Okay. It's 2 o'clock, no? Okay. Good afternoon. Thank you for participating here in this full year results presentation. This is Julián Díaz speaking, for the people participating in the call. Also, Andreas Schneiter, CFO, will participate in the presentation later on. As in previous presentations, we are going to use what we disclosed this morning as a full year result presentation in our website. If we go straight to page five. Just a bit of information in order to understand what we are discussing today. One important message is we confirm that the organic growth along 2017, until the last quarter, was very strong, but also in the last quarter, even with comparable strong quarter in 2016. In 2017, the organic growth in fourth quarter increased by 5.7%, and previous year by 5.6%. More, I think interesting also, confirmation.
The synergies due to the World Duty Free acquisition, and also negotiations of global deals, generated an increase of 80 basis points at the gross profit margin level. I think this is something that, due to obviously the integration process, we were commenting along 2017, but now it's totally confirmed. Finally, for the first time in the history of the company, we have overpassed CHF 1 million EBITDA. CHF 1 billion, sorry, Swiss francs EBITDA. Free cash flow, without one-off effects, reaches CHF 457 million, including the one-off effects that I commented at the beginning of the year, were three concessions that we extended and we agreed with the partners, with the landlords, to advance, in these cases, rent. This is something that we already disclosed. Including this CHF 104 million, we reached CHF 571 million free cash flow. If we move to page six.
The highlight that I would like to remark is, number 1 is obviously total sales increased by 7%, reaching CHF 8.4 billion Swiss francs. Organic growth already commented on. Reasons for the organic growth acceleration. I am not going to repeat all the presentations that we have done in 2017, but one of the main reasons, number 1, is obviously the healthy increase in passengers growth last year. In second level, I would say the acceleration of new spaces, 30,000 sq m that we added to the portfolio in 2017. Just for comparing with the total, by December 31st, the total number of sq m we were operating was 437,000. It's obviously the commercial space that we refurbished. Again, the idea is how to drive more spend per passenger. I think this is an important issue because sometimes it's difficult to communicate about global increase in spend per passenger.
This is also a trend that I would like to obviously compare with what is happening in other retail activities. This activity is very resilient to the online internet. I mentioned about many disciplines that are within the business that are defending the business, but the most important one is what happened with the spend per passenger. The global spend per passenger in the company last year increased by 2.1%. The average spend per ticket increased by 2.5%, including all these volatilities and currencies and all these things. It's also relevant. We have signed, as previous year, a significant number of new sq m that will be open along 2018 and 2019. So far, during the first two months, what we have signed is around 15,000 sq m of commercial space. 11,000 of these 15,000 will be open in 2018, and the remaining 4,000 will be in 2019.
Gross profit margin, again, mainly driven by the synergies. EBITDA, I want to mention, obviously, regarding the CHF 1 billion EBITDA. CHF 1 billion EBITDA is, for us, a significant improvement compared with previous year, +7.7%. I think in the press release it's quite detailed, the explanation. Let me go through. The main driver, obviously passengers increase, organic growth, 7.4%. The second main driver, gross profit margin improvement, 80 basis points. Where were, obviously, the mitigations of this growth translated to the EBITDA in 2017? Number 1 is the increase in concession fees. The increase in concession fees, as you remember, in nine months results was 27.8% compared with total turnover. Now it's 27.5% compared with total turnover. It's around 30 basis points compared with last year at 27.2%.
What is going to happen in 2018, this is a conversation that obviously we can have later on, is we are expecting the same thing. 20-30 basis points of increase in concession fees that will be mitigated again, I am going to explain how, by the gross profit margin improvement and by efficiencies and leverage of the structure of the cost of the company. The second one that mitigated this significant improvement in EBITDA, in terms of margin, not in terms of total, because obviously we are talking, I heard that everybody's talking about EBITDA margin, is the increase in general expenses. In general expenses, last year we had 6%, this year we had 6.3%. Why? Mainly due to two one-offs. One is one tax that we had to pay, obviously with accumulated value for in the past in South America.
The other one is an impairment in one of the Nuance concessions that was accrued in this line of the P&L. What is going to happen in the future? I am going to comment on that, I think the leverage of the efficiencies that we are going to implement in 2018 will impact again, obviously, without the one-offs. Continuing with the EPS. Again, I think the EPS is one probably of the most relevant information of this presentation. We have increased by 14%. During the last five years is the highest. What is the meaning of that? Is that after the transactions, after the acquisitions that change and transform Dufry, what we have now is a closer picture to the Dufry that we were communicating and everybody was expecting, is CHF 6.8 per share, 14% increase with previous year. Finally, the free cash flow.
Free cash flow, without the one-offs, increased by 18%, reaching CHF 571 million. We move to page seven. Here I have a lot of information. I will try to be systematic in this presentation. Number 1, I will talk about last year's performance compared with previous year 2016. We increased, as repeated, 7% total sales, CHF 8.4 billion, with a strong increase of organic growth, 7.4%, very good last quarter, even with the comparable. All the most important product lines performed very well. Perfume and cosmetics increased by 8%, food by 8%, spirit by 10%, luxury by 20%. Tobacco, that is probably something that I have also in mind to explain, increased by 5% globally. We also confirmed the positive sales performance of the most relevant nationalities impacted by the devaluation during the last three years. Simple information. Sales to Brazilians last year increased by 29.3%.
Sales to Russians by 36.6%. Sales to Chinese by 20%, 19.7%. The performance by division was as follows. Turnover in Division 1, Southern Europe and Africa, reached CHF 1.8 billion, 9.1% increase compared with last year. Organic growth in this division increased by 6.8%. Turkey recovered strongly with the return of Russian customers with double-digit growth, not reaching the level that we achieved in 2015. We expect this year, 2018, the Russian operation will reach the same level of sales profitability we had in 2015 with the return of the Russian passengers. In this region, Morocco, Ivory Coast, Ghana, Nigeria, and Portugal, double-digit growth. Good performance in Greece, Malta, Italy, France, Spain, with healthy single-digit growth. In Division 2, U.K., Central and Eastern Europe. Turnover was CHF 2.1 billion, 3% increase compared with previous year in CHF, and 5.3% in local currency.
The division achieved 6.3% in organic growth. Double-digit growth in Serbia, Russia, Kazakhstan, and Armenia. Again, this part of the business was impacted due to the ruble devaluation during the last three years, now the business is returning to the same level of profitability than before. Single-digit growth in U.K., despite the high comparison due to the annualization of the devaluation of British pound during the second half of 2016. Meaning it's obviously even with the comparable in terms of devaluation, because in 2016, the devaluation happened during six months and compared with this six months, the situation remains very healthy and spend per passenger is growing significantly. After that, what I would say is Basel, Zurich, Sweden, Finland, and Bulgaria, also single-digit growth. In Division 3, Asia, Middle East, and Australia, turnover reached CHF 800 million and organic growth +5.4%. Indonesia, Cambodia, Macau, double-digit growth.
