Casino, Guichard-Perrachon S.A.

Ladies and gentlemen, welcome to the third quarter 2020 of Casino Group Conference Call. I now hand over to Mr. David Lubeck, Chief Financial Officer of Casino Group. Sir, please go ahead.

Thank you. Good evening, and thank you for joining us for our third quarter sales conference call. I'm here with Lionel and the IR team. We hope you are safe and well. First, a few words about the current environment. As we are experiencing in every country, the evolution of the COVID-19 pandemic is difficult to forecast. In France, we came out of lockdown in May, and daily life reverted to some degree of normalcy during the summer, albeit with restrictions on international travel that severely curtail tourist flows from abroad. Against this background, we have delivered stable sales in France and a 46 million euro improvement in EBITDA in the quarter, principally due to our swift action on cost and strong performance from the CDiscount marketplace. In recent weeks, we have clearly seen an increase in infection rates and hospitalizations. Nighttime curfews were recently imposed in part of the country, and now a new national lockdown has been decided, effective this evening at midnight. I will discuss the possible impact of these restrictions later, bearing in mind that there are different factors at play. Less eating out at restaurants will likely increase sales in retail stores and restrictions on movements would boost proximity and e-commerce. At the same time, new restrictions could also impact consumer morale. Forecasting is not straightforward in this environment and we are ready for a number of different scenarios beyond the recent announcements. In any event, We have already been operating our stores in the past months fully complying with the security constraints of the pandemic and we do not expect additional sanitary costs beyond Q3 level. How do we adapt to this environment? Simply put, we are keeping our focus on our four strategic priorities as outlined in July during our H1 results presentation. We have continued to advance quickly on our commercial and financial priorities which allows us to be well prepared for the coming quarters. Before going into our detailed performance per banner, I will first go through the main action plans in France, how they already produce effects on our Q3 results, and how they are expected to develop in Q4 and beyond. Our first priority is sustainable growth in e-commerce and proximity. The COVID-19 pandemic has accelerated an ongoing shift to these formats, and in Q3, We have seen this trend continuing. At C-Discount, we have been focusing on marketplace growth, with marketplace GMV up plus 9% year-on-year and marketplace revenues up plus 17% this quarter. Marketplace revenues is the key metric we are following, underpinning C-Discount's profitable growth strategy. At the same time, we have accelerated the shift in direct sales towards higher margin and and recurring categories, such as hygiene, dirty self, or gardening, which proved particularly useful to our customers during the lockdown period. These categories maintained a strong growth of plus 16% in Q3, while we put less emphasis on non-profitable categories in line with our strategy, leading to overall stable GMV. This has allowed CityScout to continue its trend of profitable growth, contributing to the increase of IBTA in Q3. In food e-commerce, the shift already underway before the pandemic has continued with sales up plus 44% in Q3. We have continued the rollout of the Monoprix Plus offer powered by Ocado technology with orders up 60% at end of September compared to end of June. The warehouse located in Fleury-Mérogis now accommodates a casino offer on top of the Monoprix offer. Our exclusive partnership with Ocado is a key differentiator in this high-growth market, and our mid-term outlook for this first warehouse remains the same, €500 million of incremental sales. Finally, we have continued our expansion into proximity, with 37 new stores this quarter, bringing the total opening of new stores to 105 since the beginning of the year, in line with our target to open 300 stores by end 2021. As for our like-for-like sales performance, the numbers were as expected, impacted by the lack of foreign tourists, especially in July, which explains our overall stable sales during the quarter, with growth picking up since August. Q3 growth on average was very good in convenience and in supermarkets outside of the Côte d'Azur area, while Franprix and Monoprix had positive numbers outside of Paris. In the inner city of Paris, our banners outperformed the market, which was very soft until September, with a lack of tourists and Parisians moving out away from the city. This has improved recently, with sales picking up notably in October. Also, sales in our priority category, organic food, were strong again at plus 8%, with its share of our sales reaching 9% in Q3. Overall, we are pleased by the progress that has been made across e-commerce and proximity, and we remain confident that we are well positioned in the market. Our second priority is continued improvement in profitability through the ongoing implementation of our cost-saving plans. Since last June, we have accelerated our previous initiatives to streamline the operations and take advantage of increased digitalization of our business to improve our productivity in stores, warehouses, and headquarters. With around half of our sales in hypermarket and supermarket stores completed through smartphone apps or automatic cashiers, we have improved customer experience while also increasing productivity. We have also ramped up the synergies between our different businesses, such as Monoprix and Grand Prix, and have simplified our back-office organizations. The total impact of these cost-saving initiatives is estimated to be plus 30 million in Q3 and will have the same magnitude in coming quarters. These cost-saving plans come on top of the impact of our 2019 Roquette plan, which had a 15 million euro positive impact in Q3 compared to last year. At the same time, COVID-related costs were sharply reduced in the quarter in line with our last communication. We had 130 million euros of such costs in H1, including 37 million euros of one-off bonuses recorded in our recurring results. These costs also included logistic disruption, exceptional sanitary measures, and the hiring of additional staff. Virtually all of these effects have now disappeared, and COVID-related costs have been reduced to 5 million euros in Q3. They now consist essentially of procurement of masks and gels for our employees