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Amrest Holdings SE
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Amrest Holdings SE
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Good afternoon, good morning, ladies and gentlemen. My name is Lukasz Wachelko. I'm presenting Wood & Company, and today, I have a pleasure of moderating the conference call with AmRest management after they reported third quarter results and also the aim is to discuss the current situation.
The company is being represented by Mark Chandler, CEO; Eduardo Zamarripa, CFO; and Peter Kaineder, CSO. And not to go too far with me, I hand the mic to yours CEO. Thank you.
Thank you, Lukasz. Good afternoon, everyone. I hope that you and your families are well and safe.
I guess it's only been about 45 days since we last talked, but certainly, a lot of things have happened since then, of course, the U.S. election, which has certainly been in a lot of news; but also the second wave, and we'll talk a little bit about that; and also, of course, the recent news also of vaccines. So many things happening in only a short period of time.
But since we last talked on the earnings call, we have been going through a recovery, and I indicated to that to you on the last call. We've been able to open most of our stores after hitting a low in the second quarter of 44% of our portfolio being open. We have moved up to 98% at the end of September. Then in October, we finished at 94%, then due to recent restrictions, we've now dropped off a bit further to 90% of our portfolio. So we have a couple of hundred restaurants that we have closed, but they're ones that we don't have delivery out of. But again, the portfolio still is in much different shape than it was when we went through the first wave.
I think it's important to underline, though, that during the last couple of months, we've worked not only on reopening these stores but also in recovering a large part of our lost sales. And that's been really through actively preparing all of our lines of business for what we are experiencing now, which, as I said, the second wave; and also a lockdown we've seen in, at least, our dine-in business across most of our markets. Again, we are open in almost all markets in terms of drive-thru, takeaway and delivery. So it's been -- really been our dine-in business that's been impacted.
The same-store sales in the third quarter increased from what we had last time at the quarter with 79%. It's up to 87% at the end of the quarter. Because of second wave, that's dropped off a bit but now in the 70% range. Peter will take you through a little bit more on the details of our stores that are operating in the current trading. Also, he'll talk a little bit about 2 of the brands that were quite well, actually, during this period of time. That's Blue Frog, China and Sushi Shop. Both of those are trading above 100 same-store sales, and it's consistently, I think, every week in the plus 100. So those are 2 good news stories that we've had and continue to be.
We have opened 73 restaurants to date. That puts us on track to the 80 to 90 restaurants I mentioned to you on the last call that we're going to open this year. Probably franchise will be roughly 14 or 15 of those. And we also opened another shadow kitchen since we last spoke. I'm really pleased also with the performance of the one we had in Krakow in Poland. That one included not only our virtual brands but also included a couple of our franchise brands. KFC, in particular, has done extremely well in the trade zone. It's substantially above what it was before we open. So we have a plan to continue in next year to open some more kitchens. So we think it really is a timely one and also one that seems to be adding a lot of incremental business to us as well.
We also improved our profitability. Our EBITDA rose from EUR 22 billion in Q2 to a little over EUR 90 million this quarter. And also, importantly is the net profit. We reported last time loss in the quarter of EUR 119 million. Now we showed a gain -- a small gain, a gain of EUR 2.1 million. But also, one of our focus, as I said, is improving our margins. We have raised our EBITDA margin for the quarter to 20.4%, and that's higher not only above last quarter but also above Q3 of last year.
I also would like to talk about -- today about continuation of the year-end sales recovery, but unfortunately, there are the restrictions that are going to make a little bit more difficult for us to kind of give you more of an update of where we think it's going to come out. Right now, it's -- we have lockdown, as I said, in most of the countries. We have not seen that in Central Europe in the first phase, but we have seen some of that in Czech. Czech, fortunately, numbers are dropping off in terms of cases. And so we're expecting that -- and some of the markets are going to be back up in the next couple of weeks, able to operate fully again in some of those markets.
