Ladies and gentlemen, welcome to the Dufry's Q3 Results 2023 conference call and live webcast. I am Alice, the conference call operator. I would like to remind you that all participants will be in listen-only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. Webcast viewers may submit their questions in writing by the relative field. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Xavier Rossinyol, CEO of Dufry. Please go ahead, sir.
Thank you very much for the introduction. Good morning, good afternoon, everybody, and thank you for your interest in Dufry, soon to become Avolta. We are presenting today the first nine-month results. I'll go straight away with the presentation in slide four, with some of the key highlights. Dufry has a clear strategy, Destination 2027, that is going to provide both growth and resilience on the profitability of the company. This quarter and the first nine months of the year confirm once more these positive effects of the strategy. We had a strong organic growth of 16% in the quarter. No slowdown, neither versus the first quarter, the first half of the year and the remaining of the year. Comparables are more difficult, but there's still very strong growth and also strong growth on the profitability and the equity-free cash flow.
The quarter four of this year started with similar growth that we have seen in August and September, and all our intelligence points out that will remain similar levels for the remaining of the year. That's why we have updated, once more, our full year outlook, both in revenues and profitability. Part of it, it's also thanks to another successful step on the integration between Dufry and Autogrill. We are now more diversified and resilient. That's a key idea we will repeat in today's presentation. Geopolitics remains challenging, economic cycles change from one area of the world to another, but the demand remains strong because we have the widest portfolio that any other, than any other company in our industry. We are also progressing well on the generation of synergies.
We confirm once more, we will get the CHF 85 million savings on cost, full effect 2024, and already CHF 30 million this year. We expect tomorrow, the General Assembly, to approve the change of the name from Dufry to Avolta. As a result of this clear strategy that delivers both growth and resilient cash flow generation, we publish today the capital allocation policy of the group. We will combine at the same time, growth, deleveraging, and return to shareholders. Our target is 1.5 to 2 times net debt to EBITDA. From time to time, could be a little bit higher than that, up to 2.5 times after big business development or some bolt-on acquisitions. With a target to go back to the expected 1.5 to 2 times as soon as possible.
On the yearly cash flow, 2/3 will go to growth and deleveraging, and 1/3 to dividend to shareholders. Starting already in 2023 financial statements, the board of directors will propose in the next ordinary general assembly to distribute a dividend of CHF 70 per share, already, as I said, based on 2023 numbers. Let me now have one slide on the industry and how resilient this industry has proven over the last four decades. Passenger growth, airport passenger growth, is in the range 4% to 6%, with a CAGR of 10%, for example, between 2006 and 2019, and is expected to grow ahead of 4% per year, and this is the basis of our business. That means that in 15 years, the number of global passengers will easily double, and that will happen across the different regions.
We have a graphic here on the growth per region, but this is origin and destination. Of course, origin China, origin APAC, it could be also destination Europe. And that's why we believe that being as diversified geographically as possible in the segment of travel, it's a key element to cope better and better, and benefit better and better from this growth of passengers. Also, history proves that the expenditure when people travels is less affected by economic cycles than the high street consumption. And the reason is because when people travel, consumes, because they need something, that could be food or beverage. It could be because they're buying a gift or something to remember. When people travel, either by business or leisure, their mindset is different from the one they have when they are shopping in downtown.
So both passenger growth and consumption are more resilient than the general economic frame. Going to page six, also, after the merger, and I think sometimes it's underappreciated, how diversified in the travel experience world, but how diversified we are after the merger between Dufry and Autogrill. Geographically, 75 countries, in 1,200 locations, and 5,500 points of sale. But also on business segment, which is important both on the growth and the resilience. Now we can offer passengers duty-free, duty paid, and F&B. Different nationalities, different destinations, might want one thing or the other. Now, we are able to adapt our offering to the changing of the, the trends. Also makes us less affected by geopolitical crisis that are geographically limited. The exchange rate changes that might change the capacity of people to travel.
All these effects are less, thanks to our wide portfolio. I'm not saying we are immune to everything that happens in the world, but we are less affected than the general consumption. On this basis, we have a very clear strategy that explain every quarter, but I think it's important to remind it. It's absolute travel centricity based on our points of sales, restaurants or shops, and it's based on an increased digitalization and an increased digital engagement with these passengers. This has changed completely the way we address business, and is changing the way we are addressing the future business. Very clear geographical strategy, reinforcing the key markets we have in North America and Latin America, in EMEA, and growing more and more in Asia-Pacific, where we have the lowest market share.
We always said this is a process that will take a few years, but we already have some early indications that is also moving ahead. Operational improvement culture. Once more in this quarter, in the first nine months, we have shown that we are really delivering operational improvements. Part of them, because of the synergies that we are starting seeing in our P&L, and part of it on this culture of always trying to do the cost basis a little bit more optimal, than before. Last but not least, we are trying to make ESG tangible for our communities and our people. All that is with one target: increase shareholders value, increasing the top line growth and making it more resilient, improving the profitability and the cash flow, not only the operational improvement, but also on a very active portfolio management.
