end of July.
That was the home delivery for the vulnerable members of society. That government scheme ended at the end of July. August, we had the Eat Out to Help Out scheme, government scheme, where they basically funded people's dining out experiences. I think it was on a Monday and Tuesday night to some degree. That really had a very positive stimulus on sales. August looked very good. September was okay until the resurgence in cases and we've seen a retreat. Once again, we think that will last until the spring. It'd be nice if it doesn't, but it probably will. Now, in all of these places that have gone into second wave or third wave or whatever it might be, lockdowns, they aren't as severe as the first phase. In the U.K., education is still open.
In most of the European countries, some form of education is still open. There just isn't the same absolute hiding in the bomb shelter that they might have been in the first few months. We're seeing that in our numbers. Although our sales are down, we aren't down anywhere as severely as we were in the first few weeks of April, and probably moving into May. Where we sit at the moment across the group, almost all of our businesses, notwithstanding the fact of their very depressed volumes, are probably trading at an EBIT- positive level and certainly at an EBITDA- positive level. Probably the only exceptions to that might be Spain, Germany and the U.K., fresh U.K., which are fortunately smaller components and we knew they were troubled businesses where we have taken remedial action.
Unfortunately, the virus has hampered our ability to execute those and see them all through. We have no doubt that what we've done has been correct, and we just need to be a little bit patient now and wait for volumes to return. From an overall point of view, our teams are very motivated. Obviously, they're frustrated, particularly those in Europe and the U.K. who are going back into lockdown. It's very difficult once you've tasted the sweet fruit out there to have it taken away from you. They are all very passionate about what they do, and they are frustrated and angry and whatever else. We're just trying our best to put that energy to the best use possible. They are out there every day running their businesses, fighting, doing whatever can be done to minimize the disruption.
I guess most importantly, to maximize what the future looks like. We aren't making any short-term decisions. We're not cutting unnecessarily in a knee-jerk reaction. We understand that the next few months are going to be tough, but we also are very, very confident that following that, we're going to have some really good times. If you cut too deeply now, you're going to have no capability to handle the upside when it comes the other side. We did see that in many geographies when we rolled out of the first wave. That some of our competitors, big, small, cut maybe a little bit too deep and took a lot longer to get back up to speed than we did. That's where we talk about the fact that we colloquially think that we've gained market share. We've got no way of empirically proving that.
We do believe we've gained some market share, and that's because we were still exceptionally strong when things started turning, and we could adapt very, very quickly, and turn the taps back on and carry on trading at much higher levels. It's very difficult to go from 50% to 80% to 100% in a week. That's what we've been called on to do in quite a few jurisdictions. It happens that quickly when it does open. What else do we want to talk about? I think it's very important just to understand we are managing this business for the long term. It's not just about what we can cut in the short term. I want to emphasize that strongly. It's not about what CapEx we can cancel because we are going to need CapEx going forward. Obviously, we have curtailed it as much as possible.
Let's be honest, we are still highly cash generative at the moment. We're still profitable. We need to maintain our market position and grow our market position in the markets that we operate. There are a lot of questions that we get continually asked about acquisitions. The assumption is made that, well, times are tough and therefore there must be a huge amount of acquisition opportunity. There isn't. That's a great theoretical position to take, that there must be a whole lot of acquisition opportunity, but there really isn't. There's a lot of bank support out there, and there's a lot of people hanging on for dear life. There's government support. There's all types of schemes out there. You don't really have this theoretical plethora of businesses that are in terrible economic condition who you can pick up for a song.
It's just not the reality of what's happening out there in the market. We are very alert for opportunity. We continue to talk to lots of people in lots of different areas, particularly in market where we are. We will do some acquisitions, but none of them are going to be for nothing. At this point in time, there just isn't the amount of carnage out there that's been written about generally in the financial press. It might happen in months to come or years to come when the longer-term consequences are felt. Certainly at this point in time, there's certainly no huge list of businesses in a desperate financial situation. I think I'm going to hand over to David just to talk you through some of the financial numbers and then open it up to questions, because that's probably the best way to handle this.