at a fraction of the previous price. We don't expect these costs to move from their current low level, even with the new lockdown, since our day-to-day operations are now fully adapted to the context of the pandemic. These developments, combined with an increase in CityScout's profitability have led to a significant growth in total France EBITDA plus 46 million euros compared to Q3 2019. This brings our last 12-month EBITDA in France to 1,572,000,000 euros or 925,000,000 euros after rent. Looking forward, we expect a similar positive impact of our cost-saving plans in the coming quarters, over 30 million euros per quarter, with the new sustainable organization in place in our stores, our warehouses, and our headquarters. Our third priority is cash generation. We have continued with our efforts to reduce inventories and control capex. We put a strong focus on cash management, and overall in Q3, cash generation improved by €130 million compared to the same period last year. This was mostly due to growth and good relative performance in working capital with capex kept under control. As is the case every year, we had a working capital outflow in Q3, but this was smaller than last year thanks to the gradual recovery of fuel sales and continued strong monitoring of inventories. Our liquidity position at the end of September was strong at 3 billion euros. including €2.3 billion in fully-undrawn credit lines and €650 million of cash. Thanks to the EBITDA improvements in Q3 and good control of cash flows, our covenant ratios were once again comfortably met this quarter. Gross debt to EBITDA was 6.46 times at the end of September, which equates to debt headroom of €732 million, below the limits of 7.25 times. As was the case last year, we expect a strongly positive cash inflow in Q4 with a reversal of the working capital seasonality and a strong BDA level. This will contribute to an increase in our cash and liquidity position by the end of the year. Finally, our fourth priority is the reduction of gross debt. As stated in our press release, we now target covenant gross debt of €5 billion or below by the end of 2020. a reduction of at least 1 billion euros compared to end 2019, and the lowest level of gross debt in France in 20 years. This should be achieved mostly through the closing of the leader price deal, which we expect in a matter of weeks, and the proceeds of which will be fully allocated to our segregated accounts. On top of this impact, Q4 cash flows will also contribute to our end-of-year targets. With the proceeds allocated to our segregated accounts at the end of June, we have already started to buy back bonds in the markets. On September 22nd, we announced the cancellation of €160 million of our 22 and 23 bonds, reducing the outstanding amount of the 2022 bonds to €386 million from €452 million, and the amount of the 2023 bonds to €626 million from €720 million. At the end of September, the segregated account still had a positive balance of 114 million euros and our strategy remains the same. Deploy cash either in the open market or through bond buybacks to reduce our debt. We are sufficiently confident in the outcome of our 4.5 billion euro disposal plan to start buying back the 2023 bonds with the disposal already signed combined with the earnouts from the Apollo and Fortress deals securing the redemption or buyback of 21 and 22 bonds. After these initial comments on front and before going into the details of our banner's performance, a few words about Latin America. GPA published its Q3 results yesterday, and their detailed conference call will be held this evening. Their performance has been remarkable in Q3, with GPA publishing sales up 15.5% and EBDA up 30%. Asai's numbers were particularly impressive, with sales up 33% and EBITDA up 48%, while Multivarageur increased its EBITDA margin to 8.1%. Besides the excellent health of the business, the main event of the quarter was the announcement of the study of Asai's spin-off from GPA. This project should unlock the potential of both companies allowing the high-growth cash and carry business and the high-quality retail business of GP and Exeter to focus efficiently on their respective markets. Now let's review the sales dynamic of our banners, starting with France. As expected, Monoprix was impacted by the reduction in tourism, especially in July, and the food market was shut down in the inner city of Paris during the summer. In this context, the banner outperformed its market with live fall ice sales down just minus 1.2% on average during the quarter, with positive sales since August and a significant improvement in recent weeks. Textile sales were positive during the quarter at plus 5%. Looking at our levers for sustainable and structural growth at Monoprix, a key factor looking forward is food e-commerce. Our all-logistic automatic warehouse, powered with Ocado technology, pursued its ramp-up with 60% increase in orders between end of June and end of September, in line with our plan and the strong performance on all our key indicators. Notably, it has the largest number of available food SKUs among all home delivery offers and a very low level of missing items. As for our other indicators, main partnership, the Amazon Prime Now offer focused on five-day delivery. It has been extended to Bordeaux after Paris, Nice, and Lyon. As for our brick and mortar stores, Monoprix continues to innovate with its new concept store in Montparnasse with a high-quality food offer which is strong on local products and a number of innovations. It's time to be tested and rolled out in the network. Monoprix also launched a black box store, 100% automated store, available 24-7, ready to be deployed in many different settings, such as hospitals and train stations. Franprix, with its strong exposure to the Paris area, experienced the same dynamic as Monoprix, with challenging trading conditions in July, followed by an improvement since August. Like-for-like sales declined minus 1.1% on average during Q3, clearly outperforming the Parisian market. The decrease in sales in the center of Paris due to lower tourist traffic and fewer office workers was mostly offset by a good performance in residential areas and suburbs where the shift from eating out to eating at home boosted sales. Grand Prix's non-food offer grew by 6% over the quarter, driven by its partnerships and its 198 corners with specialist players such as EMA on home products, Sinscount on appliances and Decathlon on sports products. E-commerce was up 44% with deliveries available from 79 stores and 59 stores included in the delivery offer. Convenience