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Amrest Holdings SE
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Dear, ladies and gentlemen, welcome to the presentation of the AmRest Quarter 1 2020 Results. At our customers' request, this conference will be recorded. [Operator Instructions]
May I now hand you over to Lukasz, who will lead you through this conference. Please go ahead.
Good afternoon, ladies and gentlemen. My name is Lukasz Wachelko, I'm representing WOOD & Company. And today, I have the pleasure of being the moderator of AmRest call. The company is being represented by the management in the presence of Mark Chandler, the CEO; Eduardo Zamarripa, the CFO; and Peter Kaineder, Chief of Strategy and backed up with their IR team.
So not to go for too long. Well, gentlemen, the mic is yours.
Thank you very much. Good afternoon, everybody.
This is, I guess, our first virtual earnings call. So hopefully, we won't have any technical issues here, but it seems like a long time since I last spoke to you, I was in Spain at that time at the end of February, but it's only been 3 months. And since we last spoke, a lot has happened. When I talked to you in February, we were talking about growth, about building 300 restaurants, continuing to grow our margins and improving our leverage. And also, I guess the focus at that time was on China, where we were talking about how China was coming down from beginning of 113 same-store sales index down to 12, and that there was no effect on the European business. Well, a couple of weeks later, we all know, things have changed a lot. Government sanctions have come in everywhere. And certainly, our business and our industry has changed. And without a doubt, this is certainly our biggest challenge we've had in our history.
We had a really strong and promising start to the year. Our same-store sales for January and February in the 5% -- plus 5% range. And it looks like we were going to have a record year as we had anticipated. But of course, with the lockdowns and that, that changed. So I would say March was nothing but short of painful for us as we were able to only operate out of delivery channel. And in some cases, also we had take out and drive through. But our sales dropped after that strong start, dropped by 70% in the second half of March. And we ended the quarter, of course, with a decline of 7.4%. And Eduardo will take you through more -- the numbers in a bit more detail after me.
Fortunately, also, I think we have the advantage because of China that we reacted faster than most companies. We learned a lot from China. I was on the call with them today. We had our biannual, and they're showing every month, there's a lot of progress. Their same-store sales are now around 80% and growing. And now some of the restrictions are coming off. But we were very quick to respond to the health and safety challenges, and that helped a lot in terms of how we can mitigate the financial impact of the crisis. I'm very proud of the team. They've been -- that I have, they've been great. They've been very resilient. They've been very committed. And of course, it's our culture that's helped because we've been always proactive rather than reactive during the crisis.
During the first couple months, we really have focused on 4 key areas. The first, of course, and natural is the health and safety of our employees and customers. We've implemented strict safety measures across our network. And we've actually gone beyond the guidelines that the WHO and also local authorities have implemented, and also we put home office in effect for all our offices in our network. Since February, we started and that was because of China and before we hit in Europe, we started a crisis task force. We set up by country and also globally. And that communicates and monitors everything that's going on in COVID-19 cases across the group. And also, we have daily calls with the crisis committee, myself and the executive team, and we also have exec meetings, actually, 7 days a week to cover what's going on.
Also in terms of our customers, we've implemented contactless delivery, it's something we did first in China. And we also now redesigned our restaurants in Poland today, I'll be after the call going over to see, this is the first day we can actually eat in the food courts. So we'll see. But we redesigned our restaurants to make sure that we can meet the restrictions that have been placed on us by the governments.
Now the second key area we are looking on is CSR. And as -- because we've always been the supporter of the community. And this time, we've really been focusing on the people who've been fighting the virus, the people on the frontlines. Those -- so we've been delivering food to the nurses and doctors and hospitals and also to the police. And also we added on to any excess product that we had, we contributed through our harvest program. So it's something we're very proud of in commitment and the people. We had a lot of photos of our people and got a lot of things from the police and from doctors and nurses, thanking us for helping them out in these very, very tough times. Also, of course, the third thing that we're working on is maximizing the sales. We basically have lost our dine-in channel up till just now. And so we've been focused on delivery. And in some markets, I said before, take out and drive through. So our numbers have increased dramatically. In fact, we've doubled in most of our markets in March, our delivery performance. And also, actually, in April, it has tripled. So we believe that we come out of this, we'll be stronger for it. We were the most aggressive in terms of the competitors in most of the markets in terms of opening up to keeping the restaurants open. And that has allowed us to reach new customers and I think that's something that will help us as we go forward.