South Korea, Emirates, Jordan, and Kuwait, single-digit growth. Finally, Melbourne recovered with single-digit growth in the year after the opening of the new generation store during the last quarter of 2017. I want to remind that because this specific concession was impacting the concession fee line until the 9-month results presentation. Why? Because we start to pay the new rent in January, but the new locations and the new spaces were only open during the last quarter. Division 4, Latin America. Excellent performance in most of the countries. Was the record year in South America in many regards, reaching CHF 1.7 billion with an increase of 10.6% compared with previous year. Organic growth, 10.8%. Uruguay, Chile, Peru, Brazil, Dominican Republic, double-digit growth. Argentina, Ecuador, Mexico, Puerto Rico, Aruba, single-digit growth. Finally, Division 5, North America, turnover reached CHF 1.7 billion, 6.7% above last year, and organic growth by 6.5% increase.
Double-digit growth in U.S. and Canada duty-free and single-digit growth in duty paid. This is what happened in terms of performance compared with 2016. Compared with 2017, I am going to talk now about a trading update for January and February 2018. The trend is very similar in all the regions. The average growth has been around 7%. The most relevant are as follows. Division 1, Southern Europe and Africa. Most of the operations performed well, including Turkey, Spain, Greece, Portugal, and Italy. Division 2, U.K., Central and Eastern Europe, similar performance than in the division in 2017, despite the closing in Geneva Airport. As you may know, because we announced at the last conference call, we are not operating Geneva any longer, and the termination of the contract happened during the last quarter of 2017.
Even with this termination, the performance is very similar in total for the division. Division Three, Asia, Middle East, Eastern Europe, and Australia. Significant acceleration of growth driven by Macau, India, Emirates, Jordan, Kuwait, Russia, Kazakhstan, Bulgaria, Armenia, and Australia. Division Four, Latin America. Similar growth in local currency in South America. Countries like Brazil with double-digit growth and obviously Chile, Peru, performing very similar than the previous one. I want to remark three countries or three activities that really accelerate growth. One is Mexico, the other one is Dominican Republic, and the other one is flagship, the Celestyal cruise lines. This is Division Four. Division Five, North America. Similar growth in duty-free compared with 2017, but acceleration of growth in duty paid activities. This is what happened in terms of the trading update. If we move now to page number eight.
As we tried in previous calls, we will explain the main drivers of organic growth. Number one is the passengers increase. The acceleration of the passengers increase in 2017 is clear. International passengers globally increased by 8.4%. In locations where duty-free is operating, the number was 5.1%. It's also healthy, but it's different because the mix of passengers and the mix of the countries where we are generating sales, it's obvious that we have more presence in South America, in Central America, North America, Europe, Africa, et cetera. The second one is the future of this passenger growth. The projections for international passengers, 7.3% in 2018, 6% in 2019, and 5.7% in 2020. Where these passengers will grow? Mainly in Far East and mainly in South America. We are well-represented and very good represented, I would say, in South America.
What we are, and is part of the strategy, trying to develop the company is in Asia. We move to page nine. Information that has been already disclosed, but I want to summarize in one single shot. Page nine considers the 30,000 sq m growth space that we have opened in 2017. Most of this space, 41%, was opened in Latin America. In Latin America, operations like Cancún, Rio de Janeiro, Mexico City, Bogotá, and Barbados, contributed with the most important part of this 41%. The second one was North America, with 23%. In North America, Minneapolis, Fort Lauderdale, Tucson, Las Vegas, and Calgary. Division Three, Southern Europe and Africa, 18%, with Cairo Terminal 3, Barcelona, Athens as the most representative. In Division Three, Asia, Middle East, and Australia, 15%.
The ones that probably are more representative is the extension in Macau in the Downtown Shop, Chengdu and Fuzhou in China. This is more or less obviously what we have done in terms of the 30,000 sq m of commercial space added. The 32,000 sq m of commercial space renovated are just obviously in the bottom of this page. From Madrid, Athens, and Guadeloupe in Division One to Vancouver, Toronto, Las Vegas, and Los Angeles in Division Five. This is the intention for 2018. Again, we have a significant and similar plan for renovating shops worldwide in order to maintain the acceleration of organic growth. Some of these pictures in the following pages. The first one is Melbourne, is the renovated shop in Melbourne. The second one I think is Gatwick in the U.K. The third one is obvious it's not Russia. It's a tequila shop.
It's a tequila area. It's okay, but it's one of, obviously, the concepts we use in Mexico. This shop is in Cancún. The final one is in Rio de Janeiro, Dufry Shopping. Dufry Shopping is the concept that we are operating in duty paid in Brazil and one of the concepts that we are going to use for expanding the duty paid business worldwide. If we move to page 14, those are the square meters we signed so far in 2018, 15,000 square meters. Just a few, obviously, remarks. We have expanded the portfolio in Greece with 2,100 square meters. I think it's important to remind all of you that we have signed a significant agreement with Fraport Greece in order, first of all, to extend the contract in terms of duration of the contract, also to expand significantly the number of square meters.
The most important, to reallocate the square meters in the right locations, because in most of the airports, and we have been repeating this since the beginning of the acquisition, we need to really move the location of the square meters to the places where the passengers go through. Other airports, like in Spain, we have one attended for Hudson, 600 square meters. Brazil, new 2,800 square meters, in the U.S., 3,000 square meters. Let's move to Dufry segmentation now. I have commented the sales on the left side by division. On the bottom left side is by category. I think the strategy of the company has been announced many times. It's personal care. Personal cosmetics is 32% of the business. Food and confectionery is 17% of the business. It's also obviously growing.
Luxury goods, 14% of the total sales, plus 20%, as I said before, is obviously confirming the strategy of the company. Dufry by channel. This is a very relevant thing that I am going to comment a bit deeper later on. Dufry is a company multi-channel in travel retail. So far, the most important sales are generated 91% and profitability in airports. We have, as a strategic plan approved by the board of directors, the intention, on top of obviously developing duty free and duty paid in airports, to expand alternative channels as follows. Number 1 is obviously sales on board cruise lines. I repeat this many times. Number 2 is border shops. Number 3 is, downtown shops, especially in Asia. I am going to comment on that later on.
Regarding the tax structure in terms of the sales, 52% of the sales are generated in duty free and 38% in duty paid. One important remark, we already did that, we had several press releases in page 16, what we obviously trying to show is the IPO results in our operation in the U.S. and Canada. Dufry priced Hudson at $19 per share. The total proceeds of this transaction, this 43% was $740 million. The implications for Dufry are obviously clear and transparent. This is a division, will be consolidated as a division in Dufry, and will obviously benefit and obviously be part of any strategy of the company, locally and worldwide if needed. North American business will remain totally integrated in the actual structural disclosure. The impact in the P&L will be in, obviously, the line of minorities. Continuing with priorities for 2018.
First, just to comment on the new organization. The new organization has been already disclosed. I want to just mention three things. It is to be more agile, to be vertically integrated, and to allocate better the responsibilities. This is going to generate an extra value in the company. I am going to comment on that, because obviously it's a different way of working. Along 2018, this will have an impact, not only in the efficiency we work, also in the efficiency of the P&L structure. The business operating model. The business operating model is, if it's not the number one, is the number one minus 0.5 priority in the company. It's the most important project what we are doing here is standardizing. Standardizing what?
Process and procedures, organization, IT systems, supply chain, including the global, obviously, assortment, the advertising and promotion application, everything related with the supply chain and the digitalization. The digital part that is based and focused in the customer. This is impacting, obviously, the company in different levels. I mentioned that the total impact in the company above EBITDA, when it's fully implemented, will be CHF 50 million. The impact along 2018 due to the gradual implementation will be CHF 23 million. This project, with the obviously reorganization of the company, will impact the company above EBITDA in several, obviously, CHF millions. What we are expecting in 2018, that this will generate almost 0.5%-0.6% of extra EBITDA due to these efficiencies. The other driver of this growth, I think this is also a good information for 2018, is the increase of gross profit margin.