stores once again recorded a very good performance with 6.5% in terms of like-for-like growth over the quarter. The store base was expanded in line with our development target with 31 new stores open in Q3. E-commerce from our dense network expanded by 57% through the development of click-and-collect services, which were boosted during the lockdown period and have remained attractive to our customers. Casino supermarkets recorded 1.7% same-store growth, with a strong performance in most areas, partially offset by the lack of tourists in the Provence-Alpes-Côte d'Azur region. The focus on organic food delivered good results, once again, with 10% growth in Q3. E-commerce, which was ramped up during the lockdown, delivered very strong growth in Q3 as well, up 81%, driven notably by Click and Collect and by the delivery partnership, which is effective in 70 stores. An important recent development for the casino brand is its inclusion in the all-logistic automated warehouse, powered by Ocado technology, alongside the Monoprix offer. This gives casinos, supermarkets, and Géants in the Paris area the opportunity to optimize online order preparation costs, and at the same time, accelerate the ramp-up of the all-logistic warehouses' capacity. Finally, Géants. Lifeline sales were down minus 2.7%, mainly linked to its exposure to tourist-intense areas in the southeast of France. Our stores recorded good performances within our priority areas, especially organic food, which was up 6%, and e-commerce, which was up 24%. Géant has been rolling out its shop-in-shop strategy with non-food specialists. This includes a partnership with CER, with seven corners already in place, on top of eight HEMA home product corners and 52 Cares accessories corners. That is 36 more over the quarter. Total sales at Géant improved by seven points compared to Q2, with the gradual recovery of fuel sales and the gradual annualization of the Rocket Plan. After our retail banners, a few words on our B2B businesses. First, green-yellow. Our solar panel and energy savings solutions business unit is ideally positioned in a strong growth market and has a bright outlook. Investment in renewables and a reduction of carbon emissions are key priorities for governments and corporate clients. and Greenyellow's one-stop-shop solution is perfectly adapted to these needs. After the end of the lockdown in May, the development of the pipeline has picked up significantly. Greenyellow's pipeline has now reached 543 MW, 100 MW higher than at the end of 2019. Among its recent achievements, Greenyellow recently delivered a 6 MW solar plant for Saudi's fixed-site in Thailand, and finalized a 1.5 megabit project for Soma Energy in Cambodia. Second, our data activity maintained its strong performance, with relevancy GNV reaching €24 million in Q3, a 27% increase compared to last year. The relevancy advertising platform is ranked in fifth position in the SRI ranking of top Internet advertisers, up two places since last year. Our relevancy marketing solution signed its first contract to provide app solutions to third-party corporate clients. This is a very promising new business building on the success of our CasinoMax apps with features such as couponing, self-scanning, loyalty, and partnership programs. Third, ScaleMax, our data-centered business, expanded its portfolio with the signature of a new contract with Illumination MacDuff, the Universal Pictures subsidiary which produced the animated movies Minions and Despicable Me. Moving to CD Scouts, Q3 was another quarter of significant development for CD Scouts profitability drivers, recurring categories in direct sales, marketplace revenues, and digital marketing. Firstly, in direct sales, the mix continued to improve with sales growing 16% in high-margin and high-purchasing frequency products such as home and deco, do-it-yourself, gardening, sports, beauty, food, and IT. Cities Count gained 1 million new customers during the lockdown who started buying such products regularly and have continued to do so. These recurring purchases are a key feature of customer loyalty. During the same period, sales of loss-making categories declined in line with our strategy of shifting them to our marketplace. Secondly, marketplace sales which are the key driver of C-Discount's growth and profits. Marketplace GMV increased by 9% during the quarter, bringing its share to 45% of GMV, up 6 points year-on-year. Total marketplace revenues, including permissions and services to sellers, grew 17% above the 13% recorded over the last 12 months. Those revenues represented 163 million euros over the last 12 months, and this is a key metric we are following to track CityScout's progress. CityScout's strength among marketplace vendors has been supported by its logistic excellence, with fulfillment by CityScout now representing 36% of marketplace GMV. 122,000 FKUs are currently part of this program, and half of the space in CdScout warehouses is now dedicated to hosting marketplace groups. This is a major evolution for CdScout business model since it allows for reduction of inventory in the balance sheet, improving working capital and cash generation. Finally, digital marketing revenues had a strong showing this quarter again, plus 30%. It was supported by our proprietary CdScout ads retail solution 100% self-care advertising platform enabling sellers and suppliers to bid to promote products in the search engine. Its revenues have increased threefold and CityScout is adding features to further expand its services. Overall, GMV was stable despite the high growth of marketplace revenues. This was mostly due to a drop of travel GMV due to COVID-19, significant impact in GMV but small impact on revenues since commission on travel are much lower, the reduced duration of summer sales and the reduction of Cityscount corner sales within hypermarkets. Finally, with increased share of marketplace sales in GMV, total sales are slightly negative since the sales number for the marketplace only counts the commissions received from outside vendors instead of the full amount spent by customers as in direct sales. Overall, this quarter demonstrated the successful and sustainable transformation of Cityscount's platform model with increased customer loyalty, high growth of recurring high margin categories, marketplace revenues, and digital marketing, all of this leading to higher APTA. Looking forward, these pillars of CityScout's model will be enhanced in the coming quarters by the extension of its B2B offering to other websites in Europe. We are particularly excited by the possibilities this market