We said very clearly that if we need to exit a contract, even if it might have a negative effect on the change of scope and turnover, if it's gonna deliver better profitability and cash flow, we are gonna do it. Because we are here not to sell more for the sake of selling more, we are here to generate profitable growth. With the cash flow generation, the liquidity we have, and our focus on the deleveraging, we will keep strengthening our balance sheet and liquidity. We'll explain that in more detail, if we go now to page eight, but the strong numbers, CHF 9.4 billion sales on the first nine months, and organic growth close to 25%, as I said, in the quarter, 16%, that is not a slowdown.
Let's remember that in 2022, the first half was still easy comparables because the traffic had not come back. EBITDA close to CHF 900 million, with 9.5% EBITDA margin, 11% in the quarter. Again, very strong. And an equity free cash flow of CHF 305 million for the first nine months of the year. Thanks to this performance, we are updating our expectations for the full year, and Yves is gonna explain that a little bit later. If we go now, page nine, by regions, very strong performance across all four regions. In Europe, Middle East, and Africa, leisure destinations had an extraordinary summer. And also, those locations in the north of Europe, U.K., that depend more on Asian traffic that have been lagging behind the rest, are also catching up nicely.
Still not at the level we would like, but catching up nicely. Several business development opportunities. You have some of the key names there, but also several examples on the new way we think commercially. From concepts that don't go on traditional categories, but product pricing, like the Haute Parfumerie. Already some combined F&B and retail concepts, like the one I had the pleasure to visit, the day before yesterday in Malpensa, Milan, a Hudson Café, powered by Baci, one of the most well-known chocolates in Italy. And also new stores with a new generation of retail in Atlanta and in several other locations. North America, again, very strong performance. Very strong performance in passengers and spend per head in domestic, both in convenience and F&B.
We know that the only thing that is lagging behind is duty-free, and duty-free because some of our key duty-free locations in Canada are based in Chinese passengers that are still not coming back. But overall, very strong performance, and as you can see, increasing number of renewals and new business development opportunities. Some of them already with initial discussions on combined concepts of F&B and retail. Latin America, another extraordinary quarter. Argentina, Mexico, the Caribbean, great performance. Brazil, recovering fast. You know, Brazil has been one of the countries behind the curve. Argentina, of course, we are vigilant to the political situation. There are elections, and the macroeconomic environment there remains challenging. Next year could be difficult year, but what is important, thanks to our...
The size of our concession portfolio and the size of our geographical portfolio, we do not expect anything happening in Argentina to have a material effect on the overall portfolio, even if the performance of the country could be lower than this year. Again, significant number of business development opportunities across the region. Last but not least, Asia-Pacific. Of course, the fastest-growing performance. Comparables in 22 were easier. Still less Chinese passengers than in 2019, but what is interesting is that some other nationalities in some other big- also catching up very nicely. And on business development, we have made some announcements, but more to come. We always said that the growth in Asia will be a three to five years plan, but the level of opportunities that we are start seeing is very encouraging to support our long-term strategy.
Operations perform well, business development performs well, but also we are advancing a lot on the Travel Experience Revolution. As we said in the past, our stores, shops, or restaurants have to have five key characteristics. We are investing time and money on becoming in hybrid concepts, seeing the opportunities of combining F&B and retail. That could be in a physical store, it could be on a master concession, running all the commercial space of an airport, or it could be with doing cross-business from one to the other. From cross-promotion, from sending one consumer to the other, from sharing the information from one to the other. Second, smart, and we have deployed already camera analytics, phygital solutions, and frictionless solutions in many stores. You have some examples at the bottom. Fun stores. Probably there is a better way to say it, but I like fun stores.
The stores we have have to include entertainment. Our conversion rate in the industry is around 20%, so it means there is 80% of the people who don't find a reason to step into our shops, stores, and restaurants. Making them more entertainment, gaming, collectible, show, live shows, in the store, it's a way to drive more footfall inside the spaces. Flexible, very important because travelers are very resilient, but they change in nature. They change nationalities, they travel, they change their profile. We are investing a lot of efforts on making more flexible concepts that we can adapt to the new profile of consumers when is needed. And more local. Sense of place is becoming, both for airports and other travel destination, and passengers, more and more important. These five things that we are deploying across a portfolio, we have a few examples.
We know that actually drives better footfall, better conversion, better spend per head, and now we are in a process of scaling up these examples across the portfolio. It will take some time, because in some cases it's making investment, it's making agreements with the airport. But we are convinced that doing this makes us different. And making us different makes us more attractive to consumer, and makes us more attractive for business development, because the landlords will see that dealing with Dufry, soon to be named Avolta, it's on plan or ahead of plan. The new combined management team is delivering on the CHF 85 million synergies, full year, full effect already in 2024, CHF 30 million this year. You are seeing them on the profitability, you're gonna see them on the profitability.
50 million restructuring costs, 25 this year, 25 in 2024, and we will officially close the integration process at the end of this year. As I said, not only on the P&L and the cost synergies, but thanks to the combination of the two teams, we are exploring more and more opportunities that were not available to us before because we did not have the two business together. It could be master concessions, like the one we signed in Hubei Airport in Wuhan. It could be combining the existing business, doing cross-promotions, and benefiting both business together, like we can do now in Bangalore, Chicago, Bali, Vancouver. I could name another 50 or 60 locations where we have the opportunities to do that.