What we are expecting is 50 basis points of increase of gross profit margin. Where it's going to and how it's going to be impacted the cost structure. On one side, you have the concession fees. Concession fees, as we always said, will increase by 20-30 basis points. That will be mitigated, obviously, by the gross profit margin improvement. Then we have the leverage in two levels. The leverage of the new business operating model in the personal expenses line and in the general expenses line. This is the way that we try, and this is something that I already repeated, to reach this close to 13% EBITDA margin. Above or below, gradually you will see and we will confirm what is going on, but it still remains unchanged.
We want to be close as a company to 13% EBITDA, those are the tools that we are using for achieving that. This is something that gradually will be implemented in 2017, sorry, 2018. Finally, this is on time. We will see everything in one shot. It will be gradual, but this is the target for the company. I think this is very strange. We talk about EBITDA margin permanently, this company now. The market is expecting 13% EBITDA margin, probably today you will ask me 20 times what happened with the 13% EBITDA margin. What happened with this margin is this a target for the company? The answer is yes. How we are going to do it? I already explained it. Then gradually will be implemented. It's the only thing we can say, is we are trying.
What is a possible mitigation of not reaching this level? The strategic plan. I comment on three different channels, sales on board cruise line, border shops, and downtown shops that have different P&L structures. The P&L structure is different because the EBITDA is lower. We are going to announce during the next, probably one or two months, I hope that will be during the first month, three important projects in these three channels that will impact the company significantly in terms of volume. This will have an impact in the P&L, for sure. What is the main value of this project? If the internal rate of return of the projects are very similar to the ones that we have today. Why? Because the investment is lower, a lot lower. That's more or less the explanation. This is strategic view for 2018.
The strategic initiatives that I mentioned here, we want to be a multi-sector company. Yes. We want to be a multi-channel company. Yes, within the travel retail. Those are, as I mentioned just before, the targets for 2018. If we move to page 18. A significant, obviously, also and challenging situation is how this company is going to engage with the customers. Here, what we are discussing is that, as a consequence, how the spend per passenger will increase, and how this contribution from this part of the business, digitalization, will maintain the organic growth during the next five years. This is the final explanation. Is what we want is a digital company that will focus in the customer, external and internal customer. We are now developing a full integrated digital plan, but today we have developed significantly the digital part of focusing the customers, serious customer.
How it's going to be implemented? Number 1 is, and I repeated in the past, what we want is the sales employees in the company, the sellers, will be digitalized through iPad. This is obviously the best way of communicating with 120 different nationalities going through. You have in this iPad information about the products, about the prices, about the currencies. Even this iPad can communicate in the same language of any passenger that you can imagine going through the shops. The customer research we are creating, and we have a significant global database of customers, and what we want now is to build it step by step. One information that probably is relevant on this regard, the number of sales ticket that we have done last year is 230 million.
In most of the cases, especially if it's a duty-free operation, we are authorized to obviously record and register information about the passengers because we are authorized to collect this information. Again, this is obviously something that we need to do properly, but the idea is to really prepare a global database of passengers with information, the famous CRM database, that will facilitate the connection with the passengers. The omni-channel strategy. We are continuing expanding the generation store, the new generation store. We will expand the RED program and the AURA application, the loyalty program, and Reserve & Collect. We are today in more than 20 countries in each of these projects. By the end of 2018, we'll be in the full market of the company worldwide. Finally, another area we are progressing a lot is new products, specialized for travel retail and/or only for duty free.
We have several examples, I mentioned it in the past, too. The next target in this year is continuing with the organic growth. Our target is continuing with the same level of organic growth for 2018. The next one is focus on cash generation in order to reach this permanent level of satisfaction in terms of 2.5, 3 times net EBITDA leverage. The most relevant, that is also obviously important because it's a great event, is the returning cash to our shareholders. It's obvious that still we have not announced properly all the information because the board of Aena Espacios is going to meet during the next days, and on the 5th of April, we will have the information. I cannot comment on what is going on. There is obviously the intention to pay a dividend.
The dividend will be in a yield between 2%-3% as minimum. I say as minimum. There are then several alternatives. The two most important ones is a special dividend on one side, and on the other side is a share buyback. Obviously, significant share buyback. This is the information and will be announced after the board. The board will be the 5th, probably the 6th, will be announced. Obviously, the board has to authorize it, and it has to be in the invitation to the annual assembly in any case. I think, Andreas, I pass through Andreas Schneiter now, the presentation.
Thank you. Good afternoon, everyone. Let me move directly to page number 20. I think as Julián already has mentioned, organic growth for the year was quite strong, 7.4%. Fourth quarter, equally good at 5.7%. I think what is interesting, if you go to the chart at the bottom left, is that you see that the comparables have become increasingly higher and higher every quarter, and we continue to perform very strongly there. My conclusion on that one here is for the fourth quarter, we are almost kind of a run rate level. I think if you compare fourth quarter 2016, it was 5.6%, this year 5.7%, I think we're now at a run rate level. I think the fact that we continue to perform well, although comps are harder, is a very strong sign.
We then go to the right-hand chart and look at the fourth quarter performance by division, I think you have one division which is slightly lower, that is U.K. and Central Europe. The main driver there is the closing of Geneva. If you would look at it on a like-for-like basis, the like-for-like growth in this division is also, let's say, mid single digits. I think this is performing well. On the positive side, the one that is really performing strongly is Asia and Middle East with 19%. I think there it's a combination of new businesses, but also very strong like-for-like growth. I think conclusion here is very strong 2017, very good fourth quarter, all divisions doing well. I think we have had a very good year in terms of organic growth. I move to page 21, let's look at the FX impact.
I think before we start here, one thing that is fair to say is in 2017, the FX volatility has been a lot more benign than it was in 2016 and 2015. If you look at the past few years, we had this huge volatility almost in all the currency, especially in emerging markets. This year it has been a lot more moderate. Going to the slide itself and looking just at the main currency, our translation effect was really marginal, minus 0.1% for the full year. Trend wise, first half was negative, second half was positive, mainly due to the strengthening of the EUR. Assuming that the exchange rates stay where they are currently, we would expect to have a very small positive FX effect also for the coming quarters.
If we look at the sales split of the turnover by currency, roughly 40% USD, 24% EUR, 16% GBP, the rest, 19% different currencies. Again, not a lot of change compared to the past. Let's move to page 22 to the income statement. The way I would like to play this is I will go quickly through this income statement. There is quite a number of one-offs, and I wanted to explain that later on in a separate slide. Let me start here and then go into the details afterwards. I think we already talked about turnover. Gross margin, 80 basis points of improvement. Main driver were the synergies from the World Duty Free acquisition. I think very good result. On the concession fees, the increase was 30 basis points year-on-year to 27.5%.
Again, as mentioned in the past, one driver was the minimum guarantee in Spain. For one matter, we had a few renewals, but that was quite marginal. The other big element in the increase was mainly mix effects. If we go specifically to Q4 and we look at the same numbers for Q4 only, you would notice that the concession fees will be flat year-on-year. When we commented in earlier calls, we said, look, there were some temporary increases that we mentioned. They have vanished. This has neutralized or corrected themselves. Also the other thing that you will see is in the Q4, you do have a seasonality impact. Concession fees tend to be lower in the fourth quarter generally, and I think that also helps the average for the full year. We move on to personal expenses.