offers with international sales growing 79% in Q3 and 167 websites now connected to CityScout. Finally, One notable development to mention regarding city discount in Q3 is the approval on the 30th of July of a state-guaranteed loan based on its contribution to mass procurement to franchise a need and its strategic role in providing non-food essentials during lockdowns. This €120 million loan was concluded with five banks, and it allows city discount to diversify its sources of funding, which until then mostly consisted of loans from casinos. This concludes our review of the French business. Since GPA published the numbers yesterday and will comment in detail this evening, I will concentrate on the main highlights. In short, this was a very good quarter, both in terms of commercial performance and profitability for our Latin businesses. Life-for-life sales were up 12%, and organic growth, including expansion, was at 15.5%, driven notably by the excellent performance of Acai, Consolidated EBITDA grew by 30% from R1.3 billion to R1.7 billion. In Brazil, organic growth reached 20% over the quarter, and EBITDA growth was 28% from R1 billion last year to R1.3 billion in Q3 2020. Acai posted 33% organic growth during the quarter, reaching R10 billion, adding 2.5 billion reals of sales versus the previous year in a single quarter. On the same store basis, growth was 18.1%, the highest level since the end of 2016. This performance was driven by the outstanding contribution from the 42 stores opened in the last 24 months, the gradual resumption of food service, and the continued growth in the share of individual customers. EBITDA improved by 48% to reach 750 with a 7.8% margin, the highest level ever recorded by business. As for multivariate, same-store sales were up 10.4% over the quarter, with a positive evolution for all banners. Hypermarkets recorded 7.4% same-store growth, driven by a double-digit increase in non-food categories, even after the reopening of non-food stores. Stores are being successfully renovated with adapted pricing on categories to drive customer traffic, improve services on perishable categories, and a simplification of the product mix. Upon the Azucar, like-for-like growth was 3.6% over the quarter with a strong performance of stores located in remote regions during the lockdown. Mercado Extra delivered 18% same-store growth with rapid maturation of previously converted stores and a successful commercial campaign during the period. Eight stores were converted to the Mercado format in Q3, and 30 additional stores should be converted by the end of the year. Comprebem recorded 35.5% same-store growth, with a significant increase in new clients. The proximity segment grew 36.5%, the ninth consecutive quarter of double-digit growth. Menu to Pender Succar and many extra numbers were driven by a strong neighborhood store performance. Food e-commerce remained particularly strong, with a 240% increase over the period, driven by new customer recruitment and higher average basket size. All-night sales now account for 6% of total international sales, with a particularly high 12% at Pender Succar. With a strong commercial dynamic and with increased productivity gains in stores, distribution centers, and headquarters, the EBITDA margin at Multivisor improved again by 50 bits. This was the third quarter of sequential improvement with close to two points improvement from 6.2% in Q4 2019 to 8.1% in Q3 2020. Total EBITDA is up 9% during the quarter to 546 million reals. As for Grupo Exito, live-for-live growth was 2.3%, and the BTA margin was up 60 bits, reaching a margin of 8.2%, thanks to the outstanding performance of innovative formats such as Terulia. The rollout of the omni-channel strategy across all regions was accelerated by the impact of the pandemic on movement restrictions. Same-store sales in Colombia declined slightly from the same period last year due to the restrictions imposed by the government during most of June 3, 2020. Innovative formats perform well, driven by the quality of fresh products and service excellence at stores, notably Kairoulia Fresh Markets, with 9.8% growth in like-for-like. As for Eurogray, sales were at 11%, with strong progress in the omnichannel segment. To conclude, our teams have been focused and the continued transformation of the business across all our geographies, with increased commercial focus on omnichannel, accelerated digitalization, and significant sustainable gains in productivity. Our business units have performed well in Q3, with good commercial performance in their respective environments, strong increase in ABBA in France, as well as Latin America, with a particularly strong dynamic at ASSAI. Looking forward, we know the global pandemic will present further challenges in the coming months. In France, measures to better control the spread of COVID-19 are being strengthened, and the net impact on sales is difficult to forecast precisely. It is likely that the new shift from eating out to eating at home will reinforce store sales, particularly in proximity, as well as e-commerce. And we know from our experience in Q1 and Q2 that the impact may be quite significant. Our teams are ready to face the challenge with sanitary precautions now fully incorporated in our store operations and supply chain prepared for possible surges in volumes. Importantly, our strategic priorities remain the same and we will continue to execute them accordingly. Firstly, our commercial positioning is particularly well adapted to customer needs with a dense network of urban and proximity stores and a strong omnichannel proposition, powered by the success of CityScouts and accelerated by the quick ramp-up of the Ocado warehouse. Our strong presence in organic food is also well-suited to the growing trend on this category. Secondly, the gains realized in our cost base, first from the Rocket Plan and now from the new initiatives implemented in Q3, will be maintained in the coming quarters and contribute further to the profitability of our operations. As for COVID-related costs, which were high in Q2, they are now incorporated in our day-to-day business and will remain at a low level reached in Q3. Thirdly, our focus on cash flow generation will be maintained with strong control of inventories and capex and strong overall cash flow generation in Q4. And lastly, this cash flow generation, combined with the progression of our disposal plan will allow us to reduce our France outstanding growth debt substantially by more than 1 billion euros this year. Thank you for your attention. I'm now ready to take your questions.