So really, when we look at the second lockdown and the impact on our business, there's a couple of things, I think, that allow us to probably handle this much better than we did in the first wave. We see that the customers are more confident to use the off-line channels whenever and wherever we can -- they can at any point in time. Also, the customers seem to be less concerned or put off by the health and safety environment that we've seen in terms of social distancing and the use of masks. So it sounds almost part of the normal life, it seems like. So it's something that we have seen as probably allows us in the second wave not to see such a big impact on the customer.
And of course, we also continue to create a safe environment for our customers and our staff. We never stopped, even though some of the regulations what -- were loosened in terms of wearing masks and gloves and that we never stopped in our restaurants. We always want to make sure we're even above our -- what were required by franchisors. We continue to have that. And I think that's helped us when we made this transition because people feel safe in our restaurants, and it's also helped us to deal with moving also to more of an online way of doing business.
So we are pleased with how we've been able to handle that. We're also -- as I said, we've been working also on our delivery business. We've worked really hard in terms of improving our offer time or what we have for offer also the time of delivery, which has been going down in terms of number of minutes but in terms also of our pricing offering that we have.
So we've also worked with our aggregator partners. We've been expanding the offerings we have with them, and I believe that we're also better positioned right now to handle the digital delivery during the lockdown period. In Poland, we will be, beginning in January, expanding the number of aggregators. Today, we have only one, and we'll be expanding to multiple aggregators. So we'll see also a pickup on our delivery business in our largest market, Poland.
We also put back in place the cash task force. This is something we started from the very beginning. Actually, before COVID hit Europe, once we hit -- saw it in China, we knew we needed to focus on cash, and cash is still very important to us. And we've started those actually daily meetings on the local basis. And in terms of the senior team, we meet weekly to review the situation. We've also remained in constant touch with our suppliers, our landlords and our franchisors. We've been able to work quite closely with Yum! and Burger King and Starbucks. I'm very pleased with how they have supported us. And also, we're still working on ways to reduce our costs with the landlords and vendors.
But also, in terms of our balance sheet, we certainly are much better, I think, positioned to handle it versus when we started the year. We started this quarter with about EUR 218 million in cash. We're going to -- we finished close to EUR 180 million. That's after we paid our yearly amount due to the club banks of EUR 57 million.
We also -- if you remember, we started the year in a much lower position than we have today. We were EUR 74 million -- we're now EUR 74 million higher than we did when we ended 2019. So we have been, as I said, focusing on cash, and I think we've done a really good job on doing that.
So we've also reduced our net debt during the quarter by EUR 20 million. That's despite opening 33 restaurants during that period of time. We also have not tapped into all of our credit lines that we have about EUR 18.5 million that we haven't -- still undrawn. So that's still that to turn to. Also, leverage. Leverage, of course, has certainly has gotten a lot of attention from us, and our leverage number has risen to 6.7x, certainly the highest we've ever had in our history. But we do expect that to improve over the next year.
We've seen -- again, we've been working really hard on the cash situation, and also, we are performing better than we gave to the banks in terms of the model we gave several months ago. The banks, again, have been great partners for us. We've been working with them for almost 12 years now. And so we've had very positive discussions. We've got the bank lever for the third quarter before we closed the quarter, and we're working right now with them on the fourth quarter one. Looks positive at this point in time. And once we have more news, certainly, we'll share that with you.
And also, one thing that is not in our numbers are our cash numbers you saw for the third quarter, and that's also the expected closure of our deal with Glovo. We were asked, I think, on the last call several times about Glovo and whether it was strategic or not. It's been a great investment for us. We've learned a lot from us. Glovo has been, again, a very good partner. We'll continue to work with them as an aggregator.
The transaction we have, I think, up to 12 months to close. We do believe we can close it this year at EUR 76 million in cash will come in. So that will certainly help our cash position, we believe, by -- in at least the next couple of months. So again, a very good return on that one. We're selling our entire 7.5% stake, in that. So it's -- but we will, again, continue to operate with Glovo as an aggregator.