They remain flat year-on-year. I think on one hand we had synergies from World Duty Free. On the other hand, we had some wage inflation in the U.S., also in certain Latin American countries. That netted itself out. Other expenses, this is about higher by about 30 basis points year-on-year. There the main driver, as commented by Julián, were some sales taxes that we had in Latin America and then a few bits and pieces elsewhere. Share of results were impacted by a one-off charge. We already commented about that one in the second quarter, nothing new there. We talk about EBITDA, just above CHF 1 billion. Best result ever, very pleased with that. Below EBITDA, we have depreciation, CHF 159 million.
This is basically similar to last year as an absolute amount, because of the growth, if you measure it as a percentage of turnover, we're about 20 basis points better. Amortization was CHF 424 million. There we have about CHF 65 million of impairment from the Nuance transaction, I will come back to that in a minute again. The regular amortization was about CHF 360 million, some CHF 20 million lower compared to last year. The relative improvement was 50 basis points. Linearization, as expected, CHF 59 million. Just to remind everyone, this is related to the Spanish contract. Two elements. On the one hand, we have the straight lining of the minimum guarantee increases that happen every year. The second one is the effect of the prepaid concession fees that World Duty Free did at the time of the signing the transaction.
For 2018, linearization will be give or take CHF 47 million, about CHF 12 million lower compared to last year, the charge in the first quarter will be CHF 39 million. We will have these huge swings in the linearization as we've seen it in 2017. Other operational result was positive by CHF 53 million. There we have a number of one-offs. The biggest one was again in relation to Nuance. We released provisions of about CHF 81 million, CHF 80.8 million in relation to the Nuance acquisition. Again, we'll see that later on. Coming to EBIT, reached CHF 419 million, a 53% increase year-on-year. Financial result was CHF 217 million. This includes, again, one-off related to the refinancing that we had, CHF 41.6 million there. To conclude, taxes, CHF 91 million, again, a one-off of CHF 41 million. Minorities were CHF 54 million for the year.
In the fourth quarter, we had about CHF 16.8 million versus CHF 13.6 million last year, there was an increase. This is mainly driven by the growth and the better performance in the U.S. and in Latin America. For 2018, minorities will increase due to the Hudson IPO. Just on a comparable basis, if you were to look at the same number 2018, we would look to minorities in the order of magnitude of about CHF 70 million for 2018. Adding back the acquisition-related amortization, our cash earnings +14%, CHF 368 million. If I move to page 23, here I would want to go again to these many one-offs that I explained. We have tried to also detail them out on where you can find them within the P&L. Let me start first with the Nuance adjustments that we had. We had effectively two.
One, the CHF 65 million in the amortization and the impairment, the CHF 81 million that we have on the other operational results as a release of provision. If you want, in very simplistic terms, the net effect from the Nuance acquisition is a positive CHF 15 million. Okay? Other items that we have in the other operational result, we had again, a profit of about CHF 22 million, due to the U.K. pension fund. We changed the accrual calculation method of the U.K. pension fund. That resulted in a lower risk, as such, we could reduce the liability we could book these CHF 22 million as a gain. We have another CHF 6.1 million of costs related to the Hudson IPO that are also booked here. If we go to the financial results, there we have a one-off charge of CHF 41.6 million.
This is the refinancing. I am going to talk about it a little bit later. Of that, CHF 22 million cash, CHF 19.6 million are non-cash. Finally, the income taxes. This additional tax charge of CHF 41 million, that is related to the tax changes in the U.S., the new tax law in the U.S. We do have tax laws carry forward in the U.S., which are quite substantial. Because of the lower tax rate, we needed to revalue the deferred tax assets and deferred tax liabilities. As a consequence, we booked this non-cash tax charge of CHF 41 million. On a positive note, going forward, we will pay lower taxes in the U.S. Overall, I think if we do the math and just add it all up, we had about CHF 51 million of one-off elements now in this year's P&L.
If you would say, what is a normalized cash earnings? What would be a recurring cash earnings? We would talk about roughly CHF 419 million. If we then move to page 24, here we have the cash EPS, I think there are a couple of points which I find quite interesting. At a starting point, we already mentioned that cash EPS grew 14%, I think that is positive. What is interesting is if you look at the five-year development. You may remember we did two big transactions in 2014 and 2015, you really see if you look at the cash EPS on how that has impacted our performance. What you also see now in 2016 and 2017 is that the performance is coming back.
Effectively, if you look at the CHF 6.84 in 2017, we have now a higher cash EPS than what we had before in 2013. If you were to add back this, about CHF 50 million one-off, if you would say this is about CHF 1 additional cash earnings, if you were to go to normalize it, if you say we have normalized cash earnings of about CHF 7.80, this will be the highest cash EPS we have had in 10 years. I think the key point for me here is I think it shows that we have created shareholder value, I think there is more to come. If I look to 2018, I think we have the organic growth, we have the profit improvements, we have some savings also on the financing. I think there should be more to come.
If I then move to page number 25, to the cash flow statement. Free cash flow for the year was CHF 460 million. I think there were some one-off impacts we are going to talk later on. I will explain the free cash flow in more detail later on. I think the part that also is worth mentioning is here, the interest paid. This includes, as I mentioned beforehand, the one-off costs related to the refinancing. On page 26, we have now the details of the free cash flow. What we have tried to do here is to show the difference of the various line items between 2016 and 2017. I think the part that is most obvious is that the change in the net working capital has been quite substantial with CHF 108 million.
As we have commented about this in previous calls, and Julián commented it beforehand as well, we had some projects this year, which generated a cash outflow of around CHF 104 million, and you see that on the right-hand side of the chart. You see CHF 74 million of these CHF 108 million were related to investment in working capital that we have done for these new projects in Southern Europe and in Latin America. If you were to look at it on a normal basis, the normal operational increase will be roughly about CHF 13 million. Okay? It is much, much more moderate than what you are seeing here. Same thing for CapEx. You see the increase in CapEx from 2016 to 2017 was CHF 21 million, of which CHF 30 million was due to this one-off project.
Again, if you were to normalize it, if I can say it that way, you would have almost same result as last year. Sorry. I think what is important, obviously, the free cash flow before project, CHF 570 million plus 18%. If you go to our KPIs, as we usually do, I will start with the CapEx first, we were at 3.4%, including this CHF 30 million. I think we are fully in line with target. If I go to the net working capital, the top chart, we were at year-end, around 5.5% of turnover, again, in line with our target. I think what you do also see here is that in the year, we had about CHF 14 million of investments in core net working capital. Reason for that, A, growth, and B, new projects where we opened new locations or we needed more inventory.
If I go to the balance sheet, I think that is not very interesting, if I may say it that way. There is no big change apart from the reduction of the concession rights, which is expected. All the other changes are relatively small. Let me move to page 29, the financing and the covenant. Starting with the leverage, 359 versus the threshold of four times, I think we have comfortable headroom there. Net debt improved about CHF 70 million. If you were to strip out the FX effect, we were about CHF 150 million. Julián already talked about the Hudson IPO that generated net proceeds of CHF 714 million. On a pro forma basis, our leverage will be 2.9 times. In the last week, we also bought some Treasury shares, CHF 110 million.