And last but not least, after the approval of the shareholders tomorrow, we are gonna use Avolta as the new corporate name, and I think it's a small change, but an important change. Because we want the airports, the landlords, to understand that we are not just Dufry and just Autogrill. We are more than that because of this new strategy, this new consumer centricity, this new digital. But we want the equity markets to also understand that Avolta is more than the sum of the parts, that we have the strength of the two companies, the knowledge of the two companies, but we have a new way to deploy those strengths in a unique way that nobody has ever done before. And you can see quarter after quarter, that are yielding both on profitability and growth ahead of expectation. Last point.
Destination 2027, very clear, which delivers growth and resilient profitability. As and as a consequence of that, we have agreed with the board of directors on a very clear capital allocation policy. Two-thirds of the equity-free cash flow will go to deleveraging and growth. Leverage target, 1.5 to 2 times net debt to EBITDA, going up to 2.5 after major business development or bolt-on M&A. Again, we are not planning any big consolidation. We are talking about easy-to-integrate, one country, two country, small companies that could help to growth on key geographies. Deleveraged and growth, and one-third of the equity-free cash flow every year will go to direct return to shareholders on the shape of a dividend. For the first year, 2023 to be paid in 2024, the initial dividend is CHF 70 per share.
That's what the board of directors will propose to the general assembly, CHF 0.70 per share. With that, I hand over to Yves for more detail on the financial statements. Thank you.
Thank you. Thank you very much, Xavi, and good afternoon to everybody on the line. As mentioned by Xavi, resilience and growth is one of the key themes, we want to pass on and pass over today. This is also clearly visible when we look at our P&L, and also about our cash flow statement, looking at the revenues, the profitability, and also the cash flow. We have a highly flexible cost structure, and it's especially relevant when you look at the first two lines: cost of goods sold on one hand side, and also the concession fees, which amount for the two most relevant lines of our cost structure. Both of them are fully variable. They are fully depending on the revenues.
We have a similar setup when you look on the other side around about our cash flow statement, or the cash conversion benefits from Dufry's asset-light business model and the variable cash flow structure on most of them. Our interest costs are largely fixed. On the other hand, we consider this as an advantage as we benefit from attractive rates, which are mostly fixed in nature. We depend to more than 80% on bonds, which have a fixed rate coupon, which basically means we are protected against any fluctuations of interest rates. Moving on to the next slide, slide number 16, the diversification of our portfolio. Xavi has mentioned it, but just a couple of comments from my side as well. We have a very well-diversified portfolio.
Looking at the geographical mix, around half of the revenues is coming from EMEA, with North America contributing to 31%, LATAM 12%, and APAC 4%. This is for the nine months this year, with Autogrill contributing eight months. We have closed the transaction in February 2024. Looking at the business lines, the different business lines, i.e., duty free, duty paid, or convenience and food and beverage, contribute evenly to the revenues. On the top right, airport remains the biggest channel, with around 80% of revenues of net sales, followed by motorways, railway stations, and border shops, as well as cruise lines, ferries, and some other channels. As per product categories, perfumes and cosmetics, confectionery, and food and beverage remain the most relevant contributors.
To summarize that, our diversified approach on channels, business lines, geographies, and product categories, which significantly add to our group resilience while driving growth at the same time, as it allows us to adapt fast to any evolution in demand by our customers at any moment in time. Moving on to the next slide, slide 17. The nine months turnover of the combined group amounted to CHF 9.383 billion. Please consider that this includes nine months legacy Dufry, as well as eight months of Autogrill. We consolidated Autogrill as of February this year. The third quarter came in at CHF 3.668 billion. Organic growth versus the same period in 2022 was 20% for September year to date, and a strong +16% for Q3 against a tough comparison.
What is important to remember, many restrictions were lifted at the beginning of Q2 2022, and we have seen an increase in capacities and prolonged summer since Q3, as well as Q4 2022. Xavi has mentioned that already earlier. Related to the revaluation of main currencies against Swiss francs, our reporting currency, we had a translation effect on turnover of around 5% to 7% for the first nine months and Q3, respectively. We expect a similar effect for the full year. This is purely translation, not affecting EBITDA margin or cash flow conversion. Core EBITDA for the nine-month period came in at CHF 893.5 million, or 9.5% over turnover. The strong result is supported by our operational performance, on one hand side, productivity increases, and also the synergies we have already generated this year.
On the other hand, equity free cash flow came in at CHF 305 million. There are no surprises on the cash flow statement, so there is a clear number in that sense. For Q4 this year, in line with the usual seasonality, we do expect to see a slightly negative equity free cash flow for the quarter. Again, and that's important, this is the usual seasonality, so nothing new in that regard. Moving on to slide number 18. The group shows a significant deleveraging over the last quarter, reaching now 2.57 times EBITDA over net debt. This is supported by the combination of Autogrill and the financial structure for the combination on one hand side. On the other side, also supported by the good operational performance for the combined group.