But of course, working on those 3 channels hasn't made up for the dine-in business. We will find out again here in Poland now. Later on this month, we'll have Czech. Probably country most impacted has been Spain because of our -- of the shutdown that's been going on around us. We have increased the share of our operating stores. We hit a low of only 42% of our total stores being opened during March. And now we have more than 70% open, and that will -- actually number should get higher in the next week or so to the -- closer to 80% plus. Peter will take you through more on the recent trading in the second quarter and also how we think we're on the path to a gradual recovery.
And the fourth one is, of course, preserving liquidity. Certainly, it hit us very fast. And we had to react very fast. And of course, not knowing how long the crisis is going to go on, we've had to take quick actions in terms of both CapEx and OpEx. And this is why we also put into effect a cash task force that meets daily to review all our cash transactions, look through all possible investments and expenditures. So it's something that we'll also have weekly Board calls to go through that to take everybody -- updating them on what the situation is. So in terms of CapEx, we've stopped all nonessential CapEx initiatives, and that includes new store openings and also renovations. And also, we had a lot of projects set up and we've only now investing more in areas such as digital and of course -- and safety guidelines that we need to follow.
Also in OpEx, we also took some actions. We've taken advantage of the government support programs that have been put in place in each of the countries. We've applied right now to 69 government assistant programs. They're mostly aimed at the contributions to our payroll, also loan guarantees, tax initiatives and also rent waivers. We've also, of course -- we filed -- we mentioned earlier in the press release about the Spanish ERTE program. We also applied for similar programs in Poland, France, Germany and also 11 other countries. Also, we've taken some voluntary actions in terms of salary actions beyond what we have through the government programs. In our countries -- the management of our countries, the exec team and also the Board, we volunteered to reduce our salaries anywhere from the range of 25% to 50%. We have also delayed any 2019 bonuses to 2021 as a way to help deal with the cash situation.
And also, we've been executing some cost initiatives across most of the major lines, cost lines. Such as we've been renegotiating with landlords, with suppliers and also our franchisors. And I have to say I'm very grateful for the level of support we've been getting from the partners at this stage. And then also we're working on financing. Financing, we've been able to have help from our club banks. I started the club banks 12 years ago, and I have to say we've always had a very close relationship, and I want to thank them very much for their support during these very tough times for us. We have received a covenant waiver for the first quarter. As you've seen, we exceeded our 3.5x leverage covenant, that we were at 3.6x. And so they have -- we have got -- we received that this last week.
Finally, in addition to that, we've also taken some longer-term measures and that is adjusting our growth strategy. It's called -- we call it internally AmRest 2.0. I have mentioned that I think before the crisis that we're going to go through and focus on being more asset light in our business also, which will reduce our CapEx. Also increasing margins, and that was our -- we were on that path before we had this difficulty with the crisis. But also through the years, we've also had an issue on free cash flow. And so our target going forward is to be in a positive free cash flow and self-finance our builds and renovations and be able to lower our debt. So it's -- the plan, though, will be executed. The timing is certainly affected by the recovery time frame we're going to see on COVID in each of the countries. But it is a plan that we have updated and believe we're going to be able to execute. It also allows us, at this time, to take advantage in the situation of there are going to be, unfortunately, some competitors not able to make it through. So there will be sites available for us. And also, we believe with the work we've done in digital that we'll be able to even have greater penetration into the market.
So we do know that the world will change, though, certainly post-COVID. Customer behavior has already shifted. And we think a lot of those lags will be here to stay. We were talking to China. China was going through something similar and seeing that their customer behavior has changed. So we do see that this will be -- the crisis will be certainly a catalyst for us. And probably we'll fast forward some of the trends earlier than what we thought. Certainly, we've seen an acceleration towards online food delivery. It was something we were well set up for with our portfolio of brands. And also around our shadow kitchen initiative and virtual brands, we believe we're well positioned to handle this. In fact, our virtual brands that we mentioned -- that we started at the end of last year, we've actually tripled the number of transactions, and we had to open up a second kitchen using somebody else's restaurant to be able to handle that. So we see virtual brands as a way to go in the future and also the shadow kitchen initiative for us is still something we think is very important, especially with delivery being a focus for our customers.
