Okay, we're ready to start.
Thanks, David. Good morning,
David. Do you want to give the intro?
Yes. Morning. Welcome to our capital market update. I'm not sure how we're doing questions. Are they going to come through?
Yes. So the option are to type questions through the chat function or the Q and A function on the Zoom webinar. Or if you'd like to ask your question, you can just raise your hand and I can unmute you to ask a question directly.
Okay. Thanks, Desj. 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 a 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 August,, quite a lot has changed. And I guess by the time we talk in Feb. 0, quite a lot will change. So some jurisdictions have got better, some jurisdictions have got worse, some jurisdictions have got better than worse, some jurisdictions have got worse than better. And I guess we just need to brace ourselves for this continual roller coaster for the next while.
Hopefully, it's only months as this pandemic unfurls. We make no call whatsoever as to when it's going to 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. And 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. So, during the first few months, certainly in July 0, we saw volumes rebound very, very quickly, particularly in the Northern Hemisphere where Europe and The UK enjoyed a relatively COVID free type of summer.
And we were very, very buoyed by the quantum and the speed of the uptick that we saw in our volumes across almost every geography in Europe and UK. Obviously, other markets have different trajectories as to where they are in the pandemic. But from an overall point of view, we certainly are very, 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 going to be radically changed, it was going to be fundamentally different.
And that 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. But 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 up or related activity that we're a direct beneficiary of. So we've certainly seen it in every single geography. I can't say there's 1 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 rented out and the restaurants are emptied out until the tap is turned on again. And it's, you know, 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 pack to their capacity that they'll allow them to be, if it's 20% or 50% or whatever it might be. So, 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 0. 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 And that's a positive sign, but generally that's been decimated. But notwithstanding those areas that are operating at close to 0, 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. And I don't know how this works, but in almost every single geography, that 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. And 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. And 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.
And that's served us great because I don't think that 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. And yes, 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 the financial our financial position, which is exceptionally strong. We've been highly cash generative.
Our working capital is in a fantastic position, and not because our business is smaller than it was, obviously that's a factor, but we've absolutely seen an improvement in our working capital management manifested in whatever metric you want to measure it in, But there's been a wonderful improvement in that. And that's also got something to do with the change in customer mix. But as we move away from some of these customers who are operating at 0, generally, there 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. So I think just by default of us being focused on the correct partner 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. But at the moment, to ride through this process, 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. And 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. And 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 is now absolutely irrelevant. All we can talk about is where they are now. And I suppose, you know, we do need to make reference to what we saw in the but that's certainly no indication of what's going to happen going forward. If we start in Australia, 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 that came back online about three weeks ago. They're still only operating at about 30%, forty %, fifty % capacity. But notwithstanding that, we've seen both Australia and New Zealand operating at 100%. Sporting stadiums are starting to fill up again. Tomorrow night is a rugby league game where I think they're going to have a world record crowd.
In the COVID era, I think it's 52000 people. So, it does show you that life does carry on. People go back to their old habits and kind of sporting events, etcetera. So, in the Australia, New Zealand business, we're running almost at 100%. Some weeks is at 100%, some weeks is slightly below.
But 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 see continual growth in China from about April 0 onwards. They have had some scares when Beijing went into lockdown, Qingdao went into lockdown a few weeks ago, but they're relatively small, short, sharp and highly effective. And we've seen consumption really taking off in China and now our sales are strong.
Through the rest of Asia, we're seeing a return back to normality and we're probably running at between 8090% through Hong Kong, Singapore, Malaysia, Vietnam, but 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 6 down to 4, just as a precaution, which obviously has an impact on demand. But people are learning to live with that. The 1 market that hasn't recovered is Macau, which is absolutely tourist dependent and remains exceptionally depressed. So Asia seems to be well on the way.
They seem to be coping with the second with their waves relatively okay. And so we're quite confident about the Asia component of the business. If we move to South America, very small in our portfolio and they did it really, really tough for many, many months. Their lockdowns or their attempted lockdowns, their movement restrictions, their timing out restrictions went on for a very long time. But we're seeing a very, very strong resurgence in volumes through all 3 of the countries we operate in, 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 in meat, seafood across Chile and Brazil. So, we're seeing sales numbers in most geographies greater than last year now, not because of existing customers buying existing products, but because of range diversification. So, when the rest of the market comes back, I think we'd 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. And it's a very similar story with the Chip Kings bakery business. In the foodservice 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 and 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, but 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 0, Aug. 0, Sept.
0 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 and we've seen volumes that were in the weeks in July 0 and Aug. 0 at 90% of previous year's levels back down to about 50% of previous year's levels. And quite honestly, I don't think that's going to change until spring.
And hopefully, there's a vaccine or something else by that time. And 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. But all our businesses, with the exception probably of Spain, are in reasonable shape.