Thank you, sir. Ladies and gentlemen, if you wish to ask a question, you may press 01 on your telephone keypad. We have one first question from Mr. Arnaud Jovy from SubGent. Please go ahead.

Good evening, David and the team. I have four questions. The first one at end June 20, you had around 700 million euros of assets under IFRS 5. So are you still confident that these assets can be sold in a reasonable timeframe? The second question on leader price, when do you expect the potential green light from competition authorities? My third question is on your relative price positioning in France. How did it move in Q3? And the last question, for 20, which organic change do you expect for the French holding companies net debt? So only for the retail business, and what level do we expect for the end of 2020? Thank you.

Thank you, Arnaud. First question, the R4S5 that we had at the Adrenaline Streaming Enterprise. Again, on the disposal plan, we do not make specific comments until the disposals are finalized, are signed. So I can't make more comments than that, but the The assets that are under FRS-5 are assets which are in the process of being sold. And we are shown, I think, in the past that when we put in assets, when we decide to sell an asset, we do it. So I'm not going to go into the details of which assets and at what time this will be finalized, but when an asset is put in our FRS-5, it means that we expect it to be sold during the following 12 months. So I think that answers the question. And nothing has changed in terms of the assets that we have put there and that we wish to sell in terms of their sellability and in terms of their value that we perceive and the ability of their potential buyers to buy them. On leader price, we expect a decision of the authority in the coming weeks. The FI was completed by the buyer, by LG at the beginning of October. So with the usual delays, this should happen in the coming weeks in November. And as soon as we have this decision, of course, we expect the closing to happen rather quickly. As far as price positioning is concerned, we have not seen much movement there. We actually, as actually other retailers have commented, prices have not moved much. Everyone seems quite reasonable in price. There are some movements on promotions in certain formats, depending on each month. But overall, on price itself, and price including promotions, including opening, including everything, we don't see much movement. So on our side, we don't see much movement compared to last year. And when we look at our competitors, we don't see much movement either. So on each of our categories, each of our formats, we make sure that we have the right positioning. That's very important for us. And we monitor that closely. Of course, during the COVID period, the usual target that we have, which is client flow, is a bit more erratic because we can have very big client flow, very big sales at certain times, regardless of the price positioning. But in any case, we monitor that very closely, and we do not see any significant movements. For the net debt, I prefer now to give a target of gross debt. I think that's the target that we gave in our press release because this is the most relevant metric right now for us. It's the metric for our government, and it's the one where we have a firm commitment to get to 5 billion or below this year. And again, this 5 billion euro gross debt, we look back, the last time we were at that level, at the French gross debt level, was in 2000s. It was 20 years ago. So we have done a very strong leverage in terms of growth debt since half of 2018, where if you include the TRS in the fall, we were at 7.6 billion, 7.3 excluding these instruments, and we would be at 5 billion at the end of the year. So that's a very strong reduction. The total net debt will depend on the net debt in France will depend on the cash position, which will depend on the ultimate cash flow at the end of the year. And we'll also depend on the level of IFRS 5. So at this stage, I want to make a specific prediction there. But we are very, very committed on reducing the debt. I think that's very clear.