We also saw that our -- we had the right strategy in terms of multiple aggregator and multiple channel strategy. We've seen great results from that. We do believe competition probably will follow us in that. But that has helped us very much as we got out -- tried to reach out on the delivery side to our customers. Certainly, the customers also will be focusing on health, safety and hygiene. It's something that it's -- so we will continue to do all the measures that we have taken place, and that's what we do in terms of setting up our restaurants in terms of redesigning that. And also, I believe that the trend will be towards this kind of strong and reputable brands. Those will be the ones that'll gain share. For us, we've always said that we only would take on A brands, and I think that has been a benefit to us. And finally, digital and convenience. That will be something that will be more relevant than ever before and that will be where we will be focusing on our future investment plans. So -- and on top of that, we had talked many times about value being in our portfolio and value is also an area that will become even more important than in an -- pre-COVID.
So I mentioned China. China has been one that has shown a recovery trend already. It's going slightly better than what we anticipated a few months ago. Certainly from that experience, we see that QSR and fast casual will be gaining ground much faster than casual dining. Some countries, unfortunately, have reached the -- entered into the crisis at different stages. Russia being the last one in. So -- and China being the first one in. So we'll see the impact of them coming out at different points in time. Certainly, Western Europe has been more severely impacted for us than Central Europe. And so that will change a little bit our time frame brand by brand and country by country in terms of when we come out of it. As I mentioned, Blue Frog had a sales drop of 90% initially. And now as I said, it's up 80% plus. And we believe by the end of the year, we'll be up here back to 100% by year-end on China.
So before I hand it over to Eduardo, I just want -- and he'll take you through the numbers. I do want to, again, thank very much the outstanding job by the AmRest teams. They've been doing this for the past week, working long hours and such. And I especially want to thank the crew and members of our restaurant -- managers of our restaurants. We have -- we call them our heroes that's because they're serving our customers out there despite the risks that are involved. So for us, we kind of forget that. But to -- in today's environment, safety and that we've had people very dedicated to serving our clients.
So with that, I want to pass it over to Eduardo.
Thank you, Mark, and good afternoon, everybody. Now I will move to the financial highlights of the quarter. It's worth mentioning that the comments I will provide during the call include the IFRS 16 accounting standard.
That being said, let's just start on Slide #4 of the presentation. 19 restaurant openings in the first quarter were done. The total store count is 2,346 units. AmRest revenues for the first quarter amounted to EUR 411.9 million, representing 7.4% decline year-over-year as a result of business and social restrictions implemented by the majority of countries around the world in order to limit the spread of the coronavirus pandemic. First major restrictions with regards to obligatory store closures and the limitation of sales channels were introduced in China, while Europe implemented similar measures in the middle of March.
In first 2 months of the year, the company had seen solid top line growth of 13.8%, while in March, the revenues decreased by 45%. In terms of profitability, we are shaped first by a solid performance in Europe in the first 2 months of the year and then heavily affected in March. Consequently, consolidated EBITDA amounted to EUR 42.6 million in first quarter, representing a 44.5% decrease over the year.
EBITDA margin reached 10.3% and was down 7 percentage points versus last year. The main impact came from negatively effect of operation leverage from decreasing sales. Most of the cost savings programs have started since the end of March or beginning of April. After the first 2 months of the reporting period, group's consolidated EBITDA margin was 0.2 percentage points lower than last year, excluding China results. EBITDA margin was 0.4 percentage points higher, which indicates the overall strength of the business without the impact from the external shock related to the pandemic.
Net profit attributable to AmRest shareholders in the first quarter of 2020 reached minus EUR 41.6 million and was EUR 45.3 million lower compared to last year. Margin amounted to minus 10.1% versus 0.8% in first quarter 2019 due to drop in operating profit.
Let's move to segment information on Slide 5 to Central and Eastern Europe. The revenue reached EUR 181.8 million in first quarter 2020 and were 2.1% lower compared to the same period of last year. Wide range of restrictions implemented in reaction to the coronavirus spread resulted in around 55% of segment restaurants being opened for delivery or takeaway as of the end of March, with the remaining part of the stores being closed due to the low restrictions or low traffic.
