Earnings Call: Q1 2017

May 2, 2017

Ladies and gentlemen, good morning or good afternoon. Welcome to the Dufry's First Quarter twenty seventeen Results Presentation. I'm Sarah, the Chorus Call operator. I would like to remind you that all participants will be in listen only mode and the conference is being recorded. After the presentation, there will be a Q and A session. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Julian Diaz, CEO of Dufry. He will now be joined into the conference room. Thank you. Thank you for the introduction. This is Julian Diaz and Andreas Schneider participating in the call. Welcome to Dufry's Q1 twenty seventeen results presentation. Please go to the Page five of the presentation disclosure this morning in our website. I think the best highlight of Q1 was the acceleration of organic growth reaching 7.2% in Q1. The initiatives implemented in 2015 and the normalization of operations like Brazil, Russia and Turkey, although still this last one in low season, impulse or overall performance, well supported by UK, U. S, South America and Europe in general. It is also important to remark the high Dufry's business seasonality after Wall Duty Free and Nuance acquisitions, being Q1 the lowest in terms of generations of revenues and EBITDA as a consequence of the flat accrual of sand operational costs and depreciation, amortization, etcetera. Q1 is extremely affected in terms of profitability. EBITDA during the quarter due to reach 154,700,000.0 and cash earnings multiplied and reaching EUR $0.02 9 per share. Let's move to Page six. Turnover reached CHF 1,700,000,000.0 in Q1, 4.7% higher than the one year ago. The main impacts of the 7.2% of organic growth were the changes in scope minus 0.6% due to the closing of the wholesale operation in UK acquired from Nuance. I repeat many times that our main business is and will continue to be retail that will be like for like in June 2017. And the impact of FX minus 1.9% due to the negative translation of British pound and euro into Swiss franc and the positive impact of the U. S. Dollar. Gross profit margin reached 59.6% from 58.6 in Q1 twenty sixteen, mainly due to the synergies generated through the World Duty Free acquisition. All the divisions performed well in this regard. EBITDA grew by 5.6% above turnover, reaching EUR 154,700,000.0, 9.1% margin impacted by the seasonality of the business compared with EUR 146,500,000.0 in 2016. Cash EPS increased significantly being $0.29 in 2017 compared with minus $05 in 2016. Covenant net debt to EBITDA ratio was 7.79% versus 4.5% threshold. We have refurbished. I mentioned many times that this is a critical path in terms of driving more organic sales, 7,200 square meters of commercial space. Ladies and gentlemen, good morning or good afternoon. Welcome to the Dufry's First Quarter twenty seventeen Results Presentation. I'm Sarah, the Chorus Call operator. I would like to remind you that all participants will be in listen only mode and the conference is being recorded. After the presentation, there will be a Q and A session. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Julian Diaz, CEO of Dufry. He will now be joined into the conference room. Thank you. Thank you for the introduction. This is Julian Diaz and Andreas Schneider participating in the call. Welcome to Dufry's Q1 twenty seventeen results presentation. Please go to the Page five of the presentation disclosure this morning in our website. I think the best highlight of Q1 was the acceleration of organic growth reaching 7.2% in Q1. The initiatives implemented in 2016 and the normalization of operations like Brazil, Russia and Turkey, although still this last one in low season, in full or overall performance, well supported by UK, U. S, South America and Europe in general. It is also important to remark the high Dufry's business seasonality after Wall Duty Free and Nuance acquisitions, being Q1 the lowest in terms of generations of revenues and EBITDA as a consequence of the flat accrual of sand operational costs and depreciation, amortization, etcetera. Q1 is extremely affected in terms of profitability. EBITDA during the quarter due to reach 154,700,000.0 and cash earnings multiplied and reaching EUR $0.02 9 per share. Let's move to Page six. Turnover reached CHF 1,700,000,000.0 in Q1, 4.7% higher than the one year ago. The main impacts of the 7.2% of organic growth were the changes in scope, minus 0.6% due to the closing of the wholesale operation in UK acquired from Nuance. I repeat many times that our main business is and will continue to be retail that will be like for like in June 2017. And the impact of FX minus 1.9% due to the negative translation of British pound and euro into Swiss franc and the positive impact of the U. S. Dollar. Gross profit margin reached 59.6% from 58.6% in Q1 twenty sixteen, mainly due to the synergies generated through the World Duty Free acquisition. All the divisions performed well in this regard. EBITDA grew by 5.6% above turnover, reaching EUR154.7 million, 9.1% margin impacted by the seasonality of the business compared with EUR146.5 million in 2016. Cash EPS increased significantly being $0.29 in 2017 compared with minus $05 in 2016. Covenant net debt to EBITDA ratio was 7.79% versus 4.5% threshold. We have refurbished. I mentioned many times that this is a critical path in terms of driving more organic sales, 7,200 square meters of commercial space in Q1 with a total target for renovations in 2017 full year of twenty six thousand seven We have also signed so far 23,000 square meters of new