Thank you, sir. Next question is from Mr. Andrew Green from . Sir, please go ahead.

Hi. David, I just wanted you to run through the profit bridge numbers. I wasn't quite quick enough to type them all down. So, yeah, if you just run through those again, that would be very much appreciated. On the gross debt figure, I think it's moved up marginally versus the first half. I think on my numbers, about $200 million. I just wanted to understand, is that just a normal working capital lose in terms of sequential performance rather than year-on-year performance? And then the last question, just on the orders being processed by the Ocado CSM, just wondering what the number of orders is, maybe at the end of September. Thank you very much.

Thank you, Andrew. The profit number, well, the EBITDA drivers that I mentioned for the quarter were first the acceleration of our productivity initiatives, which yielded €30 million, new initiatives. productivity in the headquarters, in stores, in warehouses. We had 15 million euro full year impact, still full year impact from the plans from last year, the Rocket plan and the cost saving plans from last year, still had a 15 million euro impact in Q3. And on top of that, we have the growth of the idea of CityScout, we don't publish the number quarterly because CityScout is listed separately and doesn't publish its ABD quarterly, so we don't publish it, but it increased again on top of that. On the negative side, of course, we had the COVID costs, 5 million, but it's a small number. And we had the Vindemia getting out. Vindemia had a 7 million euro BDA net of rents last year in Q3. So I would say that the city's count basically compensated, more than compensated the loss of Vindemia. And these are the main drivers of the profit number. And if we project for Q4, we'll still have the $30 million, as I mentioned. We expect that to continue in the coming quarters, the $30 million from the path savings and the productivity plan that we started in Q3. We'll still have some impact of the rocket plan, but of course smaller than the $15 we had in Q3 because these are annualized. So we should have between $30 and $40 million cost saving, cost reduction in Q4. compared to Q4 2019. And we still expect this count to continue to grow, of course. In terms of gross debt and working capital, every year we have an increase in the gross debt in commercial paper or in credit lines, depending on the access to commercial paper in Q3. Last year, we had 875 million euros of credit lines drawn. This year, we have no credit lines drawn, but we had 300 million euros of commercial paper drawn. By the way, why? Because just because of the usual seasonality of the working capital, that obviously reverses into four. By the way, this renewed access to commercial paper is a good factor for our overall liquidity positions. We are quite pleased with that. Of course, we expect this commercial paper, as usual, to be repaid by the end of the year. That's what we do every year. For the order, we don't publish at this stage number of daily order by Ocado because they move so fast that it doesn't mean much to give a number one day. For instance, if I look at the number we had yesterday, the orders yesterday, they were basically double the day that we had before. I mean, that is, of course, basically linked to the very, very big boost that we have currently with the new lockdown. But even before that, they grew 60% between June and September. So we'll give, I think, a number when we have some kind of stabilization and there will be something more meaningful. But in any case, it starts to be a significant contribution to our yearly sales. And I think by the end of the year, when we have a clear view of where we are and the following trajectory, we could make some updates there. Okay, next question.

Next question is from Mr. Clément Geneleau from Brian Garnier. Sir, please go ahead.

Good morning. I will get two questions from my side, if I may. The first one is on your guidance. So if I understood well, the $5 billion growth debt will only be driven by the cash in of the price and the cash generation increase. for implying no additional assets or disposals before your hand. My second question is regarding employees' bonuses. Is there a second wave of bonuses for employees possible in Q4 in light of the second COVID wave? Thank you.