After the first 2 months of 2020, segment sales reached very solid increase of 19.9% compared to the same period of last year. In March, sales decreased by 41.1%. In first quarter, EBITDA stood at EUR 28.7 million and was 24.5% lower than last year. EBITDA margin stood at 15.8%, which was 4.7 percentage points lower compared to the first quarter of 2019. Drop in revenues caused by trade restrictions impacted negatively on operational leverage with higher labor and general cost also influenced by higher share of delivery while slightly offset by first initiatives in cost savings. After the first 2 months of the report period, segment EBITDA margin was 2.1 percentage points higher than last year.
Now let's continue with Western Europe. The sales experienced a very strong hit in first quarter as a consequence of the virus spread. The main countries necessity to implement a strict limitation by government as well as higher sales of casual or coffee shop type of businesses. The sales reached EUR 164 million in first quarter 2020 and were 13.5% lower compared to the last year figure. Due to the implementation of curbs, most of the restaurants in France have been temporarily force closed and nonoperating in March. While in Spain, casual dining business has been closed since second half of March due to significantly lower restaurant traffic or location aspects. While only about 30% of our KFC stores were opened. After the first 2 months of the reporting period, the segment posted support revenue growth of 9% year-on-year and on back of positive comparable sales growth and net openings. In March, sales drop reached 54.5%.
EBITDA reported by Western Europe division amounted to EUR 11.1 million and decreased by EUR 18 million over the year. EBITDA margin was at 6.7%, which was 8.5 percentage points lower than last year. The segment experiences the biggest drop in EBITDA due to the pandemic and street restriction implemented by government as well as higher share of casual dining segment in profitability.
The revenues for Russian division amounted to EUR 49.1 million in the first quarter, representing a growth of 11.8% over the year. Initial measures taken by government in response to coronavirus spread were less strict compared to the main countries in Western or Central Europe. That align along with QSR-oriented store mix, allows Russia segment to post top line growth. After the first 2 months of 2020, segment sales reached a very solid increase of 30.3% versus last year.
The EBITDA of Russia amounted to EUR 7.5 million, and was 8.5% lower than last year. Profitability reached 15.3% and was 3.4 percentage points lower compared to first quarter 2019. Sales decrease in March, along with additional costs associated with expanding delivery channels and marketing promo, impacted the profitability. After the first 2 months, the segment margin was 2.9 percentage points lower than last year. China is based on casual dining and posed the biggest drop in revenue percentage-wise. Sales reached EUR 9.9 million and were 49.7% lower compared to the previous year. The first major restriction in China appeared in the second half of January and more work coming day by day. In the peak of lockdown period in February, nearly 50% of stores were closed due to low traffic or local load restrictions. As a result, delivery sales in China in first quarter 2020 increased nearly 13x compared to the same period of last year. The EBITDA was minus EUR 200,000, a 2.4% negative margin compared to EUR 4.7 million or 23.8% margin last year.
Now with regards to the balance sheet, one relevant transaction included the announcement of the final settlement for the transfer of 100% of the shares of Restaurant Partner Polska, PizzaPortal, the total transaction price was EUR 35 million, a combination of cash payments of EUR 20 million and newly issued shares of global resulted in the transaction that AmRest now holds 7.5%, taking global share capital as a nondiluted percentage. The net debt, as we were saying, excluding lease obligation under IFRS 16 at the end of first quarter, equal to EUR 629.8 million, which resulted in a comparable leverage of 3.62x. As a result, the group slightly missed one of the bank's covenants as of March 31. Board received a letter of waiver on 14th of May, 2020. Requirement of bank's covenant as of 31st of March was waived, subject to certain conditions to be satisfied no later than June 30. Consequently, the bank loan was reclassified as current liability at the end of the reporting period.
In April 2020, Spanish and French subsidiaries applied for state supported bank loans, guaranteed by governments in 70% and 90%, respectively. Up to date, we have granted total of EUR 75 million. As Mark mentioned, one of the initiatives that we implemented is the cash task force, which main objective is to manage cash outflows and inflows. We are currently reviewing rental agreements and entering into negotiations with landlords. Additionally, we have taken a lot of actions aimed to utilizing government support related to cost of labor and contributions offered on all markets where we operate. The company also decided to defer the planned CapEx that we have. This is another element that allow us to fulfill short-term cash needs. The CapEx for first quarter amounted to EUR 28 million. This is a very challenging environment, but I want to assure that AmRest is taking all the several initiatives and applied to all of the government support scheme offered in the countries where we are present in order to secure they continue an improvement operations.