As mentioned by Xavi, we are targeting a level of 1.5 to 2 times net debt to EBITDA. We have a well-balanced maturity profile with no refinancing risk. The next upcoming maturity would be the CHF 800 million bond in 2024, which, by the way, has a coupon of only 2.5%. Given the strong liquidity position of close to CHF 3 billion, there is no immediate refinancing requirement of that bond, and also this is supported by the rating agencies. The attractive interest profile is appreciated, and we will look into a refinancing at the appropriate moment in time next year. The company has a well-structured debt profile, also in that regard, to product mix and exposure to fluctuation of interest rates. I've mentioned it before, around 82% of our debt is linked to bonds with a fixed rate coupon.
So there is no relevant exposure to changes in interest rates. Moving on to slide number 19, and my last slide. Should the current performance continue through the last quarter, we project a full year 2023 organic growth of around 20% versus the previous year. This refers to a turnover for the pro forma combined business, which stood last year at CHF 10.805 billion, 2022, considering 12 months for Dufry and 11 months for Autogrill. I think this is important. As mentioned earlier, we have a purely translational effect on our growth related to the devaluation of some of the relevant currencies, including euro, U.S. dollars, and sterling, against our reporting currency, Swiss francs. which stood at the area of 5% to 7% for the nine months.
Based on this, we expect our reported growth for the full year to be around 15% versus the previous year for the reported pro forma business. It is important to emphasize, again, that this translation effect does not impact EBITDA margin nor cash flow conversion. We expect a further improvement in the margin related to our performance of 8.5% to 8.7% for the full year 2023, while Equity Free Cash Flow should come in at around CHF 270 million to CHF 290 million for the year. We provide this upgrade in our expectations as we see continued demand across all geographies, paired for travel, retail, and food and beverage, and paired with our operational performance. At the same time, we continue to remain observant on the geopolitical and macroeconomic environment.
Coming back to where we started at the beginning, with the highly diversified setup we have today, we are very well-positioned and are flexible to adapt at any requirements while generating resilient profitability and cash flow generation going forward. Having said that, I hand back over to Xavi. Thank you.
Thank you, Yves. Two slides and a video. We will not be Dufry Av olta without a video. So the two slides very shortly. Clear strategy focusing on profitable growth. Growing like passengers, matching the spend per passenger, thanks to this consumer focus. Enhancing profitability, thanks to this cost discipline, this operational improvement culture, and the synergies. But at the same time of profitable growth, resilience on that growth, thanks to the size and diversification of our portfolio. In geographies, in points of sales, in exposure to different profiles of consumers, but also in being able to provide the different segments of business in the retail, duty free or not, and in the F&B. That's why we can deliver on this shareholder value creation. And quarter three, 2023, and the first nine months of the year, if we go to slide 22, confirm once again, everything I just said.
The strong organic during the year, but also in the quarter and continuing quarter four, expansion of the margins, expansion of the equity free cash flow, updated forecast for the full year, good start of quarter four, and very clear, but more than clear, consistent capital allocation to balance deleveraging, growth, and return to the shareholders. We are vigilant. We are clearly looking at what is happening in the world, both economically, financially, and geopolitically, but we are a firm believer that history shows the industry is more resilient than other aspects of the consumer spending. And thanks to our portfolio, never, never, we have been even close to the diversification we have today. It makes us very resilient. Before I show the video, I want to give big thanks to our partners, landlords, our brand partners.
We can only do what we are doing, thanks to all of us working on the new strategy. Big thanks to the board of directors and the key shareholders that are really supporting very strongly and guide very strongly to this new strategy. And very special thanks to my colleagues of the GEC and every single team member of Dufry, Autogrill, and Avolta. If we are here, it's only thanks to your daily effort, and I highly appreciate that, and I want to say it publicly. Now, a short video to make sure that everybody gets into the Q&A properly excited. We will be back in less than a minute. Thank you.
Avolta. Born to make every journey as rewarding as the destination, to stand out and exceed expectations. Avolta is brave, passionate, collaborative, and global. A powerhouse that's here to make travelers happier by maximizing every moment of their journey. Designed to open up for brands and products, to navigate from place to place, adapt to the world around us, and reveal journeys. Created to explore products dynamically, to express itself, and connect with people's needs. Giving travelers encounters that capture their imagination every step of the way, and driving footfall for landlords through F&B and retail spaces that inspire and excite.
Explore new possibilities and experience the power of purpose. Avolta.
Okay, then after this exciting video, we're gonna open the Q&A. First, I'm gonna make a clarification that, I said it looks like a couple of times, CHF 70 instead of CHF 70 cents of a Swiss franc. So I just wanna make sure it's CHF 0.7 Swiss francs per share, not more than that. I don't want people to get overexcited. So thank you for that clarification. So now we open the Q&A, please.
We will now begin the question and answer session. Anyone who wishes to ask a question or make a comment may press star and one on the touch-tone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets when asking a question. Webcast viewers may submit their questions in writing in the relevant field. Anyone who has a question or a comment may press star and one at this time. Our first question comes from the line of Harry Gowers with JP Morgan. Please go ahead.