More importantly, I think Julián already commented on it, is that we will return cash to shareholders. The question is not if, but just how much and how. I think we look forward to be able to giving you more details on that one later this month. I think if I try to conclude on what we are seeing here, in a way, in my personal point of view, I think this picture somewhat understates the real improvement that we have made. I think the CHF 80 million improvement that we have in the net debt is marginal, but I think reality will be, because we are seasonal, that we are going to see a lot stronger leverage along 2018 than what it shows here.
The second thing is obviously with the Hudson IPO, we have reached the 3 times leverage, which we always said it will be a target well ahead of time. On the debt refinancing that we have on page 30. We already commented about it, but I wanted to give the full picture again, because I think we did bits and pieces at different moments of time. Just to give the quick overview, in December 2016, we repaid a USD bond, which had a 5.5% coupon. In October 2017, we refinanced a EUR 500 million bond with a new bond, and reduced there the coupon by about 2 percentage points, so from 4.5%-2.5%. In November, we also refinanced the bank facilities, where we reduced the spread between, depending on the currency, 50 and 70 basis points compared to 2016.
Overall, I think we have generated substantial savings of about CHF 50 million compared to 2016. By the same token, we have also extended the maturity, so from 2022 to 2024. In the next literally 5 years, we don't have any refinancing to do. We also had a short-term facility with the Hudson IPO. We already paid that one back. There's some further benefits that we have now with the new financing structure. We have, on one hand, the covenant threshold, which stays at 4 times throughout of the life of the facility. We have a much bigger RCF, which provides additional flexibility. We also have locked in, I think, a quite attractive coupon with a 2.5% now for an extended period of time.
As a last point, I want to talk a little bit about KPIs, and I think we have discussion with several people of you, and I think the question is always what are the right KPIs? I think what we wanted to do is to go a bit broader on KPIs and to give you even a better feel and a better analysis on how the business is performing. We have prepared two pages here. First one is basically page 30. What we're trying to do going forward, we will use additional KPIs, cash EPS, and free cash flow. I think we already commented about in the past, but the idea is basically to do it in a more detailed way than what we do today.
The interesting part about both, and I think that is also relevant when we talk then in 2019 about accounting changes, is that they are relatively immune to accounting changes. IFRS 16 will have an impact on us. These two KPIs will not. That's why we feel it's good if we start talking about them in a little bit more detail than what we're doing today. The second one is capital structure KPIs, and I think that is also important in light of the comments that Julián made beforehand. If we go into new businesses where there are different P&L structures. Returns are attractive. I think that should be reflected somehow, and you may not see that in the P&L strictly. That's why we believe it's important to have also capital structure KPIs.
The ones we feel are the most appropriate one is equity-free cash flow, because I think it really shows what we're generating in terms of cash for the shareholder. The other one is the cash return on equity, where we use, if you want cash earnings over book equity to show on how efficiently we deploy the capital. I think this is just a heads-up. We haven't done now for this one a detailed analysis as of yet, but going forward from Q1 2018 onwards, you should expect to see a bit more granularity and more explanation on these KPIs. That's it from my side. I hand back basically to Julio.
Thank you, Andreas. I don't want to spend a long time in the conclusion. Three ideas. One is the performance in 2017 has been in line with our expectations and with our plans. I think we have delivered sales, EBITDA, cash generation, and increase in EPS in line what we were obviously planning, based in all the initiatives that we have explained. Relevant for 2018 is the new priorities for 2018 have been already explained. The new organization will obviously facilitate and support these targets. Number one is the implementation of the business operating model, and as a consequence, the savings above EBITDA, total target, CHF 50 million, and gradually impacting the P&L in 2018 until the level of CHF 23 million. Drive new strategic initiatives.
We are going to continue expanding duty free and duty paid, but also we want to expand alternative channels that will obviously amplify our opportunities in Asia and also will mitigate the difference, obviously, levels of growth in the different divisions. Finally, accelerated implementation of customer focus and digital initiatives, digitalization for increase in the per passenger, simply. Focusing in leverage and continuing obviously with generation of cash. The relevant point, and probably because it's new, is we confirm, as I said, the intention of the board of directors to propose to the general assembly, in the next general assembly, a dividend payment that will be with a minimum 2%-3% yield of the dividend, and then alternatives that are still under consideration that could go from a special dividend to a significant share buyback opportunity. That's all from our side.
I think the best now and the most interesting are the questions. All the questions obviously are welcome.
Hi, Julián. Hi, Andreas.
Hi.
Edouard Baud from Morgan Stanley. Sorry to come back on the 13%, but just so I understand, it's crystal clear. You maintain the guidance of 13% EBITDA margin, but do you maintain it for 2018, or is it an aspirational kind of medium-term target? Just so it's clear. Sorry to come back on the building blocks again, so that it's clear. Your growth margin expanded by around 80 basis points, as you said, in 2017, but that was almost entirely or entirely due to the synergies with World Duty Free.
What are going to be the drivers, so we understand in 2018 and 2019?
Thank you.
Also, sorry, to continue on the building blocks, you talked about general expenses going from six to 6.3, and as you explained, there were one-off items which drove this increase. Should we assume that in 2018, they should revert back to around 6%?
Okay. Thank you very much. The first question, obviously, I was expecting the first question because it's the only I read. We have delivered a record year in the history of the company in EBITDA and everything, okay? I talk about the EBITDA margin, thank you, because I like to talk about the EBITDA margin. The question regarding the EBITDA margin is a reference point that internally in the company we have in order to reach a certain level of efficiency. Okay? Obviously, we don't measure the company only in EBITDA margin. What we measure in the company, as Andreas said, is free cash flow, is EPS. All these things are also important. What I am maintaining is we have the target to reach around 13% EBITDA margin, 13.1 or 12.9. You know what I mean? This is the type. Why?
We know that this company, with a significant effort, will deliver more efficiencies. Where these efficiencies are allocated today? One of them is the gross profit margin. I am using the opportunity. We believe that next year, 50 basis points could be added to the gross profit margin structure in the P&L. Why? Obviously, still, we have improvements in global negotiation with suppliers and in local negotiation with suppliers because 20% of the total assortment of the company still today is local. What we have done is globally, obviously, approach all the suppliers. Still, we have a significant part of the assortment of the company that can be negotiated. These 50 basis points will come from renegotiation, mainly. The second part is what is also important in order to reach this level of leverage. You have personal expenses, general expenses, and concession fees.
In concession fees, I think it's realistic to think in 2018 that 20, 30 basis points will increase. More than anything, it's a blended thing, but you have one reason. The Spanish MAG will increase again, because this is public information. It's nothing a secret. There is the blended. Okay? What is the opportunity we have is to generate enough gross profit margin for compensating the increase in concession fees plus extra value. It's the general expenses. Last year was 6%. This year is 6.3 due to these reasons that I already explained. I believe that could be below 6%. I think the strategy today based in the business operating model plus the reorganization of the company will generate 50 basis points of EBITDA in terms of cost savings. This is something that obviously mathematically works.