Now I will turn the call to Peter for his remarks.
Thanks, Eduardo, and good afternoon, everyone. Following Mark and Eduardo's comments, I will try to give you some color on current trading and the trends we see across markets and the brands so far in the second quarter.
In terms of top line, we are recovering from lows we have seen during the second part of March. So far, this uplift is mainly driven by the gradual reopening of stores. As of last week, 71% of stores are operating and that compares to the low 42% in the third week of March. As you would expect, the stage of reopening is more advanced in some brands, such as KFC, Starbucks and Pizza Hut at levels of about 80%, with Blue Frog in China being fully operational. And less in others, such as TAG, with 10% of stores operational, which is mainly due to the stricter and longer-lasting lockdown measures in Spain and the relative weaker fit of the casual dining segment for delivery.
As the restrictions in most markets have been implemented only around mid-March but lasted through all of April, we have been facing a month-on-month decline of about 38% on sales between March and April, despite having increased the share of open stores to 56% until the end of April. With the amount of reopened stores increasing this month in May, we do see sales clearly recovering. And with the addition of the dine-in channel across many of our markets starting in the second part of May, we expect to finish this month considerably higher than April when it comes to our top line. Of course, there are significant differences between brands and markets when it comes to the speed of top line recovery. As an example, KFC Poland is already back at about 70% year-on-year sales index [ 4 ] months to date -- in May, influenced by reopenings as well as same-store sales dynamics. BK and Pizza Hut Poland are close to 50% so far in May.
It will not surprise given the stage of restrictions that on the other sides of the scale, we got our businesses in Russia and Spain. Given the category, the positioning of the brand and the fit for delivery, Starbucks is taking slightly longer to recover. In terms of stores, you see us reopening, we are doing this case by case and subject to expected sales levels and the accretion to overall profitability. Looking at the remainder of May and second quarter, with dine-in reopening over the coming weeks across all markets alongside additional reopenings of stores, we expect sales indices to recover further into second quarter. Of course, we yet need to see the impact of a more cautious customer and additional health and safety restrictions when it comes to social distancing on our business. So far, we are lacking the reliable track record from reopenings in Europe to make serious predictions, but please bear in mind that any additional business in dine-in will be mostly incremental and add to fixed cost coverage and margin improvement. Generally, also when taking observations and learnings from China, such as BK or Yum! into account, we expect QSR and fast casual to regain lost ground much sooner than casual dining. In that respect, our business in Blue Frog China is showing strong performance also versus the overall casual dining segment as we are already back at about 80% same-store sales index with all stores being now fully operational.
In terms of sales mix, up till now, the only channels available to us in Europe since mid-March have been delivery, and in some cases, only take out and drive through. Delivery has substantially increased in absolute numbers and the growth rates have been gradually growing week by week during the lockdown. In numbers, this means that delivery sales have doubled, and in some case, tripled across many of our markets versus precrisis levels when looking at our QSR brands. And these gains are visible on external aggregator platforms as well as our own channels. In China and with our casual brand Blue Frog, delivery as a share of sales is now at 10%, which is about twice the pre-COVID level.
Supported by the strong uplift in demand for delivery, our virtual brands have printed new record order numbers. As you know, we have launched our first shadow kitchen late last year and numbers we see are clearly above expectations so far. We have opened our second shadow kitchen in April also in Poland. Overall on delivery, given the portfolio of brands we operate, our multichannel strategy and initiatives around shadow kitchen and virtual brands, we feel very well positioned to take advantage from the acceleration of the delivery trend. The current situation very clearly serves as a catalyst for further adoption of online delivery. So we feel that this topic will become even more relevant going forward.
Now before opening for Q&A, I'd just like to remind you that when looking beyond the second quarter, there's a little amount of visibility on how the COVID situation will develop further and the -- and how governments across our markets will react. We are now not in a position to give guidance for this year at this stage. Like everyone else, we hope this could change and visibility on this topic to increase by the time we are reporting second quarter numbers, and of course, we'll update you as soon as we can.
And with that, I would like to hand back to the operator to open the floor for questions. Thank you.
[Operator Instructions] Our first question is from João Pinto from JB Capital Markets.