We'll write 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 geared towards the summery type of months. But 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 UK is a very similar story.
The Care Pack business continued in July 0 till the July,. That was the home delivery for the vulnerable members of society. That government scheme ended at the July,. Aug. 0, we had the Eat Out to Help Out government scheme where they basically funded people's dining out experiences, I think it was on a Monday and Tuesday night to some degree.
And that really had a very positive stimulus on sales. So, Aug. 0 looked very good. Sept. 0 was okay until the resurgence in cases and we've seen a retreat.
And once again, we think that 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 UK, education is still open. In most of the European countries, some form of education is still open and there just isn't the same absolute hiding in the bomb shelter that there might have been in the first few months.
And 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 0. 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 UK, Fresh UK, which are fortunately smaller components and we knew they were troubled businesses where we have taken remedial action. But fortunately, unfortunately, the virus has hampered our ability to execute those and see them all through.
But 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. So from an overall point of view, there's absolutely our teams are very motivated. Obviously, they're frustrated, particularly those in Europe and The UK who are going back into lockdown and it's very difficult once you've tasted the sweet fruit out there to have it taken away from you. And now we're all very passionate about what they do and they are frustrated and angry and whatever else, but we're just trying our best to put that energy to the best use possible. And they are out there every day running their businesses, fighting, doing whatever can be done to minimize the disruption.
And 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. And if you cut too deeply now, you're going to have no capability to handle the upside when it comes to the other side.
And 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. And that's where we talk about the fact that we colloquially think that we regain market share. We've got no way of empirically proving that, but 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. Now, it's very difficult to go from 50% to 80% to 100% in a week, but that's what we've been called on to do in quite a few jurisdictions, that 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. So 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. And obviously, we have curtailed it as much as possible.
But let's be honest, we are still highly cash generative at the moment. We're still profitable. And 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 wealth 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 because 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. So, 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, and we will do some acquisitions, but none of them are going to be for nothing. And at this point in time, there just isn't the amount of carnage out there that's being written about generally in the financial press. That might happen in months to come or years to come when the longer term consequences are felt. But certainly, at this point in time, there's certainly no huge list of businesses in 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, Bertrand. 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 0. So you're working off a June 0 balance that we 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 inflow about SEK 120,000,000,0.0. CapEx is in line with depreciation, as you've mentioned. And we did have the, I guess, the 1 off benefits of the proceeds on the Sterling Leaseback transaction that we did. I think really just to we talk about the cash flow evolution as the group has gone into this crisis. And we've set it up.
It's been very well managed. Our debt levels are fluctuate at the moment somewhere between GBP 175,000,000 and GBP 185,000,000. That obviously changes on a day to day basis depending on the rands. But I think it's in context, it's GBP 200,000,000 better than we were a year ago. So 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. And we don't see that as an issue going forward, notwithstanding that as Ben had said, the Northern Hemisphere is going into a much tougher period for the next few months. And 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. So I don't really want to reiterate.
I think it's all set out in the announcement. So maybe just try to hand back to you or take questions.
I think let's take questions and then we can wrap up after that. So Ashley, maybe you want to give us the questions that you do have.
So a question from Rowan Guler and from Irina Schulenburg is around food inflation across the group and the different markets. That's the first part of the question. The second part, where does the group have greater operating leverage to volume or to price? And the third part, what innovative ways have you used to help your customers deal with the crisis?
Okay. So, the first question is food inflation. Once again, we're across many, many geographies and there's a slightly different answer to most of them. But 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 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 ten years. But no, we're not seeing any food inflation.
And maybe that's because demand overall is lower in the foodservice market. Therefore, you've got more supply, not necessarily everything can make its way into the retail market and maybe that's kept prices relatively in check. We're not seeing deflation either. So, 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 going to add to inflation.
We actually don't know is the answer because there is a fair amount of dislocation and disruption in global shipping at the moment. And 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, and 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 the 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. So, The UK sources a big chunk of what they do very locally. Australia sources a big chunk of what it does out of Australia. So, very few markets are totally import dependent.
You're talking about the likes of Hong Kong, Singapore, the Middle East maybe. But as for the rest of them, there's a high degree of self sufficiency. But there is this issue of dislocation in global shipping. At market worst, I really don't know. So far, we've managed our way around it as I'm sure most people have, but 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.
Now, 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 because 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 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.
And in your cost base, the largest cost is payroll, which accounts for about 65%, I think it is, of the cost base, and that's not variable. Some of your payroll cost is variable, but a fair chunk of your payroll cost isn't variable. And when you're selling 90%, you're going to send out 1 truck, you're not going to send out 90% of a truck, you just aren't going to fill it to its capacity. And you're still going to employ the amount of warehouse people that you had before that just maybe aren't going to be operating as efficiently as they have. So, I think as David talks about it, there's no linear it's not a linear trajectory between revenue and cost.