The issue here is how long and how far will be achieved. In my view, most of this will be delivered in 2018. What I don't want now again is to open the conversation, it will be in 2018, 13% or 12.9% or 13.1%. It's very difficult to work like that because we don't work like that. We don't work because we want to have an EBITDA margin. Let's be clear. We want to generate value for the shareholders, and we want to return cash to the shareholders. If the conversation is about EBITDA margin, and we talk about EBITDA margin, I can talk hours because it's an entelechy, but it's a reference point. I don't want to avoid the conversation because the question is straight, and I am going to say to you, "Yes, we have the target to go around 13% EBITDA margin." Nothing is hiding.
The conversations and the questions about this company that is performing better than ever cannot be about the 13% EBITDA, the 12.9%. What is the issue here? You know what I mean? I am very disappointed with myself because I cannot explain the good values of this company because most of my time is explaining why the 13% EBITDA margin is not there. When you have the cash generation, when you have the deliverance, when you have the dividend that we are going to pay, I spend most of my time today as a CEO of the company explaining why the 13% EBITDA is not there. Fine. I can play this role, too. I don't disagree. I think you have obviously the right. I try to answer the question, but let's be more open-minded.
This is a company that can perform from the cash point of view, from the EPS point of view, from the dividends point of view, what else? Okay? Sorry for that because the 13% EBITDA. I am going to be known like the 13%. Okay. Thank you. Now it's clear. You need anything else? Thank you then.
Thanks, Julián and Andreas. Jon Cox, Kepler Cheuvreux. I have quite a few questions, not about the EBITDA margin, though. Maybe we can just start with the lack of deleveraging last year, which obviously upset the market today. You saw quite a violent reaction with the stock price. It looks like as of Q3, you're around CHF 3.5 billion net debt, and then at the end of the year with CHF 3.7 billion. Can you just explain maybe what happened in Q4, particularly now I see you've spent over CHF 100 million on shares, it looks like in Q4. Are those shares part of already a buyback, or is this some sort of incentive scheme? If one of you could just elaborate on that, but really start with the sort of free cash flow, what happened. Maybe you can give us a best guess for equity-free cash flow for 2018.
We can see that the interest payments are going to come down pretty dramatically, there's lots of different things, maybe you can just help us with understanding what may happen in 2018.
Let me start with Q4 2017, I think you have a number of effects there. The first one is, I think we have said that in the last years as well, Q4 typically is a quarter where we don't generate any cash. I think that hasn't been any different in 2017. If you go back, unfortunately, I forgot to put the slide here, I didn't put it here. It's like if you go back and say, what was the cash generation in 2016, free cash flow generation in 2016, it was minus CHF 53. 2015 was CHF 0, this year was plus CHF 12. It always has been CHF 0. Now, I think there has been two effects that you notice if you just look at the net debt. One thing is this reversal of the working capital.
If you say, where do we use actually the cash flow in the Q4 that we generate? It's all reversal of working capital because Q3 is the end of busy season. We have lowest inventory. We haven't paid the suppliers yet. We haven't paid the highest concession fees yet. That all reverts in the fourth quarter, that is the reason for it. The second thing that is there is if you look from end of Q3 to Q4, we had about $80 million of FX difference because the exchange rates adjusted accordingly. I think that has been the two main drivers to why the net debt looks a lot higher, I think that's why I'm saying it doesn't really show on how good we are.
What you also have seen along 2017 is like, for example, in the third quarter, the amount of free cash flow that we have generated. I think, yes, we are seasonal, we are kind of swinging back and forth, we do generate cash, I think that's critical. I don't think you should look at it on a quarter-by-quarter basis. That's the first thing. The second thing is on the treasury shares, we bought them only in Q1, this is not part of 2017 numbers. I think our view is we don't have a lot of conditional capital. We have a few 100,000 shares left. I think from our perspective, it's quite normal to have a little bit of treasury shares. Gives us a little bit of flexibility, partly for PSU, partly for smaller transactions.
It's just something that we think is good practice to have, but nothing special to read into it. Sorry, in 2018. I forget that. I think if I start with my favorite rule of thumb is to say free cash flow before financing is about 50% of EBITDA. You say, okay, look, what else do we have? We should have financing costs now, after everything that we have done, somewhere in the CHF 150 million-160 million range. A little bit depending on how, A, interest rates move, and B, on what we finally do on the return of cash to shareholders, that could both impact. We will have about, as I said beforehand, give or take CHF 70 million of minority.
If I just do very simple math and don't want to guide anyone, but if I would say CHF 1.1 billion of EBITDA, just to pick a number, 50%, CHF 550 million, let's say roughly CHF 200 million something of cash out on minorities and interest, we should get well above CHF 300 million of equity free cash flow, just to do very simplistic math.
Just to follow on. The incentives, this new return on equity, that will be proposed at the annual general meeting, and that will be part of a long-term incentive plan of management or?
No. Sorry. I misexplained that. I think we already have a so-called PSU in place where we use shares. The way we have done it in the past, and we also plan to do it in the future, is that we always float the shares in the market, and then whatever is vested will be given to management. We don't issue new shares for the PSU, but we use existing shares. That's the same concept that we want to use going forward.
Just finally, you talked about a minimum 2%-3% yield being paid out. What's the highest we could expect?
Well, this is a decision of the board. I could say one thing. The discussions have been more in the minimum, analyzing the market, analyzing obviously what happened in the Swiss market. The maximum depends on the combination of the other parts. It's a possible special dividend and/or possible share buyback. It's not discussed yet so far. It's a combination of things because what I think the board of directors is clear is that this is, and we announced it during 2017, is the year where the general assembly should receive a proposal on this, especially in this line, because it's the right time to do it. There is no discussion today until we know all the pieces that this decision will be component. Thanks.
Thank you.
Hello. Felix Rams from Tech Capital. One question on labor cost inflation. A couple of companies mentioned that they've seen increased labor cost inflation. You run a quite labor-intensive business at the operations. What do you see in terms of labor cost inflation? The second question would be on the free float. According to the SIX, your free float is increasing quite dramatically or 20%. What's driving that? In that respect, I also ask about your largest shareholder, HNA. Did you hear something from them?
Do you want to go first?
Yeah. Okay. Regarding what Andreas mentioned, labor inflation last year, it was due to the difference between the exchange rate in the countries compared with the local currency. For example, there are local currencies where we pay in local currency. Cases like Argentina or Russia. Due to the revaluation of the ruble in the translation effect and the devaluation of the currency last year was not absorbing the inflation. For the reason we had a labor cost increase, but it's just that due to the translation effect. It's not an increase in the labor cost or whatever it is. You have 5% devaluation in one country of the currency this year, and you have 20% inflation due to the labor cost. This 50% is not absorbed by the devaluation.
Obviously, we report in Swiss francs, and these countries absorb normally because the devaluation of the currency is higher than the inflation in the labor cost. This is one-off. I think we have enabled. It's not significant at all. As you see, 13.5% the labor cost compared with the total. The second question was?
The free float and HNA. I'll start, and then you chip in.
Yeah.
Look, I think when we look at the HNA position, the way we understand it is that they have economically virtually no exposure anymore to Dufry. The transaction, as we understand it, is like they bought the shares with credit. They overlaid a collar structure, so-called collar structure over it, which means that if you net everything out, there's a very, very small corridor where they still have real interest with Dufry. From an economic point of view, I think they are, if you want, out of the picture. Now, the other part, and I think we only have indications of that, we cannot prove that to you, and there has not been an official disclosure, is that a lot of the position has also been lent to the bank. The banks themselves have done a hedge by selling shares.