Yeah, good afternoon, gents. Thanks for taking the questions. I've got three questions, if I can. First one is just on the trajectory for organic growth for the rest of the quarter. Obviously, October was strong, up 8% versus 2019, so higher than the Q3. So what are you thinking for the remainder of Q4? Can that 8% continue to build higher relative to 2019? Second question, there was some comments from Estée Lauder yesterday in terms of seeing some weakness in some of its brands in travel retail in Asia due to weaker demands. Clearly, you guys have a full range of categories, not just beauty or cosmetics, but anything you would call out from your perspective in terms of consumer demand across some of those categories in your stores?
Then last one, just on the cash conversion. I mean, when, when you look at your Capital Markets Day slides from last year, you had cash conversion at more than 30%, but that was from 2025. This year, you're probably already gonna be at 26% to 27% on your new guidance. So do you think you can get to that 30% mark in 2024 already? Thanks a lot.
Thank you for your questions. Look, if you look at the expectations for the full year, you will see that what we are saying is to keep last quarter very to what we have, 14% to 16% organic. Of course, nobody can fully anticipate what will be the translation effect. That's why we are saying that it could be -5 to -7. We all know that the Swiss franc tends to strengthen when the geopolitical situation in the world is unclear, but the organic growth, that is the important one for us, it should remain similar to what we have seen in the quarter versus 2022, and similar probably to 2019. Also, the seasonality four years later, I mean, it's a long time, but I will focus on the growth versus prior year.
Estée Lauder, look, as you very well pointed out, they are one brand on one category, on one segment of business, so we have many more. The beauty of Dufry Avolta is that we can adapt the offering to whatever the public wants. We can change the brands. We can change even on the brands, the product. We can change the categories. There are places in the world that were very strong in one category, and the consumer has changed, and now it's another category. There are some very big nationalities that might want to consume more F&B than retail. We can adapt.
So we are not seeing the slowdown you are mentioning, but we don't disclose sales by brand, so we could be seeing one brand, and I'm not saying that's the case, going down, but more than compensated by another brand or even another category, and that's why it's more difficult to see the consequences of one brand in our portfolio because we have many other things to sell. The cash flow conversion, look, we said what we said for the full year, 2023, we will keep working on the same philosophy. We need to grow more than the passengers, and we need to keep expanding our profitability year on year. We are not gonna give, at this stage, a specific percentages, but 2024 and 2025 should be better.
We should have organic growth, and it should be better in margins than what we have this year, both in EBITDA and in cash flow conversion. Thank you.
Thanks a lot.
The next question comes from the line of Manjari Dhar with RBC. Please go ahead.
Hi, it's Manjari Dhar. Thanks for taking my questions. I just had two, if I may. The first is on sort of spending demographics and maybe which nationalities you're seeing spending the most in travel, given we haven't really seen the Chinese or the Russian spenders come back to 2019 levels? And then secondly, on the new store concepts, I was just wondering if you had any learnings to share from the new concepts that you've opened this year, and anything you're sort of looking to ramp up the rollout of. Thank you.
Thank you for your question. One of our, many, but one of our key competitive advantages is precisely that we are in many more places than anybody else, and we have more information about passengers and passenger profiles than anybody else. Being a public company, we typically speak a lot, and we realize over time the competition picks up. So we know perfectly well, and you're pointing out something very important. In Europe, for example, that we've been seven to eight months ahead of 2019 numbers without some of the highest expenditures, which shows that we've been able to replace those high expenditures by other type of nationalities adapting our offering. And it's not only how much they spend, also is relevant, the duration of the flight. Also, it's relevant if that airport is a transit airport, is not a transit airport.
It's also important if they have more or less time, if it's domestic or international. So all these, the age group is also relevant. So there are so many variables that is really complicated. But the reality is today we are where we are because even if in some geographies we've been missing the highest, traditional highest expenditure, we have been able to replace those by other people. And I think that's what we bring to the table that we didn't have before the merger. On the new store concepts, on the five key elements I explained, we have in all five clear examples, and we have a ramp-up plan. In most cases, it's ahead of 100 to 200 relevant stores in all of them over the next 24 months. So yes, there are clear plans to keep ramping up.
But as I said, sometimes it's something you can do by yourself. For example, put more entertainment in a store, but sometimes if you need to touch the physical store, you need the permits of the airport, sometimes the permit. So it's not something you can do overnight. But the direction is very clear, and we have examples that confirms the direction we took when we defined the new strategy with this consumer centricity is absolutely the way to go. Thank you.
Thank you.
The next question comes from the line of Jörn Iffert with UBS. Please go ahead.
Hello, and thanks for taking my questions. If it's okay, I would take them one by one. Maybe to start with the first question, can you tell us what you observe regarding the consumer behavior in your shops? Do you still see some trading up? Do you see maybe also a little better momentum in food and beverage versus classical retail? And also, if the consumer, for example, is going for the same products, can also buy on the high street or is more going for products which are unique in the travel retail shop. So maybe just some insights here would be highly appreciated.