And obviously, we have brought our cost back where we can, but there's just no way you can cut your costs to counteract the shortfall in the revenue, in the top line revenue. So 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. But obviously, the quantum is less because your turnover is less.
And 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.
Yes, 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. And we just have to be flexible enough and fluid enough to adapt to that. So 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. And yes, they might have to swipe a QR code at the entrance to the restaurant and yes, we might have to deliver the product and disinfect it on the way, but fundamentally, not a whole lot has changed. So this innovation, there's no great catch line we can give you that says we've got this innovation that's going to be a game changer. Innovation is a constant it's a constant evolution in what you do. And it's part of the DNA of what we do all the time.
So, we're constantly making these small changes and innovating around the edges to improve what we do. But 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, Charles, the most comforting thing is that it's business as usual. As business comes back, it's business as usual.
And I think that's the most positive message that we have to give and that's the most positive experience we've seen. Okay, next.
We have 2 questions from James Timon. The first is, are any of the acquisition opportunities sizable or are they all small add ons at this stage? And the second question, was all the cash flow in the quarter from the sale and leaseback and working capital or was there some underlying cash flow?
Okay. I'll answer the first question, David can answer the second question. Not that I don't know the answer, but I'll let David answer it much more eloquently than I could. So the first question was on acquisitions. There's nothing that's large out there and 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. And 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. But 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 saw you can see the EBITDA margin. So we absolutely generated EBITDA cash flow from an operational perspective. So yes, the sale and leaseback did contribute, but the reality is what 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. So yes, some of it helped, but it certainly wasn't all because of the sale.
Okay. We have 2 questions from Paul Stegas. 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?
And the second part, can you highlight the nondiscretionary revenue percentage in your different regions?
The first question on the provisions is we've done nothing with provisioning in the and we don't see a requirement that there will need to be an increase in provisioning. I'll say that now in Nov. 0 and obviously we'll have to have a look in Jan. 0, Feb. 0 is to see where Europe is, but we certainly aren't seeing any huge amounts of stress in the customers' abilities generally to pay their bills.
Now, there's no doubt that that debt experience is going to be higher than previous years and maybe it's, I don't know, maybe it will be double what it was previous years. But if we put that in context, I think our historical bad debt right, if Charlie correct me if I'm wrong, was less than 0.01% of revenue. So even if you double that as 0.02, it's certainly not going to shift the needle by any huge amount if it's a 1 off. So we don't see a requirement at this point in time to increase our provisioning. And at some point in time, obviously, we have to assess the provisioning that we have there, but we believe it's relatively comfortable and more than adequate.
Second question was, I can't remember my name most days. Sorry, give me a clue.
Non discretionary revenue percentage.
I wouldn't have a clue, because I'm not sure what non discretionary means. In reality, you put something like healthcare as non discretionary, but there's actually quite a large discretionary element to healthcare. So, elective surgery by and large has been canceled. So, 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. So, 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. So even those non discretionary items have dropped. Education is the same. We put it in the non discretionary bucket, but that's moving around all over the place in different geographies.
Schools are open, schools are closed. Universities are open, universities are back online. So I just don't know that I can 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 can just say it on the provisioning. I mean, we've continued through the quarter and beyond obviously to continue to provision as we normally do. So generally as a percentage of revenue, which obviously we provision on a monthly basis going forward. So we haven't stopped provisioning for it's continued as normal as we normally do.
Okay. A question from Vikhet Sharma.
Good afternoon, everyone. I'm Stephen Lilly, one of the senior biotech and our state of Stifel. Appreciate everyone's attendance here the virtual version of the conference. We're going to be wrapping up the day 1 with Dan Gold,
who is the Chief Executive
Officer of MEI Pharma.
That might have a slight negative on our margins. But bear in mind, for many, many years, we've been rebalancing our customer portfolio. We've spoken about that for many years. And we don't have a huge exposure anymore to the national segment. So it's really yes, it's almost not going to be of consequence when it does come back again.
And I think we'll end up being a lot stronger in the smaller and and I don't want to call it any small because there are some large customers in our sweet spot as well. But in the target market that we're in, I think our position is stronger and our margins, we believe, will hold up. There will be some competitive pressure, there's no doubt. And 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. And we're normally the first in line to get smacked with a baseball bat. And our competitors are going to be looking to build some market share back again. But that's all just part of our 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. And 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.
And 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're taking our shareholding up to, I think, about 46% at the moment. But I don't think they actually reported a loss through the whole COVID issue. And I might be a little bit wrong, but I don't they had any loss of any consequence.
And they were, I think, the first business that went and clicked back into profitability again because they're just saying you're still operating in process environment, it's just what they do. So, you know, there's certainly learnings from them for the rest of the group. But we believe South America is a good market with a lot of potential and is highly, highly, highly fragmented. So there's obviously opportunity for us to do what we do best, which is rolling up and consolidating.