commercial space will be open until the 2017 and first month of twenty eighteen. Most of this space will be open in 2017 and the 23,000 are the square meter sign so far during the first quarter and still we have three quarters to go. Let's move now to Page seven. Despite calendar effect, one day less in February and Easter Q2 twenty seventeen instead in Q1 twenty sixteen, Dufry had a good performance in most of the locations in Q1. Let's go through the different divisions. Southern Europe and Africa Division one, turnover reached EUR 2 and 88,800,000.0 in Q1 twenty seventeen with organic growth increasing by 2.8%. Spain and Malta with single digit positive growth and Morocco Ivory Coast, Dufry Italia in Italy, Turkey and Portugal double digit positive growth. Division one reached double digit positive performance during the first three weeks of April supported by Easter seasonality. Double digit positive performance in all the operations, as that in Spain and Malta with single digit positive performance. Central and Eastern Europe Division II, TUNOV reached 4 and $15,500,000 in Q1, with organic growth increasing by 8.8%. Double digit growth in UK, Basel in Switzerland, Finland, Serbia, Russia, Kazakhstan and Armenia. Single digit positive growth in Germany, Sweden and Bulgaria. Negative single digit performance in Zurich and Geneva due to the seasonality of Easter period last year in Q1 and this year in Q2. During the first April, double digit positive performance in the division. All the operations, UK, Switzerland, Sweden, Finland, Russia, etcetera, reaching double digit growth. Asia, Middle East and Australia Division three. Turnover reached in Q1, 188,500,000.0 with organic growth decreasing 0.4%. Middle East operations, Jordan and Kuwait, single digit positive growth. China, Macau, South Korea, Indonesia, Cambodia, double digit positive growth Hong Kong, double digit negative performance and Melbourne, single digit negative performance due to the renovation of most of the commercial spaces in this airport that will be finished by the May. The closing of the operation in Mumbai and the partially closing in Sri Lanka generated a negative impact in the performance of this division. During the first three weeks of April, Division three performed single digit negative growth with China and Middle East, Sharjah, Jordan and Kuwait, single digit positive growth and Macau, South Korea, Indonesia, Cambodia, double digit positive growth. Also continue the negative impact of closings in Mumbai and in Sri Lanka. Latin America Division IV, turnover reached EUR 400,000,000 in Q1 and organic growth increased by 12.7%. Mexico, Argentina, Ecuador, Trinidad And The British Caribbean, single digit positive growth. Brazil, Uruguay, Chile, Peru, Puerto Rico, Dominican Republic, double digit positive growth. During the first three weeks of April, all the operations accelerated the positive growth, reaching most of them double digit positive growth. North America Division five, turnover reached $392,100,000 during Q1, being organic growth 4.8%, double digit positive growth in U. S. Duty free and single digit positive growth in Canada duty free. Duty Pay in The U. S. Also performed single digit growth, acceleration of growth in this division during the first April with good performance in all the different types of businesses. Let's move to Page eight of the presentation. As I mentioned, Dufry has opened 5,600 square meters of new commercial space, locations already announced in Italy, France, Greece, Indonesia, China, Chengdu, Brazil, Chile and several new shops in The U. S, New York, Boston, Houston, Tampa, Traction and Phoenix. We have also renovated, as I mentioned, 7,200 square meters of commercial space and those are the locations from Athens to Los Angeles. Let's move to Page nine. 23,000 additional space signed in 2017. Locations are Italy, Spain, Greece, Colombia, in Bogota, Pulman Tour sales onboard cruise lines, Jamaica and several new contracts in The U. S, Venice, Grand Rapids, New Orleans and Des Moines are part of the additional space signage so far. The project pipeline opportunities as in the previous calls is very healthy, 32,000 square meters under negotiation or participation in tender processes. Most of this space is located in North America in Division 5, but also we have a very good representation of this pipeline in Middle East 27% and Latin America 22%. Let's move to Page 10. The most important or one of the most important components of organic growth, positive is very positive in forecast. For the year 2017, 2018 and 2019, between 57%. And so far in February 2017, the increase of number of international passengers was 7.6%. This is obviously a significant good base for understanding the potential of the organic growth during the next quarters and in the next year. Let's move to Page 11. Dufry fermentation, this is one of the most relevant parts of the risk diversification strategy, Dufry by division on the right top side of this slide. Most of the obviously, the division is performing well. Let me just comment on the significant strong seasonality in Southern Europe and UK, Central And Eastern Europe, where we reached 25% of the sales in UK and Central Europe. This is the division number 217% in Central Europe and Africa. These two divisions are the most affected by seasonality. Then in terms of categories, confirmation of we are obviously very focused in personal care, fashion and cosmetics, confectionery and food catering and finally luxury product. In all these categories, have grown very close to 