It's difficult because I need to say yes and no to all the, to all the questions you asked. So in some cases, we see trade up in some categories, and we already discussed that. Perfumes, wine and spirits, there is a clear segment of the population that is going to a trade up. We can see the perfumes typically priced at $100. It could go now on a new segment ahead of $300. We have the Haute Parfumerie addressing that. But in other geographies, you see new populations, travelers, that maybe wants a perfume and cosmetic at $9.99. Of course, domestic or international is a completely different behavior. We see very strong F&B in the U.S., for example, and in other geographies.
But you also see people that are more on the convenience of food that you can get in a convenience store. One thing we're generally seeing is that the takeaway, it's something that it's maybe. Another trend we are seeing, the food sometimes is decreasing in the planes, and therefore, people is more motivated than before on buying some of those products before they fly. So I would say we see trade up in certain categories, but we also see new consumers that benefit or that they appreciate lower pricing products. Also, we are introducing a lot of indie brands in perfume and cosmetics, more makeup. So I can tell you, our commercial team and the team of the regions are making an amazing job because we need to adapt locally to the local trends.
It's a very complex topic, but it's something we have that is unique because we are the ones now having the widest portfolio of commercial concepts. Your second question, because this is now.
May I follow up on this, Xavi, if I may? Regarding food and beverage and classic travel retail. Are there currently differences in sales momentum and margin momentum?
No. No. In relevant geographies, no. Of course, you have to do it in a comparable way. So, for example, if you have a Northern European airport where Chinese are very important and Chinese are not there, F&B is more independent of the nationality. So if you have a German consumes food, but it consumes less, less high-end products. So you need to exclude these things. But if you exclude these exceptions, no, in the U.S., that is very comparable. We have a very strong in travel retail and very strong in travel F&B.
Thanks for this. Second question, if I may. Let's assume we have tougher macro, and let's assume sales for Avolta would be just flat next year. With the synergies you are creating, I mean, would you still feel comfortable to expand margins a little bit and also cash flows? Is there anything we need to consider regarding timing of CapEx, timing of concession fee payments, or anything which could negatively impact the cash flows next year, year-over-year, if sales are just flat?
Our target is clear. We don't expect flat sales, we expect growth of sales, but even if there will be flat sales, as you put, we will expand the margins. We have the synergies. The synergies will come back independently of the increase of sales or not, and we still see some room for improvement on the margins and the cash flow. And I think it was clear, we do not expect neither this year or next year, extraordinary, extraordinary things.
Thank you. And the last, if I may, just a quick one. Interesting update on the capital allocation. With the new leverage targets, I mean, does it also mean, and you explicitly mentioned smaller bolt-on deals, Avolta is not looking anymore for larger deals? This is over now? So you want to focus on the organic business more versus M&A in the next couple of years, in the strategic period?
Since September 2022, when we presented the new strategy, we were very clear, and after the merger between Dufry and Autogrill, we reinforced that message. The focus number one was to successfully integrate the two business. Target number two was to deliver on Destination 2027, and that includes some bolt-on, easy-to-integrate acquisitions, but we are not looking at any major transformational business right now. I think the focus has to be on what we have and what we can grow, in a step-by-step way.
Thank you very much.
The next question comes from the line of Tatiana Balandina with Stifel. Please go ahead. Ms. Balandina , your line is open. You may ask a question.
Hey, this is actually Simon speaking for Stifel. Two questions, please. First of all, looking at next year, consensus points to revenue for around CHF 13.6 billion, so basically in line with the 2019 pro forma revenue. Are you comfortable with where consensus is? And any reason that you could not achieve a better Equity Free Cash Flow than in the 2019, based on similar revenue, given synergies, portfolio management, and so on? And secondly, can you just give us your exposure to the wider Middle East region, and do you see any impact from the conflict at this stage? Thank you.
You want to take the first one?
Sure. So look, on the first one, on the consensus, as Xavi has mentioned before, it's a little bit too early to talk about 2024. We have provided a very clear outlook and actually, increased it on revenues, EBITDA, and also cash flow for this year. In regard to next year, it's a little bit too early. Having said that, look, overall with the consensus, we do feel comfortable, based on where we stand today and what we see, so there is nothing specific to be mentioned there in that regard. In regard to the cash flow, look, we have answered that question before. Xavi was very, explicit on that. We have provided an outlook for this year. We feel comfortable with the CHF 270 million to CHF 290 million for this year.
Next year, we do expect to see a growth, but it's too early to quantify that or to mention specifics in that regard.
On the Middle East exposure, our exposure is limited, but we have countries near the conflict area. But I think the key message is that we are publishing the numbers we are publishing. The numbers are year to date, close to 5% better than in 2019, and in the quarter, I think 8%. And we had the war in Ukraine, already ongoing. So of course, every conflict, every geopolitical context, every major devaluation will have an impact on the business, but you will not see it on the consolidated numbers, because always something that goes bad here, goes better somewhere else.
So the effect of the Middle East crisis for now is practically zero, but even if it's a little bit, it will be compensated for things somewhere else. So you should not see a major effect or a major impact of this conflict, even if it extends a little bit more in our consolidated numbers.