How should I explain that best? Reality is, if you think about the HNA stake, most of that has already been replaced in the market again. Okay? The problem that we have, if you want, in very simplistic terms, is technically HNA is still a shareholder, and that's what appears in the registration. Because they actually lent their shares and the shares were sold in the market again, we have now more than 100% of shareholdings because actually you're counting the shares twice. We went back to the SIX and said, "Hey, look, for the free flow calculation, it is not correct to assume that HNA should be carrying 20%," because the way they have structured the whole transaction, I think the way it has been disclosed, I think it's relatively clear that the economics exposure is lower.
What we're saying is, "Look, the real way to count it is to count the shares in the market." That's why we propose to the SIX to basically not count, if you want, the HNA stake. That was the background.
Maybe one follow on that. You know who owns the stakes now, or it has to be sold in the public market? In other banks, the major sales. If you're going to vote on dividends and stuff.
Well, you are a smart technical person, I'll try to explain it to you, and then you tell me whether you got it. I think a lot of it is through conversation that we have with different people. Take that with a pinch of salt. It's not, if you want, official communication, but it's just the way we understand that things work. Okay. What happens is when they structure the additional collars, HNA structured the additional collars, basically what happens is the bank that structured the collars has an exposure, and the banks will want to hedge out their exposure. The way to do that is basically to sell shares, Dufry shares in the market. When you see when these collars happened, this happened in October. The last two happened in October and in December.
For example, in December, you saw that at some point, Elliott was buying the shares, which subsequently they sold again. You will have seen that Norges Bank increased their stake also in December. If you just look through the market movements, there has been a very strong correlation between structuring collar and people taking positions. Now everything has been sold in the market, so Elliott has left. Norges Bank has sized their transaction. Yes, everything is now in the market. It's basically free flow.
Okay. No more questions in the room? Please.
Thank you for taking my questions. Julián, you mentioned in your presentation that the channel strategies, the three steps we can possibly assume in the next announcement in the next, I don't know, weeks and months. First question to that, does that entail organic and inorganic growth or movements or steps? The second part of that question is, you didn't mention any, let's say, build-up of the famous F&B competence that you want to get in-house. Maybe you can give us an update on that line, please.
Yeah.
What do we have to expect, and maybe on the timeline, if you can.
Yeah.
Thank you.
Yes. Regarding the first part of the question, what we are talking about in this alternative channel is organic growth. It's pure organic growth. It's the tenders that we have already won or we are in the process to negotiate or contracts that we are in the process to negotiate. It's purely organic.
That's for both the cruise line and.
Exactly that. For the three lines. It's for the borders of, for the downtown, and for the cruise lines. The contracts that I referred to are organic contracts. Yeah, for avoiding obviously the misunderstanding there could be. No, it's organic contract. The second one is food and beverage. Food and beverage obviously is a different business than the business we are doing, with a different P&L, different returns, different CapEx. What we have announced, and I think this is a rationale that has been part of the rationale in the U.S., is that our U.S. subsidiary, due to the type of market they are competing, because in this market, the structure of the business in travel retail is completely the opposite than in the rest of the world.
60% or 65% of the business in this market is food and beverage, or capabilities in this specific market should be developed in order to compete in the same level of competence with other competitors in the market. One of these competencies is food and beverage, and this is located and issued, obviously, as a target in the U.S. As a whole business, I don't think so. Dufry today, as a global company, you asked me the question, we are not, in this moment in time, focusing food and beverage as a strategic channel. For us, still, there is a lot of room for improvement and growth in travel retail, pure travel retail.
Sorry, maybe I did not express myself clearly. I was referring to the U.S.
Okay.
I was referring to the first announcement when you said that you're going to IPO Hudson.
Yeah.
You want to build up food and beverage competence in the U.S. I remember in the call at the time, you said that's going to entail possibly a small acquisition of a team or whatever.
Yeah.
Here's my question. Where do you stand in that process? Is that something we can expect in terms of a team?
The answer is straight. This is also straight. It's a strategic move that we are going to do in the U.S. through acquisitions. The answer is yes. Middle, small size. They are not going to happen in 2018. They will happen probably in 2019 because we have enough now room for growth in the U.S. in 2018.
Okay.
Hello, Leonie Novak from Bank of Barajas. I was interested in the impact you expect from IFRS 16, which is going to be applicable starting next year. Then I wondered if you could comment a little bit on the projects in net working capital and what's behind the numbers you announced for next year.
On the IFRS 16, the basic mechanics on how it will work is that we will need to capitalize all the components of concession fees or rent, which are fixed and/or can be determined in a reliable way. In our case, the largest part will be that we will need to capitalize minimum guarantees, okay? We are currently in the process on doing the proper analysis on that one. I think we have given a first wide range indication of CHF 5 billion-CHF 10 billion of assets and liabilities that will be capitalized. We will need to refine that. I hope in the next quarters, we will be able to give you a more precise update. That is the balance sheet. That is easy. The more complicated part will be on the P&L, because you will have, on one hand, the concession fees that will be substantially reduced.
Your EBITDA will be a lot higher. You also will have an additional amortization charge, and you will have an additional interest charge. I think at this stage, I would prefer not to talk about too much about details, but there will be fundamental changes to the P&L. That is why we also think adding new KPIs and starting to track them early on will increase the comparability over time. I think that is the thought process that we have behind. Now, I think in terms of the working capital, I think there are two things that I wanted. Well, the things that I really wanted to say is, look, we do have a very seasonal evolution of the working capital, and you have seen it in 2017 on how big these swings can be. They can be more than one percentage point quarter-on-quarter.
We actually do have a project, and that is related to centralizing supply chain. This is called One Order, where we want to, if you want, further centralize the supply chain, and that should give us some benefits on the net working capital. We have not quantified, however, yet on how much that is going to be. That is part of the business operating model. There embedded is also the centralization of the working capital or the supply chain.
Thank you. Any other questions here in the room? If not, we go to the telephone.
First question from the phone is from Jörn Iffert from UBS. Please go ahead.
Hi, Julián. Hi, Andreas, and thanks for taking my questions. It's just two quick follow-up questions, please. The first one is on the EBITDA margin, if I may come back. You described a couple of positive benefits materializing likely already in 2018. On the other hand, you're also investing, I think, in online initiatives, shop upgrades, et cetera. Can you help us to a little better understand the trend of the EBITDA margin into Q1, and do you already see improvements here? Second question would be just a housekeeping one. Below the EBITDA line, other operating expenses, what do you roughly think will be the run rate here in 2018-2019? Thanks very much.
Okay. Regarding the-- I think it's a good question, the 13% EBITDA. Let me come back to the explanation. I think, first of all, it's very difficult to say now, what is the speed of all the initiatives that we have already started to implement in 2017 and beginning of 2018, for having a very clear understanding if it's going to be quarter one, quarter two. This is not possible today. This information is not possible. How this is going to happen? I think very fast, because obviously what we have is the intention to accelerate the implementation of these initiatives. If you want, I can repeat again the initiatives, but the initiatives are what they are. It's the new structure plus the business operating model will contribute around 50 basis points. These 50 basis points will be gradually implemented.