So before I hand over to Eduardo, I do want to reemphasize that we believe we're well set up for the recovery. We've always talked about equal brand and scale. I think that's something very unique in Europe, and that's something we believe will help us deal with the second wave moving forward. I also think we'll come out of this crisis in a much stronger position than we've been coming in. And also, we're looking to take some market share as well.
So with that, I'm going to turn it over to Eduardo, who will take you through highlights of finance. Eduardo?
Thank you, Mark, and good afternoon, everybody. Now as I move through the financial highlights of the quarter, it's worth mentioning that the comments I'll provide during the call includes the IFRS 16 accounting standard.
The total store count is 2,338, and we started the quarter with 92 of the units operating, and we were able to get to 98% at the end of the quarter. The net sales for the quarter amounted to EUR 441.4 million, a decline of 12.6%.
We were able to gradually recover. In July, we registered a decline of 15% versus prior year, while in September, the decline was 11%. On a quarter-to-quarter basis, revenues increased by 62.2%.
Same-store sales for the third quarter reached 86.6%, on a month-to-month basis was trading up, getting to 88.3% at the end of September. Strong sales recovery, along with cost efficiencies, rent negotiations and relief as well as government aid programs enabled to generate a margin improvement versus the previous quarter and even versus last year.
Consolidated EBITDA amounted to EUR 90.2 million, representing a 10.3% decrease over the year. EBITDA margin reached 20.4% and was up 5 percentage points versus last year. In Q3, we registered a rental relief benefit of EUR 15.3 million as a result of the amendment of IFRS 16 concerning accounting treatment of rent reductions and deductions due to COVID.
For the third quarter of the year, the benefits received from different governments related to payroll and social contribution programs amounted to EUR 4.2 million, which are included in the other income line. Net profit attributable to AmRest shareholders amounted to positive EUR 2.1 million, showing the big piece of recovery that we have shown.
Moving to segment information. On Central and Eastern Europe, their revenues reached EUR 198.6 million. In second quarter 2020, we're 9% lower compared to the same period of last year. Quarter-to-quarter sales increased by 48.6%, driven by reopening of economies and taking the advantage of QSR orientation and strengthening the position in delivery, drive-thru and takeaway.
The third quarter EBITDA stood at EUR 48.3 million and was only 6.4% lower than last year. EBITDA margin stood at 24.3% compared to the previous quarter. Segment EBITDA doubled. A faster reopening of the economies, adjustment to available channels and strong operations and support government aid helped the segment to recover.
I will continue with Western Europe. We had a solid sales return. For the third quarter, sales reached EUR 167 million and decreased by 16.2%. But quarter-over-quarter, sales were off by 81%. Spain and Germany remained the most affected due to more casual dining and coffee segment-oriented business. France posted a 3.3% decline in sales year-over-year due to more delivery- and takeaway-oriented business.
The third quarter EBITDA was EUR 23.6 million with a margin of 14.2%. Quarter-to-quarter EBITDA increased by EUR 28.6 million due to the loss registered in second quarter. All the initiatives are in place supporting this margin expansion.
For Russia, sales for the third quarter amounted to EUR 42.8 million, down 22.2% versus last year, with a recovery quarter-over-quarter of 91.8% with a 97% of restaurant opened. Even with the drop of sales that I just mentioned, the third quarter EBITDA increased 15.4%, and the margin stood at 31%.
China in the third quarter improved the path of recovery. Sales year-over-year increased 4.5%, and revenue quarter-over-quarter increased 28% versus last year. In the third quarter, the EBITDA had a strong recovery with a margin of 42.1%. Improvement in sales along cost-saving initiatives implemented helped to achieve a record segment profitability.
Now with regards to the balance sheet. We have a very strong cash position of EUR 180 million. Cash preservation still is one of the top priorities in AmRest. Through the cash task force that we implemented at the end of first quarter, we covered cash flow and EBITDA in 4 work streams: payment terms; cost and G&A reductions; government grants, including payroll; and finally, government incentives. The cash task force is a global effort across all functions and supported by each of the countries. It's important to highlight that we keep very disciplined approach on capital expenditures. It's a must to keep generating cash from operations, making the assessments that give the highest returns and be able to have a positive net cash flow.