That doesn't mean we don't look at what happened in the world, and we are not concerned about what happens. And also, remember one thing Yves just said a few minutes ago, how flexible is our cost structure? So also, if something happens that could affect the sales of a region, we can more than minimize those effects on the P&L and the cash flow. So even if there would be, from time to time, an effect on a certain geography, you will see much less of that effect on the bottom line.
Great. Thank you.
The next question comes from the line of Yvonne Chow with Nan Fung Trinity. Please go ahead.
Hi, can you hear me? Hello?
Yes, we can hear you very well.
Hello? Oh, thanks. Thank you very much for taking my question. I understand that next year is still, you know, a bit too early to tell, but, let's say if we go back to your guidance on the Capital Markets Day, you know, the slide 93, would you say that the outlook today should be better than what you provided in 93 for, say, 2024? For example, you know, in, in that slide, you mentioned integration cost was CHF 100, CHF100 million, now it's only CHF 50, and then the CHF 85 million in the, synergies is coming one year forward. So it does. And then the travel is not going down. You just mentioned that, Chairman, you mentioned that the Easter impact is not that much now. So overall, it does sound to me that that outlook is conservative.
Can we say that?
Um.
For 2024?
Look, I think as Yves just said a minute ago, we gave, I think, very clear outlook or expectations for 2023. We said we feel comfortable with the consensus that is out there today for 2024. The only thing, nobody, neither the analyst nor ourselves, can easily predict the translation effect, but we feel very comfortable on the organic growth. That is the one that matters. Of course, i t could translate into higher or lower numbers, and that's sometimes why some people might get confused on reported number growth and organic growth. But on the organic growth, we feel comfortable on what we said.
We grew more than expected on the 2023. We have accelerated some of the synergies and cost, but you're already seeing that partially in 2023, and you will see a little bit more in 2024. I think with that, you can figure out what we are saying quite well.
Okay. Actually, I also have another follow-up question, to the concept question. Because you mentioned that because you have a wide range of products, basically, you can be flexible, you can adjust to what customers like.
I'm just wondering what kind of time. Let's say, you know, you discover that, for example, Estée Lauder, right? For example, makeup products are not doing well, but like, how much time do you need to adapt to customer, let's say, you know, buy more other kinds of products and other brands? Like, is it like we're talking one quarter or, like, one month? Like, you know, how flexible you guys are in terms of adapting to customer behavior?
That depends a lot. I mean, if you're talking about new assortment could be very fast, depending if that assortment is already available in our warehouse. If it's a completely new brand, it will take more. If it requires change of the stores, will take even, even more. Sometimes adaptation is also adapting the price and the promotions, which you can do much faster. If there is a difference on the exchange rate of a country versus the U.S. dollar, you might want to change the price faster.
There is also another thing, sometimes it's anticipating, and this is an advantage we have that is linked to our wide portfolio. If you see that something is changing in Hong Kong, for example, and it's an indication on how Chinese consumer behavior is changing, by the time they travel to London three months afterwards, you already adapted the offering even before the passenger arrived there.
So we also do a lot of cross-information, anticipating what is gonna happen. Our understanding of the consumer in the U.S., where we have the largest network, was very helpful to anticipate the passengers we saw from North America to Europe this summer. So this advantage of the size of the portfolio and the 2.3 billion passengers that go through our locations, this is a unique advantage that Avolta has, that none of our competitors has, and we intend to use it even more going forward, thanks to the digitalization process that we are at full speed on.
Understood. Thanks.
Thank you.
The next question comes from the line of Neil Canell with J.P. Morgan. Please go ahead.
Hi, gentlemen. Thanks for the call. One for Yves, maybe. Yves, on the CHF 800 million bond maturity next October, appreciate you guys have a 2.5% coupon on that, and that's obviously very beneficial at the moment. But just given that the maturity is now current, I know you have the RCF, and you can use that, but that would obviously just push the maturity out to 2027. Are there alternatives to a straight refinancing or repayment using the RCF that you're looking at? You know, is it something you could look to pay down with cash and not refinance at all?
Look, in principle, absolutely. So look, there are different possibilities we have. The RCF is the obvious one. On top of that, we currently have several hundred million CHF on the balance sheet. Obviously, part of that is required to run the business from an operational perspective, but still, some of the cash can be used. Also, when we are talking about the refinancing, it does not need to be replaced with another CHF 800 million facility. You can also slice and dice it and maybe do a bond which is slightly lower in volume.
We also need to consider that the maturity is in October next year, so while we are not providing precise figures yet, you can assume that there will be some cash flow generation next year, which will also help to be used or can be used to repay part of that bond next year. Yes, the bond is current, but I think it's also important to note in that regard that we had discussions with the rating agencies about that, and also from their perspective, they are very much supportive and understand the business rationale from an economical point of view, to keep the bond to a date which is closer to maturity rather than refinancing it already now.
That's very clear. Thanks for that.
Thank you.
The next question comes from the line of Chandni Hirani with Barclays. Please go ahead.