In business operating model, what we forecast, because obviously we have now better understanding about the speed of the implementation, will be around CHF 23 million. The remaining part will come from the reorganization of the company, as I said. The target is 50 basis points. The other 50 basis points is generated by the gross profit margin improvement. We have, as a consequence, as I said, the increase in concession fees, 20-30 basis points. There is a leverage that these 50 basis points of reorganization and business operating model that will go through the lines of general expenses and the line of personal expenses. The upgrade of the shops I think is very important.
This is not related with obviously any negative impact in the P&L, because the capital that we are investing is very similar, and the reality of the outcome is very good, it's very positive, because the increase in spend per passenger is tremendous. In the places, obviously, we need to adapt the shops to the reality of the places, because it's not something that can be repeated like a pattern, but it's going to have a significant impact in the spend per passenger again. Talking about the online, because I think it's an important subject with you and with the market. There are two aspects here. One is the concession fee. The other one is the online retail and how the online retail will impact. The third one is the food and beverage part.
One is, number 1, how travel retail can really establish a position or defend a position in order not to be disrupted. I think it's very important that we all understand that there is not a formula 100% right. What we know is that there are specific ways of engaging with the travelers that can be only done through travel retail and will be done through travel retail, and this is confirmed because the spend per passenger increases and the spend per ticket increases. For the future, the main issue is we are in the position to engage with the customers in a different and better way than the high street. This is number 1, and we have the captive audience, and the audience is in the airport. How this is going to impact the travel retail?
In my view, the spend per passenger in travel retail and especially in duty free will increase from now on year-on-year. The second part is how the concession fee will evolve. I think it's a combination of things. It's blended. It's a miscellaneous because obviously there are many things there that may influence. If we sell more in one operation, or we sell more in another operation. What is the problem that we need to face here is that sometimes we have established contract, for example, the market in Spain, that is gradually increasing and will have an impact, and will have also the mix. How this impact will be 20, 30 basis points of the P&L. Finally, the issue about the food and beverage. I don't think that today, for duty free is on any interest to participate in food and beverage.
It's a completely different business model, it's a completely different P&L, and I don't think that it's going to have a significant advantage on any regard regarding the travel retail. In fact, worldwide travel retail is more healthy, growing faster, and more profitable than the food and beverage market. It's very simple. Compare the companies and you will see. Obviously, in food and beverage, you have to compare different lines, not the EBITDA because obviously the CapEx is always very important and very relevant. Let's see. I think there is an opportunity in terms of 13% EBITDA. The answer is yes, and we will try to explain every time that there is a call or there is a one-on-one meeting, how we are progressing with this specific subject.
The second question on the other operational results. Look, I think the run rate will be probably between CHF 15 million-CHF 20 million per annum, and that will be mainly including opening of new shops, so startups costs that we have on one hand and closing and restructuring costs on the other hand. That will be the typical stuff. Obviously then anything that comes in addition will be on top of it.
All right. Thanks very much, both of you.
Thank you, Jon.
Next question is from Pierre Safa, Silver River Capital. Please go ahead.
Yes, hi. Thank you very much for taking my question. The first one was, if I may ask, I didn't hear your comment about the dividend at the beginning of the presentation. You said you expected at least, and you gave a number, which I didn't hear. That was the first question. The second question is, the free cash flow to the firm conversion of 50% sounds a little conservative. I was just hoping to, I guess, double-click on that. If one takes your guidance for taxes, working capital, I think it's 5%, 6% of sales and CapEx, you get a number that's actually quite above that number. You're closer to 60%, 65% free cash flow to the firm conversion before minorities and interest expense. I was just hoping to understand why you mention a number that seemed to be quite significantly below that.
Finally, could you please just discuss a little more how the digital targeting of customers is advancing? You've done that already, but specifically, should we be expecting some launch of an app in the coming months, just allowing you to better target the consumer before he actually gets to the airport? How do you think about that? Thank you.
Thank you very much. Yes, let me repeat regarding the dividend that the board of Aena is discussing today is a proposal to present to the general assembly. This proposal probably will be finalized around April 5th in terms of obviously the agreement, probably will be communicated on April 6th. The basic proposal today is having a dividend or proposing a dividend of minimum 3% yield for the dividend side with different alternatives as a complement of the dividend. One of them could be a special dividend, one of payment, and the other one could be a share buyback. I think today what I could say is the share buyback is probably having the most important chances in order to really be confirmed, because obviously we are very focused in understanding what the shareholders of the company prefer.
This is where we are today, and it will be announced very soon.
The free cash flow. I think you're actually correct. Historically, the free cash flow to EBITDA ratio was 55%. I think the 50% in a way is conservative. I would agree with that. I think I don't like to use the 55% because you do have swings year to year, and I think if you have a year like this year where we're just below 50%, people will come back and say, "Yeah, but you're too high with 55." That's why I'm taking 50. You're right that on a normalized basis, it could be higher, and especially also if we grow the EBITDA margin, I think it could be close to 60%, but historically, 55 was the average. You're right.
Regarding the digitalization, a short explanation about travel retail. Historically, in travel retail, our main problem was how to contact with the customer, with the travelers, especially before they travel. The most efficient way of doing it, because obviously you could do mailing, or you could do whatever you want, but finally, the right or the most efficient way of contacting with the customer is in the airport. Let's go to the presentation. In the presentation, in one of the pages you have seen there that we have explained four different areas where we are working. Number one is the RED application. RED is a loyalty program. It's a loyalty program that obviously is created based on the customers we have every year. In the locations where we are operating, every year normally goes 2 billion, 2.5 billion passengers, depending how you account it.
We have 230 average million of tickets every year. This is the idea in order to really collect information and to create this loyalty program. Today, the loyalty program is expanded in 20 countries. As a consequence of this expansion, we are always trying to create the possibility to the customers to buy before they travel. This is the Reserve & Collect. This is a project that is in parallel, is delivered at the same time, and will be expanded in the full portfolio of companies by the year end. Where is the challenge now? It's obviously the omni-channel strategy. You referred to that, and I totally agree. This is one of the most important possibilities we have.
If we contact the customers at home at the time that they book the travel, if they are at a certain time having relationship with the tour operators, then the hotels, then the airports, then the retailers, then the airlines, and finally they go back home. This is the omni-channel strategy that is common in this page of the presentation. Obviously, there are some gaps in this type of strategy because we don't control the whole chain. We know what we can do if we control the chain, but we don't control the whole chain. What we are now doing is negotiating and trying to reach agreements with different stakeholders of this chain in order to really amplify as much as possible the opportunities to contact with the customer before they travel. That's the process. That's what we are going to do.
I think in my view, the target for Dufry should be not only to be a travel airport retailer, we need to be the marketplace for all these companies that are operating in an airport. We generate maximum 70%-80% of the total income for many of the places or landlords where we are. If we can generate the idea to be the marketplace for these companies, we will be able even to deliver the merchandise before they travel or after they travel, if we are talking about duty paid. In duty-free, it is not possible because in duty-free, we are selling in a bonded area, and we need to deliver the merchandise and charge the merchandise in the cash register in the place we are selling the merchandise.
This is more or less the opportunity, and it is a huge opportunity the company will develop and is trying to develop in the shortest period of time, but during the next two or three years, obviously, this will have an impact on the organic growth.
Okay. I think that was the last question.
Last question?
Yeah.
Any other questions in the room? No? We finish here. Thank you for participating in the call, obviously, as always, we are welcoming any type of comments, questions, in the investor relations department, Andreas or myself. Thank you.
Thank you.
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