10% and in luxury growth by 16% compared with previous year. If we move to Page 12, Dufry by channel, the acceleration of our airport sales turnover reached EUR 3 and 92,100,000.0 during Q1, being organic growth 4.8%. Double digit positive growth in U. S. Duty free and single digit positive growth in Canada duty free. Duty pay in The U. S. Also performed single digit growth. Acceleration of growth in this division during the first April with good performance in all the different types of businesses. Let's move to Page eight of the presentation. As I mentioned, Dufry has opened 5,600 square meters of new commercial space, locations already announced in Italy, France, Greece, Indonesia, China, Chengdu, Brazil, Chile and several new shops in The U. S, New York, Boston, Houston, Tampa, Traction and Phoenix. We have also renovated, as I mentioned, 7,200 square meters of commercial space and those are the locations from Athens to Los Angeles. Let's move to Page nine. 23,000 additional space signed in 2017. Locations are Italy, Spain, Greece, Colombia, Imbogota, Pulmantur sales onboard cruise lines, Jamaica and several new contracts in The U. S, Venice, Grand Rapids, New Orleans and Des Moines are part of the additional space signage so far. The project pipeline opportunities as in the previous calls is very healthy, 32,000 square meters and the negotiation of participation in tender processes. Most of this space is located in North America in Division 5, but also we have a very good representation of this pipeline in Middle East 27% and Latin America 22%. Let's move to Page 10. The most important or one of the most important components of organic growth, positive is very positive in forecast. For the year 2017, 2018 and 2019, between 57%. And so far in February 2017, the increase of number of international passengers was 7.6%. This is obviously a significant good base for understanding the potential of the organic growth during the next quarters and in the next year. Let's move to Page 11. Dufry fermentation, this is one of the most relevant parts of the risk diversification strategy, Dufry by division on the right top side of this slide. Most of the obviously, the division is performing well. Let me just comment on the significant strong seasonality in Southern Europe and UK, Central And Eastern Europe, where we reached 25% of the sales in UK and Central Europe. This is the division number 217% in Central Europe and Africa. These two divisions are the most affected by seasonality. Then in terms of categories, confirmation of we are obviously very focused in personal care, fashion and cosmetics, confectionery and food catering and finally luxury products. In all these categories, have grown very close to 10% and in luxury growth by 16% compared with previous year. If we move to Page 12, Dufry by channel, the acceleration of our airport sales. Most of the new contracts mentioned before are in airport retail, but we are also trying to accelerate our growth increase lines and in border and downtown shops as mentioned in previous calls. Regarding Dufry by sector, impacted by the seasonality, 65% duty free, 35% duty paid. What we are going to see over the next two quarters is an increase of the duty paid for this seasonality explained. Let's move to Page 13, priorities for 2017. I think to drive more organic growth and to continue with organic growth acceleration is priority number one. This can be done with two different, obviously, initiatives, increasing the penetration and increasing the spend per ticket. The initiative for driving organic growth started last year and continued this year with the renovation of Square meters of commercial space. This year, I confirm that the initial target is to be between 26,030. Then we have a significant set of actions for driving our customer experience via digital innovation, basing in four pillars. One is, first of all, understanding better of customers through research and mystery shoppers. The second one is training all the staff and provide them with the latest technology. This is something I commented on in previous calls with the iPad technology. And then three, omnichannel digital experience, RED preorder and also the initiatives in order to improve the efficiency of operations through digitalization. Social media is going to be part of this. Finally, the last pillar is digital innovation with the opening of the new store generations, I will comment on later on. The second target for this year is the implementation of the new business operating model. There are two obviously more important issues here. One is the standardization of operations after the two transformational acquisitions. And the second one is the implementation of efficiencies at EBITDA level. I mentioned the last time that the target for implementing these efficiencies in the P and L will be CHF 60,000,000 along 2017 and 2018. We have started the first wave of initiatives of the business operating model in 17 countries, including Australia, Switzerland, North America and South America, and we will implement along 2017 and 2018 this business operating model in all locations. EBITDA margin, we confirm the medium trend, obviously, target of reaching 13%, 13.5%. The three aspects of this achievement should be number one is the reflection of the full world duty free synergies in financial, the one is fully confirmed. The second one is the contribution from full implementation of, let's say, the 60,000,000 of business operating model efficiencies that will happen in 2017 and 2018. And finally, the full recovery