Thanks, Bernard. I think you've highlighted a whole lot of the financial stuff already. I think particularly the cash flow has been excellent in the quarter. I think bearing in mind the working capital was constricted as we went into June. You're working off a June balance actually managed in the quarter and has been a big driver of cash flow as we've gone forward, particularly when you compare it to what has happened normally in prior years. As I said, free cash flow, in- flow about ZAR 1.2 billion. CapEx is in line with depreciation, as you've mentioned. We did have, I guess, a one-off benefits of the proceeds on the [standard] leaseback transaction that we did. I think really we talk about the cash flow evolution as the group has gone into this crisis. We set it out. It's been very well managed.
Our debt levels fluctuate at the moment, somewhere between GBP 175 million and GBP 185 million. That obviously changes on a day-to-day basis, depending on the Rand. I think it's, in context, it's GBP 200 million better than we were a year ago. Once again, just reiterating the cash flow generation and the strength of the balance sheet. Liquidity, we've got, it hasn't really changed much in the last quarter from where we were at year-end, so there's still ample liquidity available to the group. We don't see that as an issue, going forward, notwithstanding that, as Bernard said, the Northern Hemisphere is going into a much tougher period for the next few months. Really just to finish off saying debt covenant, from our projections and where we are at the moment, there should be no issues from that perspective for the group.
I don't really want to reiterate. I think it's all set out in the announcement. Maybe just I hand back to you or take questions, Bernard, as you said.
I think let's take questions, and then we can wrap up after that. Ashley, maybe you want to give us the questions that you do have.
A question from Rowan Goeller and from Irina Schulenburg is around food inflation across the group and the different markets. That is the first part of the question. The second part, where does the group have greater operating leverage, to volume or to price? The third part, what innovative ways have you used to help your customers deal with the crisis?
The first question is food inflation. Once again, we're across many geographies, and there's a slightly different answer to most of them. The general theme is there is no food inflation. Obviously, some markets have a little bit. South Africa, I believe it's running at about 5%, which is most probably in real terms nothing. Around the rest of the world, it's really trading at almost nothing. Don't ask me why. I can't explain it. I haven't been able to explain it for most, probably the last 10 years. No, we're not seeing any food inflation. Maybe that's because demand overall is lower in the food service market. Therefore, you've got more supply, not necessarily everything can make its way into the retail market. Maybe that's kept prices relatively in check. We're not seeing deflation either.
We're seeing a great deal of stability generally across pricing. I did see somebody ask something at some point in time about supply chain difficulties and whether that was gonna add to inflation. We actually don't know, is the answer, because there's a fair amount of dislocation and disruption in global shipping at the moment. I'm sure you guys might have a better handle on it than me as to why that's happening. There's a great shortage of containers. There's a huge shortage of reefers, of refrigerated containers. They're in the wrong place. It's all just a little bit upside down. The price of shipping a container around the world has gone up quite a bit.
Fortunately, it's a small part of the price of a product where you're talking about food generally, because 80%, or I think it's about 80% of what we do is sourced locally across the group. The U.K. sources a big chunk of what they do very locally. Australia sources a big chunk of what it does out of Australia. Very few markets are totally import-dependent. You're talking about the likes of Hong Kong, Singapore, the Middle East, maybe. As for the rest of them, there's a high degree of self-sufficiency. There is this issue of dislocation in global shipping. It might get worse. I really don't know. So far, we've managed our way around it, as I'm sure most people have.
They're talking on a global basis that there aren't going to be enough toys around the place in the right places for kids for Christmas presents. I know that doesn't impact us, but that just explains that there is a problem somewhere, that containers aren't getting to where containers need to get to, for whatever reason. The second question was operating leverage and whether it's cost or whether it's price. I don't really understand what the question means. Obviously they're both drivers, and they both have an impact. It's pretty simple the way our arithmetic works. You've got sales. You've got a gross margin of about 23%, I think it is. You've got a cost of doing business of about 18% or 19%, and you've got an operating margin of about 5% out of that, give or take.