Total CapEx for the first 9 months of the year is EUR 67.2 million with 59 openings year-to-date. In September, we complied with the scheduled amortization payment to the global banks in the amount of EUR 58 million. In terms of the state-supported loans that we received, in Spain, still we have payment to withdraw EUR 18.8 million.
Net debt at the end of September of 2020, including the impact of IFRS 16, deferred to EUR 591.8 million, which resulted in a comparable leverage level of 6.7x, a reduction of EUR 19.8 million quarter-over-quarter.
On September 30, we received a waiver for the third quarter that weighed the requirements of testing one of the bank covenants at that date. The next bank covenant test will be made on the 31st of September -- December of 2020. We continue to have very constructive dialogue and constant communication with our global banks and Schuldschein bondholders.
This is a very challenging environment, but we are following a series of initiatives in order to secure a continued improvement of the operations of the business.
Now I will turn the call for Peter for his remarks.
Thanks, Eduardo. Hello, everyone. Well, as you all know, we are now in the epicenter of the lockdown. And most of the markets we operate have been implementing measures very recently, limiting access to restaurants for customers.
When looking at our largest markets, it's Poland, Czech Republic, Hungary, Germany and France, which have put restrictions in place, effectively closing down all of our dining business, and those 5 markets alone are accounting for about 2/3 of our business. In addition, other countries such as Spain have limited dining capacity in restaurants to 50%, enforced early closure in Spain. In Spain's case, it's 10:00 p.m. Now whoever knows Spain, please understand the obstacle we are facing to have any meaningful evening dining business under these circumstances.
Bear in mind that in normal times, close to half of our group's business is dining. So what I'm trying to say is that the degree of the disruption we are facing already right now is quite significant. At the same time, COVID cases haven't really come off their peak levels yet, as you know. So there are no signs of an easing of those restrictions in the very, very near term.
Of course, given this week's positive news around the working vaccine, there is hope that trends are turning positive. And we will move back into a normalized environment eventually, following some comments maybe as soon as spring of next year. And I think we have shown that in such a scenario, we are able to recover very fast.
But I think most importantly, as Mark said before, we believe, and that's what I think our numbers seems to confirm so far, that the second wave differs in some important ways from the first one in spring, which should translate in a slowdown of sales and, with that, profitability less harsh than what we have seen earlier this year. And to underline that point, let me run you through some numbers around the most recent current trading.
Starting off with same-store sales. In the third quarter, as was mentioned before, we have been returning back to 87% of last year's same-store sales, which is a pace of recovery we're obviously very happy about. In October, overall, we have been at around 80% same-store sales. We have been starting off at a similarly strong level as in September, but with lockdowns gradually being implemented during the second half of the month, of course, we have seen some impact on our top line.
The first indications for November seem to show that they are holding at a level of about 70% for now, and that is the beginning of this week. As a reminder, during April, during the first lockdown, we have been well below 50%. The same-store sales dynamics, at least at this stage, look much more solid than in the spring. And again, this is with all the limitations on the dining business I was outlining before in place.
Those sales numbers. I'm mentioning they're adjusted for closures. So we are comparing sales trends at one open store with an open store during the same month in the previous year. So with regards to our top line, which is, therefore, a combination of same-store sales and the number of stores we're operating, it's important to see that we also got a larger share of stores operating than in spring, which is an additional positive we can get the numbers we have seen at the last lockdown, but I will comment on that later on.
On a brand-by-brand basis, in the third quarter as well as in October, we're very happy with the strength of Blue Frog in China and also Sushi Shop. The most recent monthly same-store sales for October coming out of China show an impressive 110 same-store sales index. And please remember that this is a casual dining, not a QSR brand. So therefore, recoveries typically, other than looking at peers, should take longer.
Sushi Shop has been slightly above 100 in October, which is a level similar to the previous month, which, of course, is an outstanding result. In U.K., and I mention this because I did in the last call, Sushi Shop same-store sales have been 30% above last year's in October and at a similar level in the third quarter. And I mean looking around at other brands, I haven't seen any other fast casual or QSR brand, which has a similar kind of level of performance in the U.K. this year.