of the market where we suffer more over the past two years, Brazil, Russia and Turkey affected markets. And this is, in fact, one requirement that we don't control, but what we have seen so far in 2017 is very positive, and we are expecting good results in these locations. And then extension of contracts, it says here, key contract is not peripherally key. Most of the new contracts mentioned before are in airport retail, but we are also trying to accelerate our growth increased lines and in border and downtown shops as mentioned in previous calls. Regarding Dufry by sector, impacted by the seasonality, 65% duty free, 75% duty paid. What we are going to see over the next two quarters is an increase of the duty paid for this seasonality explained. Let's move to Page 13, priorities for 2017. I think to drive more organic growth and to continue with organic growth acceleration is priority number one. This can be done in with two different obviously initiatives, increasing the penetration and increasing the spend per ticket. The initiative for driving organic growth started last year and continued this year with the renovation of square meters of commercial space. This year, I confirm that the initial target is to be between 26,030. Then we have a significant set of actions for driving our customer experience via digital innovation, basing in four pillars. One is, first of all, understanding better of customers through research and mystery shoppers. The second one is training our staff and provide them with the latest technology. This is something I commented on in previous calls with the iPad technology. And then three, omni channel digital experience, RED pre order and also the initiatives in order to improve the efficiency of operations through digitalization. Social media is going to be part of this. Finally, the last pillar is digital innovation with the opening of the new store generations, I will comment on later on. The second target for this year is implementation of the new business operating model. There are two obviously more important issues here. One is the standardization of operations after the two transformational acquisitions. And the second one is the implementation of efficiencies at EBITDA level. I mentioned the last time that the target for implementing these efficiencies in the P and L will be CHF 60,000,000 along 2017 and 2018. We have started the first wave of initiatives of the business operating model in 17 countries, including Australia, Switzerland, North America and South America, and we will implement along 2017 and 2018 this business operating model in all locations. EBITDA margin, we confirm the medium trend, obviously, target of reaching 13%, 13.5%. The three aspects of this achievement should be: number one is the reflection of the full world duty free synergies in financial, the one is fully confirmed. The second one is the contribution from full implementation of the 60,000,000 of business operating model efficiencies that will happen in 2017 and 2018. And finally, the full recovery of the market where we suffer more over the past two years, Brazil, Russia and Turkey affected markets. And this is in fact one requirement that we don't control, but what we have seen so far in 2017 is very positive and we are expecting good results in these locations. And then extension of contracts, it says here key contract is not correct. Probably key is a word that we use in this phrase, but this extension of contract that are not important contract under renovation or extension in 2017. What we are looking here is five specific contracts, the other ones are very small and three of them are already agreed for extension. Then cash generation and deleverage, we confirm the medium term leverage of below three net debt to EBITDA. And this is for us a target that will be fully achieved in 2018. But right now, what we have is just to comment on the target in 2017. Then Andreas, I will pass through the presentation to you. Thank you, Julian, and good morning and good afternoon, everyone. So let's move directly to Page 15. Julian already talked about organic growth. So let me comment on the remaining aspects of turnover growth. First of all, changes in scope. So that includes only the wind down of the wholesale business that we acquired as part of the Nuance transaction. The coming second quarter will be the last quarter where we have a change in scope from that business. The other component, the FX translation effect was minus 1.9%, and we will see the details of that in a minute. On Page 16, we show the evolution of various emerging market currencies. It is evident that the normalization has continued also in the first quarter of twenty seventeen. Based on the current exchange rate, the Brazilian real will be stable from the third quarter onwards. The Russian ruble will have a positive effect of about 10% to 15% for the remainder of the year. And in the case of the Argentinian peso, we expect to see this moderate devaluation of Q1 also to continue for the rest of the year. Then on Page 17, we have the details of the FX translation effect as mentioned beforehand. So compared to the fourth quarter twenty sixteen, the negative FX translation effect in the first quarter was more moderate at minus 1.9%. This was mainly driven by the lower devaluation of the British pound versus the Swiss franc. Based on current rates, we should see a further reduction of the negative FX effect in the 2017 and the flattish development in the second half of the year. So let's move then to the income statement on Page 