Thank you, Clément. For the $5 billion debt, the guidance we give here includes If you get from the Q3 number, it includes, of course, the cash-in from the enterprise. It includes the fact that the cash flow will allow us to reduce the growth debt, the short-term growth debt again. And there could be something more, but just by that, we can secure the $5 billion. So it's just based on that, nothing more. So I think that is clear. As for the COVID cost, including the bonus, yes. We had this bonus of 37 million euros in Q2 that was included in the 170 million total cost that we had in H1. So in H1, we had this exceptional cost due to the very specific nature of the lockdown period, the first lockdown period. We are in a very different situation now, obviously. We have been now used to working with the pandemic. Nothing will change from yesterday to the next day, and the stores will work the same. The life of our customers will change, but the life of the stores themselves is not going to change. So it's very different, and in the sense, it doesn't warrant any additional costs for our operations. So that's why when I said we intend to maintain the level of COVID costs at the level of the R&K3, that includes everything. Next question.

Next question is from Mr. David Lemonnier from Bank of America. Sir, please go ahead.

Yes, good evening, and thank you for taking my question. The first one, can you potentially give us a bit more color on the exit rate? Because you said that July for Monoprix or for Fonprix was quite weak, improving in August and September being better. But can we get a sense potentially of what will be the exit rate and what you've seen so far early October? So that's the first question. The second one, just a question about this pin-off that GPA may do with SAE. Obviously, you expect to create some value there, but what will you do if it's going to happen? So how strategic are these assets, and do you have potentially any plan to reduce your stake in SAE or GPA or both?

Thank you, Xavier. For the trading, I'll give the rough picture. The idea of July was not good. I mean, the beginning of July especially was clearly not good because before the 14th of July, and there was many banners, we had the impact of the lack of tourists. In Monoprix and Franprix, it was clearly, July was clearly low, and it was better in August, but I guess August is always smaller in any case. than the rest of the quarter, but it was better than last year in August. And September continued basically the trend that we had in August. In October, we saw a clear uptake, especially at Monoprix in the last three weeks of October. Now, at Franprix, we have very different dynamics in the center of Paris, in the center where the offices are, where we had a drop in sales. and the residential areas in Paris and the suburbs of Paris where we had growth. So the equilibrium between the two can vary from one week to the other. What we've seen recently is, of course, a very big uptick in the last few days. We are back to the last few days. We've been in the same order of magnitude than in the first lockdown, when the first lockdown started. So clear double-digit numbers and even a triple-digit number if you look at the e-commerce part of the business. So this is where we're at. And of course, I won't make projections for the next month because will it stay at this level or not? It's really very difficult to predict. I would say that overall, in this COVID period, we've had very strong variations from one month or one week to the other in some cases. So I would look at the overall dynamic. And I would say that the Parisian market overall was not good in Q3. And in that sense, it was... mid to high single-digit negative if we look at the numbers of the market. So all monoprene of Franprix did better than that. And now I think we're basically back to a period where it's going to be higher. But again, I will be very cautious because I can't extrapolate from the high double-digit numbers we're seeing right now. In the spin-off, the goal of the spin-off is not to reduce our stake, not at all. It is to allow both companies to develop fully on their respective markets. There are basically no synergies between SAE and the rest of the business and CBD. These are very different businesses that operate totally separately, even on the purchases, even on the headquarters, everything is different. So they're on the same holding company. They have the same listed structure above, but these are two different companies. And I think it will be better for them to be viewed by the market separately because SAE is an extremely strong growing business. I mentioned again, 33% of growth in the last quarter, 48% growth. And this is a very long track record. At SA we have an extremely good manager with Ben Niro Gomez, the CEO of SA who's been there since basically the beginning and got this company from 3.5 billion to where it's now, soon to 50 billion. So I think it's, of course, one of the best managers we have in this company. And when we see the view that the market could have on FIE, we think it would be best for this business to be listed separately. And also it would be good for the rest of the business, which have their own strategy, which are very focused on omnichannel, to be listed separately. But the idea for us is to keep the same stake, 41.2% in both of these companies and accompany the developments and of course what we think is that there's much value to be created there.

Next question. Next question is from from Morgan Stanley. Yes, thank you very much. Just three questions for me. The first one is can you perhaps comment on the profitability associated with the partnership with Ocado? whether this venture is currently profitable or when you expect it to be profitable. That's the first question. The second question that I have is with respect to the cost savings that's detailed earlier on in the presentation, are there any one-off cash costs that we should be aware of? And the third question that I actually had was, With respect to the cost savings, and you mentioned that you would expect those to be recurring on an ongoing basis, what explicitly are the type of measures that you think could have a recurring positive impact? Thank you very much.