It's needless to say that we are very happy with the latest brand addition, which was designed from the very start over 20 years ago as a delivery brand. Therefore, it's doing well now, and it will do even better going forward. The brands weighing on their overall results won't be surprising on franchise brands, in line with what we told you in the second quarter. It's Starbucks, due to the lack of tourism, the share of home office work and the weakness of delivery, so its a brand which is underperforming right now. Our own brand is La Tagliatella, which is, of course, built around the evening dining experience, which, especially in its home market, Spain, is a competitive advantage in normal times, but now it puts brakes on the recovery.
We have been working very, very hard to make the brand fit for delivery, also with some success. In November, we are at 14% of sales being wide delivery versus 3% pre COVID. So we are slowly getting there, but right now, it isn't enough to offset the lower dining business.
With regards to the share of open stores, we have been back at 99 during October, it's mid-October, but we ended the month at 94 for the reasons I just mentioned. We were closing 75 stores in Czech Republic, which was the first country implementing a lockdown in October. Those are the stores, either not able or not needed for delivery, given wider trade zones, but we also closed about 70 stores in Spain, the majority of them being impact franchise units.
As of 9th of November, so since Monday, the share of operational unit held at 90%, and that compares to 44% of open stores in April of this year, again showing that the impact of the second wave is different to the one in spring.
As Mark said before, there is a lot of focus on the delivery channel, deliveries available to us across all markets. So right now, a lot of our stores are basically turning into DART or shadow kitchen, able to mitigate some of the losses we faced in dining.
As we sometimes don't need the same number of stores to cover a city or trade zone, we can close one of the stores without sacrificing on delivery volumes. Also, we don't sacrifice on delivery times, and we have invested a lot of energy in the past months to improve. 1/3 of our orders are delivered within 20 minutes and 2/3 within 30 minutes, which is a huge improvement compared to what we used to be but also versus competitors. And that makes a difference when it comes to top line dynamics. Delivery now in November accounts for 23% of group sales, which compares to 12% to 13% before COVID, and average cash tax are on average 20% to 30% higher than in case of dining.
And lastly, on store openings, as Mark said, we are still on track for the 80 to 90 gross openings for the year and the number we have been guiding in the previous call. We have been adding 33 stores in the third quarter, of which 28 are equity by franchise, which gets us to total of 59 for the year as of end of September. And to give you an even more recent update, at the beginning of November, we're at 73 stores, of which 62 are equity and 11 are franchise stores.
With regards to next year, we're working on a pipeline of openings, adhere towards the second part of the year and which focus on the preservation of our flexibility and ability to change and adapt those targets with the changes we see in the overall market environment we operate in. So far, we have not finalized the store opening budget for next year but be assured that we will be prudent in our approach when it comes to making commitments to landlords and franchisors.
And with that, I'd like to hand back to the operator and give you the chance to ask some questions. Thank you.
[Operator Instructions] Currently, we don't have any questions, so I hand back over to you.
Okay. So maybe taking the privilege of moderator, I will start. Can you elaborate a bit more on the state aid because there was a 19.6 positive impact on the third quarter numbers? I understand that at least part of that was related more to the second quarter, and because of the IFRS accounting, we are seeing it's now in P&L. So what was the part related to the second quarter? What was related to the third quarter? And do we have any expectations going forward of rental release and sale of grants?
Yes. Regarding the rental relief, the first and second quarter number is EUR 10.7 million, and for the third quarter, it's EUR 4.6 million. So this amounts to the EUR 15.3 million that I was mentioning.
No. Rent is an important part of our expenses, as you know. So now that we are getting into this second wave, it's an effort that we will continue making. Now, the team is, of course, in close contact with all our landlords, which are quite aligned and know about the situation. And the idea is that in all the industries, in all the segments, we collaborate so that we can continue handling and having positive results.
Our numbers for the following months, it's something that is being reviewed right now, but it's something that for sure the team will look for.