I have some. So the first one, you have to meet certain conditions at the end of the second quarter to comply with the debt covenants, can you give us some color on these conditions? How demanding are them? My second question, can you give -- can you place us on the restrictions in the different countries, Poland is reopening today. What about the rest of the countries? And third question related to this 71% of your stores are operational as of Thursday, how many can already offer dine-in services? My first -- my fourth question, just a quick follow-up on your growth ambitions. You mentioned a 2.0 program, how does this compare with the pre-COVID long-term plan? Also, you target positive free cash flow, is this in 2020 or 2021 only? And finally, just to confirm if I understood correctly, consolidated sales in April are 38% down versus March, is this right? And how does this compare year-on-year?
Okay. So maybe I can answer a couple of those, and then we'll add in there. The conditions that we talked about for the waiver, that was your first question. We have provided the bank's 2020 forecast. And so we've actually updated that one. And they've also asked for 2021. So we are in the process of providing them our business plan for both years. And so that is something that we need to deliver to them within the next 30 days. So that is the condition because they wanted to see what our run rate was going forward. So that is what is due to -- for us to provide the banks. So we need to run it by the Board first, their updated forecast because you can imagine everything has kind of changed from our -- when we started out the year. So that's the conditions we have to do. We have to come back to the bank with our updated business plan for both 2020 and also 2021.
And I think the next one was on restrictions, and I believe that was in terms of different by country. As you've said -- yes, Poland, today, we'll check out after this. This is the first time we'll be able to do dine in with -- in Poland. So it will be affecting our food courts as well but also on -- with Pizza Hut, which has been -- we had some Pizza Hut restaurants that only been -- or dine-in restaurants that only been doing delivery. So that's been the -- an area that we are going to be able to do. Czech will be later on this month. So Czech, we're looking for something different. We're looking at reopening -- full reopening on May 25. That's the plan. Hungary has also opened up outside of Budapest. Budapest has some restrictions, but we expect to have announcement here by the end of this week. Germany has also opened up there actually by region or by states within it. So they're all in different part -- so they're rolling out. And we have Hamburg as the next one that could be reopening as -- actually as of today. So we expect to see more of our restaurants actually all open in there. France is slightly different. The malls can reopen on May 11 -- are open on May 11 except for Paris.
So we're still waiting for that to happen. But we expect an opening -- reopening date will be known sometimes at the end of this month in France. Spain's slightly different. We expect -- they're in stages. We expect to move on today to stage 1, and that's except for Catalonia, and we're also expecting to open up in Madrid. So you can see that they're all at different stages. We have other countries as well. But we're seeing -- basically, most of the restrictions are coming off in this month and also next month. So we expect that we should be probably closer to up and running. I think the one we're waiting on most is in Spain this season. People are still on lockdown there. So in terms of the 71% of the businesses, as I said, dine-in is -- we have -- at that point, we had no dine-in, in that number. So that was as of the end of last week, was at 71%. So we believe that, that number will greatly increase as the malls open up in some of the countries and also we'll be able to open up restaurants like our Pizza Hut dine in. So the 71% is really only with takeaway, other than China, of course. But everything has just been takeaway. The 3 channels we mentioned before, takeaway, drive through and delivery.
In terms of the timing of the AmRest 2.0, it was something I had implemented before the COVID-19. Now the timing has probably been pushed off, I would say, a year, at least a year. We'll be cash flow positive because that's one of your questions, that will be happening. And of course, we believe in 2021, a lot will depend on the recovery period. As everybody always talks about, is there a second wave or not. So if everything goes as predicted, then 2.0 comes in effect in 2021. And we've already taken actions on our portfolio, how we want to handle it, taken actions in terms of structure or asset light. So -- and a lot of renegotiations and things. So really, if things go as we hope, then we hope to be implementing AmRest 2.0 in terms of the growth period starting next year. Right now, it's in a different stage. But yes, positive cash flow is what we want to have.
I didn't get your last question in terms of April. Could you repeat the question in terms of sales?
Yes. It was just to confirm. I understood that consolidated sales fell 38% versus March, is this right? And how...
The -- yes, that's the month-on-month number. Let us dig out the year-on-year comparison.
Yes. Because we had basically 2 weeks of good trading in Europe for March. And then, of course, April was still in the lower part of what we were doing, then we started making recovery more towards the end of April into May.
[Operator Instructions] As there are no further questions, I'll now hand the session over to you.
Operator. Sorry, well, let me take the advantage of being a moderator, I have a couple of questions to be asked.