Sorry, the last question? I didn't get it. Okay, let's get to the... the three questions you asked. Profitability, avocado. Of course, we've just started this business. There's the fixed costs of operating the warehouse. And when we start the business and we do zero sales, of course, it's not profitable. So there's a ramp up of the sales. And at some point, it gets to zero and then it gets profitable. So we are too early, of course, to be profitable right now. But if it goes according to our plan and grows according to our projections, which might actually be exceeded if you look at what's happening right now. It should be profitable sometime by the end of next year, probably. But today, it's not yet profitable, of course. It's not a big drag on the profits either, as you can see, because in the overall result that we show, it's not a significant drag, but it's not yet profitable. In terms of cost saving and cash costs, Most of the cost savings we do are productivity improvement. We have a lot of temporary workers and we have some significant turnovers. We basically build that to reduce our costs. This does not generate very big cash costs. The big restructuring costs that we've had in the past, we've seen them going down. These cost savings are not generating in themselves big cash costs. If it was the case, by the way, we would have seen that in the cash flows of the quarter, which are actually a significant improvement compared to last year. If I got your last question well, it was about the recurring savings and the recurring COVID-19 costs. The recurring COVID-19 costs that we will still have in the coming quarters, we see them at around 5 million, as I said, which is basically the cost of providing the protection that we have to provide to our employees, masks and gels. By the way, masks, of course, only cost a fraction of what they used to cost in Q2. Prices have been basically divided by 10 if you look at the cost of the masks. It's not really the same thing at all. And the current level of operation is perfectly compatible with masks with the sanitary necessities. So in that sense, I think this will move. So recurring, this 5 million per quarter is the cost of operating the business in this environment. So they will last as long as we have to protect our employees and our customers. But no more than that. We're going to expect more than that. As far as the recurring sustainable cost reduction, there are 30 million euros per quarter 30 million Q3, so same thing next quarter, same thing Q1, Q2 next year. After that, your annual hours, of course, and the connection to what I said, which is basically making good use of the increased simplification, digitalization of the business everywhere, in the stores, in the warehouses, in the simplification of our organization. We've worked on the synergies between Franprix and Monoprix, for instance, worked on synergies in logistics, and simplified the way we operate the business and control the stores. So we've done that. We had plans ongoing and we accelerated them. And I think now we have the right, we have a version that we are able to do that quickly. And we think the current way we operate the business is perfectly sustainable. Actually, if we look at the increased digitalization of the business, we now have about half of our of our sales done through automatic cashiers or smartphone apps, it can go a bit higher probably. It's an ongoing trend. And simplification of our back office is also something that increases actually our efficiency. Okay, next question.

Next question is from Mr. Robert Joyce from Goldman Sachs. Sir, please go ahead.

Hi, good evening, David. Three from me. First one, would you be able to say what the growth in EBITDA after leases was in France in the quarter? Second one, just, it sounds like it is, but could you confirm that Ocado is ramping in line with your expectations and how long you think it will take to get to the 500 million euros in sales you're targeting? And then the final one, if you could just help me, on the gross debt target of 5 billion, it implies a sort of 700 million reduction since the half year. I believe that's the expected proceeds in from leader price. So is that implying that you're not expecting cash generation from the rest of the business? Thank you. Thank you, Rob.

So ABDA after rents, we published the ABDA after rents. It's 925. So if you compare it to the ABDA after rents that we published in Q2, you can see that the improvement after rents is actually higher than the improvement before rents. It's 53 million. Why? Mostly because we don't have the rents for Vindimia anymore. So this improves even more the picture when we look at the EBD after rents. And we don't have additional rents basically compared to last year. The effects of the same earnings back have been annualized and we've worked to reduce the rents on some of our footprints actually. Ocado, yes, it's ramping up according to our plan. It's an industrial project where we have the projections in demand and offer. The 500 million euro, it's very difficult to pinpoint an exact time, of course. I would say it's a wide mark, but it's a bit too early to be more precise than that. It's between three to five years. So if we go fast, it could be three years. If it takes a bit longer, it could be five years. That's That's basically what we're looking at in terms of framework. The reduction of debt, actually, if you look at, yeah, your computation is correct. At the end of June, we had very little short-term debt on top of the bond debt. So the impact of the disposals made in H2 basically reduced the gross debt from the levels at the end of June to the level it would be at the end of the year. The excess cash that we generate usually turns about more cash in balance sheet. If I look at Q4, at the end of Q3, we had short-term debt. We had commercial debtors. We will repay this commercial debtor with the cash flow from Q4. We can go beyond that, of course. We could use also part of our cash flows to buy back some of the debt outside of the segregated account. So that's also a possibility. But it's a rather cautious guidance that we gave, which basically takes into account the disposals already secured, the leader price disposal and the small disposal that we made in Q3, the small Mercedes disposal. And that's it. But you're right. We intend to generate cash. This will also improve our cash and liquidity position at the end of the year, not just reduce the process. And that's our goal. Okay. Is there any more questions? I think the last one, I think.

Okay.

Okay. So I think if this was the last question, I mean to thank you all for being there tonight and be safe, everyone. Thank you.

Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.