Okay. So shall we expect that the taxes will deduct the rent relief to go back to a level of roughly EUR 10 million per quarter from 4 in the -- for the first or it's just too early to say?
I think it's too early to say. No, we know we still have some deferrals that were accepted, some reductions but also took a -- is still valid. But for the new negotiation, I think, as you mentioned, it's early to talk about.
And what about the payor grants?
Yes. The payor grants...
[indiscernible] where government are going forward.
That's a great question. No, right now, as you can imagine, within -- we're saying the crisis committee that we have, one of the arms that we have there is monitoring very close any grants that we could have across the countries. But up to now, nothing clear. But for sure, it's one of the top topics that we are monitoring in order to participate in any grant that could be given to the company.
And Lukasz, I think we still have about EUR 3.8 million that we hadn't received that in cash as of the end of the third quarter from the governments from the first wave. So we expect roughly EUR 3.8 million in cash to be recorded in the fourth quarter for the government assistance.
Okay. Are there any questions from the room? Or can we continue?
We do have a question from the room from [ Jacob Croek ] of RCB.
Yes. Can you hear me all right?
Yes.
Yes.
Okay. Great. Congrats on the figures. I just have a -- maybe 2 questions. The first one, I just wanted to clarify on your same-store sales. Assuming like a restaurant has both takeaway and delivery and seating and following some regulations now, it's only serving delivery and takeaways this get counted into the same-store sales base, correct?
Yes.
Okay. And can I just repeat? Because I'm not sure if I heard this correctly. Did you say that 90% of your group's restaurants are currently open?
That's correct. As of today, 90% of the 2,333 restaurants, we have about 200 restaurants that we've closed temporarily because they -- it is of some countries where we have malls that are closed, that we haven't been able to do delivery from those. We can -- actually, in Poland, the [indiscernible] in Poland is that we -- they are still able to operate from malls in terms of delivery and takeaway.
So those are decisions we made just because it makes sense because of where they're located and the restrictions on dine-in. So we for now have -- we're up to actually 99% of our restaurants opened only a few weeks ago. So we stabilized right now around 90%. A big part of that has actually came from Czech Republic. But we've seen Czech numbers getting much better in terms of number of cases. So we hope in the next couple of weeks that we'll be able to open up about 65 restaurants that we closed in January.
Understood. So -- and you have a 70% same-store sale results right now.
Yes. We're in that range right now. It goes up and down during that days, some days higher than that, some days around 69% or 70%. So it's pretty much where we -- we've been pretty stable right now with that number.
That actually has been a bit better than I expected. What we saw coming, the second wave, we expect the impact to be a little bit more in some of the countries. And I think once there's been more clarity as to what the restrictions are, then we've seen the numbers. Actually, last week, actually went up by 2 points our same-store sales versus the prior week. So we actually saw an increase versus where we were the week before.
Okay. And just one more on CapEx. Can you please remind me what is your guidance for the year? And assuming you can -- more or less, back to a normal year, what can we expect going forward in '21, '22 maybe, a range?
Yes. The CapEx would be around EUR 80 million.
That's for this year, correct?
Yes.
Yes. And next year, it will be probably in the range of EUR 120 million, EUR 125 million. And then after that, the number, of course, '22, we believe, will -- the number will go up. We haven't done our 3-year plan yet, but that number should go up.
But the CapEx numbers are -- because of the fact we're shifting more towards franchising, that should be also -- allow us to not have to have a same level of CapEx that we had in the past. But as I say, I expect this to probably be in the EUR 120 million range or cover everything from new store openings to projects, investment in digital, to renovations and such. So...
We do not have any further questions on the line.
Okay. So I have another question regarding the delivery business in Poland. For now after the deal with Glovo because exclusivity goes on, but starting from January next year, you will be able to cooperate with all the other aggregators. Do you have any number in mind how much it may boost the revenues and deliveries in Poland? Or is it, again, tough to say at this stage?