Well, first of all, guys, I wanted to ask about the savings. You mentioned being implemented at the end of the March and early outlook. Can you put it somehow into the numbers? And what -- can you point out what kind of cost savings they were?
Eduardo, do you want to address that question? Eduardo, you're on mute.
Yes. Sorry. As I was mentioning during the script, we started to make the savings at the end of March, beginning of April. And it was mainly, of course, driven at the beginning with all the renegotiation with the landlords. In some of these cases, we got -- and we got the opportunity to defer some of the payments and then some of the negotiation. Given the impact, we also get some percentages of reductions. Now also in terms of cost of labors, we took advantage of the programs that we had all across the countries in which we operate. But really the impact that we are going to see are starting in the month of April.
Okay. And would it be possible to estimate the amount of the state aid you received?
Of course. And it's something that we will share. Now on -- the thing is that it varies by country. Now for example, you have the situation of ERTE, as we were mentioning, in that the people that went into that program. The thing is that the majority of the employees of the restaurants. People went there more than 3,000 people went to there. And the payment of the payroll belongs to the government, but we are enforced to make the payment of the social security of those persons. Now if we go program by program, the thing is that we could be saying that we are, certainly in terms of the restaurants, around 20% of the cost of labor that we have in operations.
I think it's important to also note that we've not had to lay off our people. Of course, we didn't -- the ones that didn't work in the restaurants that were on civil contracts that wouldn't -- was different, but we haven't made any structural changes. Everybody has been taking voluntary cuts or we've been assisted by the government. So we've tried as much as we can to maintain the employment of our people here because we believe that we'll -- we are going to come out of this and then be able to start operating our restaurants again. So it was important for us to maintain the teams that we have.
Okay. Would it be fair to assume that given that you are reopening the restaurants as we speak or maybe next month towards the third quarter, the state aid shall not be expected?
The state aids are going to be -- are going to start to reduce, for example, as the people start to come back. So what we should be expecting is, of course, April is going to have a higher percentage. But May and April as restaurants continue to go on openings, that is going to be reduced because of that. Now -- and what we are saying now of course, all the restaurants that we are opening, we are making an exercise location by location if it makes sense to open, which is the proper moment to do it in terms of the expectation of the traffic that we could have on each location.
Okay. And would it be fair to also assume that the second quarter being more impacted than the third quarter with the COVID-19 lockdowns, would it be fair to assume that the result of the second quarter would be in terms of EBITDA worse than the first quarter?
Yes. I mean that's pretty safe to say because we have -- because we had 2 months of basic -- other than China, we had 2 months and almost 2.5 months of business not so far off. I mean, exactly, as I said, we were -- same-store sales at 105. So yes, the third -- the second quarter will certainly be worse than the first because we've been operating of course down with not till recently have we been growing back up again. So -- but we do see the trend of course quarter-by-quarter, crawling back to, hopefully, by the end of the year, getting closer to where we were sales-wise, at least pre-COVID. But it depends, again, as Peter said, by the brand and by the channel. Dine-in is the one that probably we have to wait and see how the consumer behavior is on dine-in. QSR, I think, will actually could come back even better. And QSR, given the new customers we've obtained and also where delivery has become a bigger top of mind for people. But yes, the second quarter will be worse than the first.
Okay. And speaking of deliveries, can you disclose what was the share of deliveries within the first quarter? And within that in March and how it develops going forward? And what's the difference in terms of economics because of cost of deliveries or the provisions for aggregator? So how does -- will the sales in normal business and sales in dine-in -- in deliveries, how they look like?
Well, maybe we can address and maybe I'll talk about Poland because it varies by country, right? So -- but in Poland, 40% of our sales was delivery and the rest was takeaway and drive through. Drive through actually was a fairly large number. So of course now we'll see how -- I think you're going to -- we're going to have to see how it goes here. I think Poland will be the best one for us to check on in the next couple of weeks because I believe it's going to -- when I -- when we first opened up the malls, things were slow, but then things picked up in terms of traffic. But we will see what will happen going forward as to how much delivery will be as a percentage of the business. But it was roughly 40% in Poland in terms of what we were operating.
In the third quarter or in April or in March?
In March, April.
Okay. And I think what the -- maybe the -- a few last questions. If you agree with me that the second quarter will be tougher in terms of profitability than the first one, it also seems that the leverage number will be higher than 3.6. So we'll -- you should most likely break the covenant again at the first half of the year. Is that a fair assumption?