Hi, thanks for taking my questions. The first one is, you mentioned that you're starting to see, you know, business development opportunities coming through with your, you know, recent two examples of contract wins. Do you still only see your group's net new concessions, per annum to only be 0% to 1%, which is what you mentioned at the Capital Markets Day last year? And also, are there any kind of key contracts that are up for renewal in the next year? The second question is on margins. So obviously, this quarter you had an unusually high margin.
Can you talk in a little bit more detail about why and the moving parts and whether you kind of see this kind of margin area of 11% normal for a quarter next year, where you don't have seasonal payment outflows and once, you know, sales have recovered? Thank you.
Your question on the business development is very interesting because if I talk about gross business development, of course, should be more than 0% to 1%, because we have more opportunities than that. But we talk about net increase, decrease of concessions, and we actively continue the portfolio management. We have exited some concessions that we thought were not at the right level of profitability. So the net effect for the incoming, the near future probably will be still on the low end, but with a stronger business development and some cleaning up process. You could see, for example, that for the quarter, or for the year to date, is stronger than the 0% to 1%, but I think I rather be conservative there. On the margin, do you want to take that?
Sure. So look, this year, as you have mentioned, very strong Q3. I'm super happy about the outcome there. Two messages or three, if I may, on that regard. On one hand side, you obviously have the usual seasonality, so the third quarter typically is stronger than, for example, the fourth quarter, but I think that's clear and understood. To your question for next year, look, as Xavi has mentioned earlier, for the full year, we do expect to see a better performance next year in regard to revenues. We do expect to see growth in regard to EBITDA margin and also in regard to cash flow. By how much? It's too early to say. When we speak about the specific quarter next year, look, what we do expect, two points there.
On one hand side, because we expect for the full year a better performance, this obviously should also be reflected by the quarters. But having said that, you cannot assume or it's challenging to assume for every specific quarter to precise performance. What I want to say with that is like, look, there might be some things earlier in the year, later in the year, which do affect the performance of single quarters. I rather would look at, at the full year performance, and there we do expect to see an improvement. Also, what is helping us for next year, obviously, is the synergies. As we have mentioned earlier, for the full year, we will generate the full amount of synergies of CHF 85 million we have communicated previously. That will be fully reflected in the numbers of next year and certainly also help the performance in the third quarter.
Okay, great. Thank you very much.
There are no more questions on the telephone at the moment. Let us move to the written questions. The first set of questions come from Santiago Domingo with Magallanes Value Investors. Do you consider any of your assets as non-core Italian motorways? And the second is: Do you consider share buyback as another way of remunerating shareholders even more due to the current low share price? And the third one is, should we take 35% EFCF conversion as the peak, or is there room to improve over the long term? What measures can be taken to improve your EFCF conversion? And the fourth and last is, in 2023, your revenues will be close to pro forma 2019 once, but core EBITDA will remain quite lower than pro forma 2019 one. Why?
How to do the catch-up in terms of EBITDA?
Thank you for your questions. The motorways in Italy and other countries is a core business. We said in the past that, in Europe, short-haul flights, motorways or train stations are alternative routes, and we want to be present in all of them. Like in the Caribbean, port shops, cruise lines, and airports are also alternative focuses. So on that, is very clear. Of course, airports remain, by far, the largest segment with 80%, but the rest is also strategic. Share buyback, at this time, we just announced the dividend. I think it's clear what we intend to do on the short term.
I think our view is we have a clear strategy that should deliver, at the same time, growth, de-leveraging, and increased profitability, and we believe that the consequence of this strategy, it is well suited to do a resilient dividend payment, and we believe that at this stage, together with the board of directors, is the best way forward. I'm not sure the EFCF, what it means, is probably equity free cash flow. Look, once more, we gave a very clear outlook or expectations for 2023. We said we feel comfortable with the consensus for 2024, and I think any comparison to 2019, it's a bit unfair because the world was a different place. The profile of consumers was a different one. I think we need to take 2022. 2023 is a clear improvement on 2022.
2024 will be a further improvement on 2023, and that's the way I think we should think about the business. Thank you.
Thank you. We have a question coming from Camillo Dacco with Arcana Capital. Good afternoon. Congrats for the results, and thanks for the presentation. Could you kindly comment on your rating target? Is it still BB or higher, now?
So look, what we have said so far is, and it still holds true, is that we feel comfortable with a double B rating, ideally higher double B. Is there an ambition to become investment grade? Obviously, would be amazing. But having said that, what is important for us is in line with the capital allocation we have also announced today, to keep a certain flexibility in regard to reinvesting into the business, maybe some bolt-on acquisitions going forward, to keep that leverage target of 1.5 to 2 in the medium term, and therefore, to basically. If that can be achieved by being investment grade, fantastic. But for us, it's important that we continue with the business, with our growth strategy, in line with Destination 20 27, and also in line with the capital allocation.
Again, if this allows to become investment grade, fantastic, but the focus is really on the business first.
I'm told there are no more questions, so I just wanna give big thanks to everybody for your attention. And please, as I always say, when you travel, make sure you enjoy our restaurants and our shops. We will be very happy to serve you then. Thank you very much. Have a nice afternoon.