It's tough to say, but you are correct. I think in our biggest market, we've been operating with the fully Glovo, and of course, they don't have full distribution everywhere. So we will, in January 1, be able to do with more aggregators. So with that, we do know that our numbers are going to go up quite significantly. But we don't know -- we haven't yet quantified that because we still want to see how we're trading here by the end of the year. But it's certainly going to be a boost to our business in Poland.
Okay. But do I understand it right that you are already negotiating the terms of trade plus other players inside the business as soon as it [indiscernible]?
That's correct. And also, internally, we've been working with the accounting team as well because it's quite complicated to go with an aggregator in Poland. So we've been working on that. So we're prepared to go January 1 with multiple aggregators.
Lukasz, you might be aware that we signed this agreement, this Glovo agreement with Takeaway.com, which obviously, pay on Fishel has been out in Poland. So Poland will be included in that agreement. And as Mark also said, Pizzaportal and Glovo together, it's a minor fraction of the market. It's 20%, 30% market share. And our experience is that usually, the overlap is actually relatively surprisingly small, actually.
So when you team up, especially if it's a #1 platform, with another aggregator, you're reaching so many more customers, and you're getting so much more incremental business, yes, more than actually we expected initially because you would think that there's a lot of overlap with existing customers. But it turns out there is a huge incrementality.
So we'll be able to -- during the next call, we'll be able to provide you a little bit more information on that because we'll have a little history by then. We'll have a couple of months of trading when we have the next earnings call. But I'm looking forward to that, and it's been a great partnership with Glovo, as I said. But also, Poland having such a great opportunity with a number of restaurants we have and being the largest market, I think, it's going to be a nice plus for us for next year.
And another thing, how are the negotiations with franchisors with Yum! and others going in terms of the changing of rollout plans? Because I understand that delivering on the initial ones for this year and maybe for the next year, given your leverage, is out of the range. So how will the conversation with them look like?
Actually, we've been able to renegotiate with all 4 brands. And again, as I mentioned during my section, Yum!, Burger King and Starbucks have been great. They've been -- we've been working together how not only to kind of re -- kind of rework the timing of the openings, and they understand that -- the difficulties everybody is going through. But also, they're working with is how we can actually different ways to boost our business, whether it's Starbucks with a German plan and also on how to do delivery and also with Yum! and Burger King and technical solutions that will help us on the digital side.
So we have -- so we've been -- fortunately, we've been able to rework all those agreements, and the timing has been more in line with what's going on here in terms of recovery. But also, they've been very active in helping us and finding ways to move ahead of that, I guess, in the new world that we're facing.
Okay. And the final question from my end -- my side is on Pizza Hut, which has been the trouble child for a longer while. Do you have new idea, new concept, new way of doing that business? Because it's underperforming the other trends. So going forward, is there a new recipe for Pizza Hut?
Yes, there is. I mean the brand, we took over those businesses, they were not really, I guess, in great shape in terms of the operations side. There's a lot of things we've done to improve the operations and the quality of the assets.
And I think we've also -- on the digital side, we were lacking that when we took over the businesses as well. So we are going to have some digital solutions that will help us. Also, from an operational standpoint, we've raised the level of the standards that we have in the restaurants. And also, I think we've been able to -- when we took over the business, we also have some franchisees that were probably in trouble. That has changed in terms of we've been able to kind of clean up the portfolio.
And now with the team we're opening up, we've seen a lot of interest, actually, in the franchising side. So -- and so we're seeing that with the model we have. And with a tighter selection of the franchise community, we see -- we do see upside, especially in France and CEE, which is, I think, were the 2 markets we see a lot of upside. But we already have a pretty good pipeline for next year for franchising. And I think that's been based on -- everybody's seeing that we're able to kind of put together a better business model for it.
So I'm cautiously optimistic that we're going to be able to improve quite a bit results of Pizza Hut.
Okay. Great. That's all from my end. Operator, do we have any questions from the room?
We do. I believe we also had a question request from Krzysztof Kawa, which was retracted. So Krzysztof, if you're the one who needs to ask a question, if you could just please press star one for me, and we'll get to you straight away. But in the meantime, we do have a question from JP Rolandez of The L.T. FUNDS.