In your cost base, the largest cost is payroll, which accounts for about 65%, I think it is, of the cost base. That's not variable. Some of your payroll cost is variable, but a fair chunk of your payroll cost isn't variable. When you're selling 90%, you're gonna send out one truck. You're not gonna send out 90% of a truck. You just aren't gonna fill it to its capacity. You're still gonna employ the amount of warehouse people that you had before that just maybe aren't going to be operating as efficiently as that. I think as David talks about it's not a linear trajectory between revenue and cost. Obviously we have brought our cost back where we can, but there's just no ways you can cut your costs to counteract the shortfall in the top line revenue.
I think we've done a relatively good job of maintaining margins. Our EBITDA margin for the quarter is only 0.5%. I think it's 0.5% less year- on- year. Obviously the quantum is less because your turnover is less. I know we don't bank percentages, but it's still very pleasing to see that we could deliver a 5.7% EBITDA margin in a COVID world. The third question was a long time ago, and I have no clue what it was.
The innovative ways that we've used to help customers deal with the crisis.
Yeah. Look, I think this innovation word is probably overused. There are a lot of words that are now overused, like pivoting and lockdown and a few others. Our business innovates the whole time. Our customers innovate the whole time. We just have to be flexible enough and fluid enough to adapt to that. At the end of the day, if we actually have to call a spade a spade and look at the countries that have come back 100%, there actually is no major change. The customers are the customers buying the products they bought before in the manner that they bought before, selling them to the same customers they sold before in the same manner they sold them before. Yes, they might have to swipe a QR code at the entrance to the restaurant.
Yes, we might have to deliver the product and disinfect it on the way. Fundamentally, not a whole lot has changed. This innovation, there's no great catchline we can give you that says we've got this innovation that's going to be a game changer. Innovation, it's a constant evolution in what you do. It's part of the DNA of what we do all the time. We're constantly making these small changes and innovating around the edges to improve what we do. Can I tell you something that's absolutely revolutionary, that's going to blow your socks off and change your perception? Absolutely not. I think that's the most comforting thing is that it's business as usual. As business comes back, it's business as usual. I think that's the most positive message that we have to give. That's the most positive experience we've seen. Okay, next.
Okay. We have two questions from James Kleimann. The first is are any of the acquisition opportunities sizable or are they all small add-ons at this stage? The second question, was all the cash flow in the quarter from the sale and leaseback in working capital, or was there some underlying cash flow?
I'll answer the first question. David can answer the second question. Not that I don't know the answer, I'll let David answer it much more eloquently than I could. The first question was on acquisitions. There's nothing that's large out there, quite honestly, I don't think we'd consider anything too large at the moment. It's a very risky environment. You've got no idea how businesses have actually coped with COVID. Where we have looked at any acquisitions, there's so many adjustments that vendors are trying to put in of COVID in, COVID out, revenue would have been this, revenue should have been that, cost could have been this, government assistance was that. In a small business, a small acquisition, you can live with that and you can live with the risk. I think it's magnified a whole lot of times if it's a large acquisition.
Notwithstanding that, no large acquisitions have come to the market and we aren't looking at anything large. David, do you want to talk about the cash flow?
I mean, the absorption was a little bit in the quarter. The rest of it really, I guess you can see the EBITDA margin. We absolutely generated EBITDA cash flow from an operational perspective. Yes, the sale and leaseback did contribute, but the reality is the operational cash flow offsets a little bit of working capital absorption, which is much better than what we did in the comparative period and normal for this time of the year. Yeah, some of it helped, but it certainly wasn't all because of the sale.
Okay. We have two questions from Paul Steegers. Can you elaborate on provisions for bad debts? Do you see these rising materially during the second lockdown in Europe, and can you quantify these provisions? The second part, can you highlight the non-discretionary revenue percentage in your different regions?
The first question on the provisions is we've done nothing with provisioning in the first quarter, and we don't see a requirement that there will need to be an increase in provisioning. I say that now in November. Obviously we'll have to have a look in January, February as to see where Europe is. We certainly aren't seeing any huge amounts of stress in the customers' abilities generally to pay their bills. Now, there's no doubt our bad debt experience is going to be higher than previous years. Maybe it's, I don't know, maybe it will be double what it was previous years. If we put that in context, I think our historical bad debt write-off, Charlie, correct me if I'm wrong, was less than 0.01% of revenue. Even if you double that, it's 0.02%.