Thanks. There's a question from Gino. Well, 2 parts to the question. Number 1, how important is Dec. 0 trade to the European, UK businesses in terms of seasonality?
And number 2, 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?
Yes. I suppose the first question is how important is Dec. 0. I actually don't know what the number is. It's not hugely important, but it's fair to say that Dec.
0 is probably bigger in Europe than Nov. 0 or Jan. 0 or Feb. 0 are. But Dec.
0 certainly isn't as big as the summer months. So it's not critical do or die that you have to have a good Dec. 0 or else you're gonna make losses in the year. I think it's, yeah, 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 involving. 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. And 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 1 of the best ways we can help them is making sure they get 100% of the taking. But it will help. And it does help having alternative distribution channel for our customers. For us, it's agnostic because we're still selling to the customer. And the customer is either the restaurant or a dark kitchen.
A dark kitchen is still our customer. So that absolutely is helping. And, 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 UK 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 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. And 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. Yeah, I think it's foolhardy to say that you want you want to reduce or minimize your working capital because if you don't have stock on the shelves, you don't have sales. And if you're not going to give credit to your customers, you're not going to have sales either.
So, yeah, I don't think we should be too short sighted in trying to come up with some type of 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, yeah, will continue and I'm sure it will. But I think please bear in mind, our working capital days are very low anyway.
Now, whether it's 8 or 9 or 10 or eleven, there's not a whole lot of difference between them. It's lots of billions of brands. But at an operational level, that's not all that much. And I do just reiterate, if you don't have stock, you don't make the sale. And if you don't give credit, you don't have any sales.
Then some questions from Rowan Guler. What have you learned about the resilience or fragility of the restaurant trade through COVID times? And 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 hit?
What have we learned about the resilience? And I think we spoke about it right up front and we've continued to be impressed by it. And that's the resilience, the tenacity, the perseverance of our customers. I mean, there were all these predictions upfront by all the clever people in the room about the number of restaurant closures that there would be. And when you look at it now, the amount of restaurant closures is higher than it traditionally runs at, absolutely.
But 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. And they've adapted very, very quickly and seamlessly, basically. And I think we always said that. These people are this is their businesses and we can see all the negatives and the complications, they don't see it.
Okay, so we have to have a QR code at that check-in. Not a problem. We have to sanitize. Okay, not a problem. We just got to do that stuff.
They do it, they get on with it. And we see no major negatives from the customer base. They somehow managed to cope and adapt with it, adapt it very well. On the point on incentivization, look, we talk here about incentivization in the businesses. And our most important asset in the businesses are our people.
And we have to look after our people because they're the ones who are going to drive the business going forward, they're going to get us out of where we are and they're going to take the business to better and higher places. So 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. And the reality is there's a global pandemic that has decimated many, 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. And we can be very, very short sighted and say, well, you know, you didn't make the profits that you made last year, therefore, you're not going to get a bonus. And 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. But it's important that you do incentivize people and that you don't just incentivize them by making their measurement purely a financial measurement that's based on historical profitability. Because you know what, that's just not going to exist for a year or two. So you have to be flexible and adapt to it or else you're going to pay a long term cost for it.
Okay. I think we have a last question from Nick Webster. I can allow Nick to talk. Otherwise, I've seen the e mail from you Nick. Nick, are
you able to
Yes. Can you hear me?
Yes.
Yes. Bernie, 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. So is that what's driving that? Is that market share or what else?
It just seems very impressive given the situation you faced during that period.
Yes, I think there's 2 parts, but let's not forget New Zealand because New Zealand is also operating at 100% plus And they had Auckland closed down for two or three weeks in Aug. 0. And they're having some other closed downs. I think they closed it down last week for two days. And Auckland is the biggest city in New Zealand, notwithstanding that they're getting over 100%.
And 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. And look, I can't answer you exactly where it's coming from because it's just it's coming from everywhere. So 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 0. We're doing nothing in the airport precincts. We're doing very little to the industrial caterers who are catering in office blocks. But the counter to that is we're seeing phenomenal growth in the traditional restaurant takeaway, cafe, travel markets. So 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, say, 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. So, almost every single branch or depot in Australia or New Zealand, other than 1 or 2 of the major CBD branches, are actually outperforming the prior year. So, 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, yes, we are where we are. It's not a the world is in a tough place and I think we're in a very good place in the tough place. We're very happy with we're happy that we're playing the best hand possible with the cards we've been dealt. And 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 and 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 1 or 2 weaker areas which have received a whole lot of attention. And hopefully, those are going to be drivers of growth in the next few years going forward.
So, I look forward to talking to you all in Feb. 0. I think the 1 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.
And I'll just yeah, 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. And wishing you all a very happy festive season and go spend lots of money in restaurants. And 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,