Yes. Actually, I don't have any question. I simply wanted to congratulate you, not only for the results, but also for the clarity of the Q3 report. It's -- from an investor standpoint, it's very good to be able to work on numbers clearly stated as you have done during last quarter, and thank you for improving the reporting. Congratulations again.
Thank you for that. I want to thank also -- we have on the line also our Global Controller, Aleksandra Tajak. She and Eduardo have done a great job on the finance side to improve it and hearing feedback from everybody. And I also want to thank -- we've also, with Peter, we've talked about trying to provide more information especially on same-store sales and that. So we continue to enjoy hearing feedback from you, from all of you to see how we can improve even further our reporting. Thank you for that.
Thank you very much.
Thank you.
We also have a question from Daniel Marshall of Polar Capital.
Yes. I just had a quick question around the balance sheet. Just wanted to kind of understand how you think, perhaps, leverage will end for the year. Obviously, that's very difficult to forecast what sales and EBITDA will be. But I guess if you finished Q3 at 6.7x, which seems pretty high, and obviously, you're going to get the cash-in of EUR 76 million from Glovo, then I'm guessing if same-store sales are currently running at around 70%, plus you have 10% of your store -- total stores closed down, and perhaps sales could be down if lockdowns last for the majority of Q4 then, am I right in thinking that sales could be down 40%? In which case, if sales are down 30% to 40%, probably won't generate that much EBITDA.
So despite the cash coming in from Glovo sale, on a trailing 12-month basis, the leverage will still be quite high at year-end. If that's the case, it's around the high 6s towards 7x. What is your thoughts on doing a capital raise? You've seen many COVID-hit businesses, especially in the U.K., but also across Europe. Do capital raises to sure up their balance sheet to then [indiscernible] and go after market share and growth?
I'm thinking if you're finishing the year with very high leverage and constantly in discussions with banks having to get waivers each quarter, why not do a bit of capital raise, sure up the balance sheet and then invest in top line growth for next year of store rollouts? Interested to hear your thoughts on that.
Yes. I mean I think your logic in terms of the -- where we are at leverage is spot on. I mean in terms of -- I mean, a lot will depend here on the restrictions if they're going to get extended or not. And some of the country's restrictions will be coming off by the end of November. So we'll see if that happens or not.
Capital raise has always been asked. I mean I think it's something that's always looked at by the company and by the shareholders. Again, it's just one of the options. I think right now, we're able to help the growth that we have, and we're going to be able to -- next year's numbers for openings will probably be in the 130 to 150 range, which is still, during the situation, probably a lot more than a lot of other companies. And that's probably going to be -- 40 to 50 of those will be franchise.
So I can't speak to the capital increase. It's always an option that's being considered. But I really have -- I really can't make a comment on that right now because it's not something that we've got the point of announcing anything or doing something like that. So I think it's -- like everything else, it's an option. But right now, my job is to make sure that we are able to manage the situation, whether we have a capital increase or not. But it's always something being considered, I'm sure.
We have no further questions on the line.
Well, thank you very much, everyone. I hope that it's visible that we used the period of the first lockdown in spring until now to prepare. I think that's obvious when you look at third quarter results and when you listen to the color we have given you on same-store sales and open stores and around delivery.
So we feel much stronger. We think, as we said, the second lockdown now is different in its impact. Of course, that's to be verified now in the next couple of weeks, and we're going to share as much color as we can. But we feel in a very strong shape.
If you have any more questions, please reach out to the IR team. Please feel free to do that. They'll be available. And yes, thank you very much for dialing in, and I hope to speak soon. Thank you very much.
And I want to thank everybody as well. And as Peter said, please come to us with any questions. And also if there's -- also if we can -- since we aren't able to travel on the road, certainly open to having calls and to walk through a few more details.
So again, I'm looking forward to when we get through this crisis where we can start seeing each other face to face. But I want to thank everybody for their support during this whole period of time, and looking forward to talking to you soon. So thank you.