It's certainly not going to shift the needle by any huge amount if it's a one-off. We don't see a requirement at this point in time to increase our provisioning. At some point in time, obviously, we have to assess the provisioning that we have there. We believe it's relatively comfortable and more than adequate. The second question was, I can't even remember my name most days. Sorry, give me a clue.
The non-discretionary revenue percentage.
I wouldn't have a clue. I'm not sure what non-discretionary means in reality. You'd put something like healthcare as non-discretionary, but there's actually quite a large discretionary element to healthcare. Elective surgery, by and large, has been canceled. In the northern hemisphere, you've got hospitals full of COVID patients, who might have different eating requirements, catering requirements. They might have closed down operating theaters. Wards are operating at different types of levels. Even in the healthcare sector, we've seen a decline in revenue during lockdowns. Certainly in aged care and nursing homes, we've seen a decline in revenue. We've spoken about that before, where people are quarantined to their rooms. There aren't any functions. There's no family visiting. There's no family meals. There's no celebrations. There's none of that stuff. Even those non-discretionary items have dropped. Education's the same.
We'd put it in the non-discretionary bucket, but it's moving around all over the place in different geographies. Schools are open, schools are closed. Universities are open, universities are back online. I just don't know that I could give you a serious answer to that. We have no guaranteed revenue in our base. Some of it, I suppose, is just a little bit less volatile and has a much stronger resilience than other components of it.
I don't know if I can just add on the provisioning. We've continued through the quarter and beyond, obviously, to continue to provision as we normally do. Generally as a percentage of revenue, which obviously we provision on a monthly basis going forward. We haven't stopped provisioning, for it's continued as we normally do it.
Okay. A question from Vikas Sharma. [crosstalk]
[crosstalk] The national customers, I think have fared a little bit worse in this than the smaller local guys. When the national customers start coming back again, that might have a slight negative on our margins. Bear in mind, for many, many years, we've been rebalancing our customer portfolio. We've spoken about that for many years. We don't have a huge exposure anymore to the national segment. It's almost not going to be of consequence when it does come back again. I think we'll end up being a lot stronger in the smaller and I don't want to call it only small because there are some large customers in our sweet spot as well.
In the target market that we're in, I think our position is stronger. Our margins, we believe, will hold up. There will be some competitive pressure, there's no doubt. As things start coming back to normal again, there's going to be competitive pressure. Customers are going to be looking for cost savings. They're going to try to recoup some of their losses. We're normally the first in line to get smacked with a baseball bat. Our competitors are going to be looking to build some market share back again. That's all just part of business and it's part of what we do. The second question was about South America. At this stage, it's a small component, but we're very, very enthused. We were making fantastic progress in Chile. Brazil, we've got a very, very good business there, a very good base.
We've been looking for acquisitions for quite a long time. We couldn't really justify the price of acquisitions at the time. Hopefully, this introduces a little bit more reality into pricing expectations in Brazil. We believe it's a good market with fantastic potential. Our Argentinian business, just out of interest, we've taken our shareholding up to, I think, about 46% at the moment. I don't think they actually reported a loss through the whole COVID issue. I might be a little bit wrong. I don't think they had any loss of any consequence. They were, I think, the first business that went and flipped back into profitability again. Because they're just so used to operating in crisis environments. It's just what they do. There's certainly learnings from them for the rest of the group.
We believe South America is a good market with a lot of potential and is highly, highly fragmented. There's obviously opportunity for us to do what we do best, which is rolling up and consolidating.
Thanks. There's a question from Dino. Well, two parts to the question. Number one, how important is December trade to the European U.K. businesses in terms of seasonality? Number two, to what extent is food delivery and takeout offsetting the impact of on-premise dining? How do you expect this to evolve through the Northern Hemisphere winter?