That's a fair assumption. I mean given the -- based on that it's trailing 12 months EBITDA for the formula. So yes, we will. And that's why with what we're doing for the banks, of course, the desire is to get a waiver for the next couple of quarters until we come out of it.
One thing, Lukasz, as we stated, we also took the EUR 75 millions of state support loans and that increases the debt. Of course, we also have our club of banks aware of this thing. So because of those 2 situations, EBITDA and increase in debt, the assumption that you are making seems correct.
Okay. And -- but as I understand, well, 70% or 90% of this state aid debt is being secured by the government. So it's all on your leverage or it's somehow excluded from your leverage?
At the end, it's secured by the government but it's incremental debt for us. And it's 5 years, 10-year period with 1 year of grace, but at the end, we will have to fulfill the payments of these loans. And of course, it's included in our numbers and leverage.
Yes. It was -- and again, we have a waiver from the club on that -- on those loans, of course.
Okay. So well, you mentioned during the presentation that you would like to take the advantage of weaker players falling out of the market and taking the locations. However, given that going forward, most likely every single quarter and next foreseeable quarters, you'll have an issue with leverage and you'll have to keep CapEx limited as much as possible. Would you be able to take actually the advantage or would just -- this advantage will pass in front of you?
I think it's still going to be there. And also, we're still -- doesn't mean you can't do something on the franchising side as well, right, for some of our brands. So we say asset light, doesn't mean you're not going to have restaurants built. So yes, I mean, I think for this year, for sure it's not going to be the one where we're going to make investments. I think the important thing is to enter into next year in the position that makes us strong. So I believe a lot of these -- the opportunities will still be there next year, and so be less competitors in the marketplace. We're certainly, I think, now looking to see if we can get -- work with our landlords and things to be able to get better returns for what we have. But then we'll be ready, I think, in the next -- beginning of next year to see if we can explore those opportunities.
The very last question from my end. Would you totally exclude capital increase as a possibility over next couple of weeks, months, quarters? Or that's something which you would consider?
Well, it's nothing that -- I think, again, that will be something that has to be discussed at the Board level. So I really can't address it because at this point, it's not within my control, that part of it. But certainly, I'm sure the Board is considering all types of actions if needed. Again, a lot will depend on our plan that we put together for 2020 and 2021.
But you would agree with me that having cash on hand and having much stronger balance sheet would make your life much easier, and you would be able to exploit the opportunities in much more of efficient way than now with restricted CapEx?
I believe you know the answer to that question because it's kind of hard not to take cash in hand. If somebody asks you cash or no cash, you would take the cash for sure. So yes. So -- but again, a lot of things have to be considered. But yes, that would certainly make my life a little easier.
There is some questions from the audience. Our next question is from [ Travica Javinez ] from [ Power Roco Corporation ].
It's regarding the occupancy level, I would like to know what percentage of occupancy are different major countries considering from now on? For example, in the case of Spain, you know that according to the evolution of different phases, a 30% of restaurant occupancy level can be opened is allowed to have, then if you move on to Phase #2, you can get 50% or something like this. Could you give us some color in the major countries, what do you expect from May going forward?
We are pretty much expecting the 50% number that you mentioned. And that's how we are designing our -- redesigning our restaurants for that. Also will help -- will be the patios because the patio will be also something similar. So most of the time here it's been based on -- like it being 1.5 meter away from each other. So the table will be set up, for instance, here in Poland, it's also going to be -- you can't sit at the same table as -- unless it's family. And that's -- so it depends by country, but I believe overall, we would look at the 50% occupancy number as kind of a general guideline for most of the countries.
There is no further question at this moment. Back to you, Lukasz.
Okay. So thank you very much for the presentation. Thank you for the Q&A. So it's up to you for the closing remarks, if there are any.
Yes. I want to thank everybody again. It's been, as I said, the 3 months, a lot has happened since we last spoke. And as Peter said, I believe on the second quarter call, we'll be able to provide a lot more information in terms of our projections forward and what we expect on there. And hopefully, also by then we'll have a lot more experiences in terms of -- with the dine-in experience and also where we're going to be coming out of by each country. So again, I want to thank everybody. And hopefully, the next call we'll have a lot more good news to tell you. So thank you.
Thank you very much.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.