Yeah. I suppose the first question is how important is December. I actually don't know what the number is. It's not hugely important. It's fair to say that December was probably bigger in Europe than November or January or February are. December certainly isn't as big as the summer months. It's not critical do or die that you have to have a good December or else you're going to make losses in the year. I think it's better than the poorer winter months, but it's worse than the better summer months, if that makes sense. The second question was about food delivery. Yep. It's absolutely true that a lot of our customers and new customers have benefited from a pickup in home delivery, which isn't only through the traditional players. There's a whole lot of new players evolving. There's a whole lot of community players evolving.
There's a whole groundswell of local support to order directly from a restaurant for the restaurant to deliver to you and get almost 100% of the meal ticket and not have to pay a 30% or 40% commission. That's happening in quite a few geographies. It's quite a strong groundswell that we're seeing that's getting a whole lot of local support that people are saying, we really need to help the restaurants, and one of the best ways we can help them is making sure they get 100% of the taking. It will help, and it does help having this alternative distribution channel for our customers. For us, it's agnostic because we're still selling to the customer, and the customer's either the restaurant or a dark kitchen. A dark kitchen is still our customer. That absolutely is helping.
Yeah, I suppose that's part of the reason as to why the sales now aren't as bad as they were in the first lockdown. I don't think that home delivery was allowed, or takeaways weren't allowed in the U.K. in the first lockdown, whereas now they are. We certainly saw that in New Zealand. In their lockdown, they weren't allowed takeaways or home deliveries, whereas now there's a far more relaxed view to that, which obviously is helping a little bit.
Okay. A question from Sandile. Any specific targets on net operating cycle days going forward, given the structural improvement you've highlighted during the presentation?
Look, I don't think you can read too much into those days. I'm not sure what days really mean because there's lots of factors that are going to impact that. At the end of the day, we're going to fund the business. We're going to arm the business with the working capital they require to run their businesses effectively and to grow and to take advantage of market opportunities. I think it's foolhardy to say that you want to reduce or minimize your working capital because if you don't have stock on the shelves, you don't have sales. If you're not going to give credit to your customers, you're not going to have sales either. I don't think we should be too short-sighted in trying to come up with some type of theoretical working capital utopia.
That moves as the mix changes, and we need to make sure that we feed our businesses with as much ammunition as they need to grow and to grow strongly when the opportunities prevail. Having said that, we have had some good, I guess you call them efficiency gains in our working capital management, and hopefully, some of that will continue, and I'm sure it will. Please bear in mind, our working capital days are very low anyway. Now, whether it's eight working days or nine working days or 10 working days or 11 working days, there's not a whole lot of difference between them. It's lots of billions of Rand. At an operational level, that's not all that much. I do just reiterate, if you don't have stock, you don't make the sale. If you don't give credit, you don't have any sales.
Some questions from Rowan Gillmer. What have you learnt about the resilience or fragility of the restaurant trade through COVID times? The second part, you've changed the short-term incentive targets to reduce performance metrics. Does this allow you to take a longer-term view that is less concerned about short-term hits?
What have we learnt about the resilience? I think we spoke about it right up front, and we've continued to be impressed by it. That's the resilience, the tenacity, the perseverance of our customers. There were all these predictions up front by all the clever people in the room about the number of restaurant closures that there would be. When you look at it now, the amount of restaurant closures is higher than it traditionally runs at, absolutely. There's new restaurants opening. In those economies that are opening up, there's new restaurants opening up. Existing customers are doing relatively well. They're paying their bills. They're trading relatively well. They've adapted to the new circumstances. They've adapted to the takeaway home delivery model.
They've adapted to the change in government regulations with how many people they can have in their restaurant, indoors, outdoors, curfews, closing times, serving alcohol, not serving alcohol. They just take it in their stride, they've adapted very quickly and seamlessly, basically. I think we always said that. These people, this is their businesses, and we can see all the negatives and the complications. They don't see it. We have to have a QR code at that check-in. Not a problem. We have to sanitize. Not a problem. We just got to do that stuff. They do it. They get on with it. We've seen no major negatives from the customer base. They've somehow managed to cope and adapt to it very well. On the point on incentivization. Look, we talk here about incentivizations in the businesses.
Our most important asset in the businesses are our people. We have to look after our people because they're the ones who are going to drive the business going forward, who are going to get us out of where we are, and who are going to take the business to better and higher places. Some of the traditional KPI metrics are just going to have to be put on the back burner for a while. It doesn't mean it's a free-for-all. It just means that you have to adapt your measurement that takes into account the reality. The reality is there's a global pandemic that has decimated many industries. The industry that we serve has been particularly badly hit.
Fortunately, not as badly hit as some others, but it's been particularly badly hit, and we need to be cognizant of that, and we need to make sure that we retain our staff and our expertise in the business because those are the guys who are going to drive the future. We can be very shortsighted and say, well, you didn't make the profits that you made last year, therefore you're not going to get a bonus. That's fantastic. We'll save a lot of money in the first year, and we'll lose a whole lot of expertise, a whole lot of whatever, of IP from the management team, in their disillusionment, in their disenchantment, whatever else. Now, it's not to say that they're mercenary and they only come to work for money.
It's important that you do incentivize people and that you don't disincentivize them by making their measurement purely a financial measurement that's based on historical profitability. You know what? That's just not going to exist for a year or two. You have to be flexible and adapt to it, or else you're going to pay a long-term price for it.
I think we have a last question from Nick Webster. I can allow Nick to talk, otherwise I've seen the email from you, Nick. Nick, are you able to-
Yeah. Can you hear me?
Yeah.
Yeah. Bernard, it was just a question on Australia. Given you said it was close to back to 100%. Seems quite a remarkable performance given the lockdown in Victoria for that period and presumably its importance to the business. What's driving that? Is that market share? What else? It just seems very impressive given the situation you faced during that period.
Yeah. I think there's two parts of it. Let's not forget New Zealand, because New Zealand is also operating at 100%+. They had Auckland closed down for two or three weeks in August. They're having some other close-downs. I think they closed it down last week for two days. Auckland is the biggest city in New Zealand. Notwithstanding that they're getting over 100%. In Australia, the 100% has only been the last few weeks as Victoria has reopened. Subsequent to that, I think we're traveling in the low 90s%. Which is now elevated up to the high 90s% and 100%. Look, I can't answer you exactly where it's coming from because it's coming from everywhere. There's some segments that don't exist. We should be loading lots of ships at this point in time, lots of cruise ships. We're doing zero.
We're doing nothing in the airport precincts. We're doing very little to the industrial caterers who are catering in office blocks. The counter to that is we're seeing phenomenal growth in the traditional restaurant, takeaway, cafe, travel market. Even in the domestic travel market, and that's in New Zealand as well, we're seeing a huge uptick. Hotels are relatively full, not in the CBDs. In the regions. Maybe it's because Australians, New Zealanders are relatively good and worldly travelers who spend a lot of money traveling. The fact that they're now spending their money domestically is benefiting our business. Yeah, almost every single branch or depot in Australia and New Zealand, other than one or two of the major CBD branches, are actually outperforming the prior year. You're right, it is a phenomenal performance.
Thank you.
We don't have any other questions on the system from our side. I'm not sure if anyone has any questions.
Look, I think from our side, we are where we are. The world's in a tough place, and I think we're in a very good place in a tough place. We're happy that we're playing the best hand possible with the cards we've been dealt. We're very confident about the future. Our teams are very motivated. Our financial position is strong. We're taking advantage of the bounce back where the bounce back has happened. Where the bounce back will happen, we are absolutely in place to take advantage of that, and to play that as best we can. Yes, we do have one or two weaker areas, which have received a whole lot of attention. Hopefully, those are going to be drivers of growth in the next few years going forward. I look forward to talking to you all in February.
I think the one thing that will be for sure is things will be different. I don't know how they'll be different. Hopefully, they'll be better. Everybody, take care. Thank you for attending. Stay healthy. Look after yourselves. Look after your mental health. The whole world is going through a very tough time, and I think we need to acknowledge that. Wishing you all a very happy festive season. Go spend lots of money in restaurants. Encourage everybody else to as well, please. David, I don't know if you got anything to add at the end.
No, nothing from my side. Thanks, Bernard.
Okay. Thanks, everybody.
Bye.
Thank you.
Cheers, Bernard.
Thank you. Thanks. Bye-bye.