18. As an introductory remark, I would like to highlight that the first quarter is always the lowest quarter of the year. And as such, it has the lowest profitability and any fixed costs have a relatively higher weight. We already discussed turnover, so let's focus on the lines below. The gross margin improvement was driven by the synergies of the World Duty Free integration. Over the full year 2017, we expect gross margin synergies to contribute approximately CHF 14,000,000. Additionally, so which would translate roughly into zero five percentage point of margin. Concession fees increased by 0.9 percentage points compared to the first quarter twenty sixteen. Now although there is some seasonality in the cost item, if we use the full year 2016 concession fee, it's a word that we use in this phrase, but this extension of contract that are not important contracts under renovation or extension in 2017. What we are looking here is five specific contracts, the other ones are very small and three of them are already agreed for extension. Then cash generation and deleverage, we confirm the medium term leverage of below three net debt EBITDA. And this is for us a target that will be fully achieved in 2018. But right now, what we have is just to comment on the target in 2017. Then Andreas, I will pass through the presentation to you. Thank you, Julian, and good morning and good afternoon, everyone. So let's move directly to Page 15. Julian already talked about organic growth. So let me comment on the remaining aspects of turnover growth. First of all, changes in scope. So that includes only the wind down of the wholesale business that we acquired as part of the Nuance transaction. The coming second quarter will be the last quarter where we have a change in scope from that business. The other component, the FX translation effect was minus 1.9%, and we will see the details of that in a minute. On Page 16, we show the evolution of various emerging market currencies. It is evident that the normalization has continued also in the first quarter of twenty seventeen. Based on the current exchange rate, the Brazilian real will be stable from the third quarter onwards. The Russian ruble will have a positive effect of about 10% to 15% for the remainder of the year. And in the case of the Argentinian peso, we expect to see this moderate devaluation of Q1 also to continue for the rest of the year. Then on Page 17, we have the details of the FX translation effect as mentioned beforehand. So compared to the fourth quarter twenty sixteen, the negative FX translation effect in the first quarter was more moderate at minus 1.9%. This was mainly driven by the lower devaluation of the British pound versus the Swiss franc. Based on current rates, we should see a further reduction of the negative FX effect in the 2017 and the flattish development in the second half of the year. So let's move then to the income statement on Page 18. As an introductory remark, I would like to highlight that the first quarter is always the lowest quarter of the year. And as such, it has the lowest profitability and any fixed costs have a relatively higher weight. We already discussed turnover, so let's focus on the lines below. The gross margin improvement was driven by the synergies of the World Duty Free integration. Over the full year 2017, we expect gross margin synergies to contribute approximately CHF 14,000,000. Additionally, so which would translate roughly into zero five percentage point of margin. Concession fees increased by 0.9 percentage points compared to the first quarter twenty sixteen. Now although there is some seasonality in the cost item, if we use the full year 2016 concession fee as a benchmark, the increase is 0.1 percentage point. And as such, the first quarter twenty seventeen is in line with the development of the business generally. Personal and general expenses as a percentage of turnover remained unchanged as the higher relative weight of the fixed cost compensated for the synergies. So we expect that the remaining synergies from World Duty Free integration will be visible in the financials in the coming quarter. As a result, EBITDA for the first quarter was 154,700,000.0 with a 9.1% margin. Then below EBITDA, depreciation was fully in line with last year, and amortization was lower compared to last year in absolute terms and also when measured as a percentage of turnover. The improvement in the amortization is due to a positive translation effect from the British pound as well as the full amortization of certain assets and extension of contracts. For the full year, we believe that the first quarter amortization is a good indicator generally to extrapolate. Other operational results for the quarter were minus $6,700,000 where the majority of costs were related to new projects and local restructuring costs. Financial results improved by 8,800,000.0, mainly due to the earlier repayment of the U. S. Dollar bond and the related cost savings, this repayment we did in December. Income tax was positive at $10,200,000 for the quarter. As usual, I would like to highlight here that tax rate does vary significantly across the year. So the first quarter is typically not a strong indicator for the full year tax rate. Noncontrolling interest increased by $1,300,000 mainly due to the good growth in locations where we do have minority partners. Overall, net earnings to equity holders improved by 24,800,000.0 Cash earnings, which add back basically the acquisition related amortization, were $15,400,000 for the quarter. Then if we move to Page 19, we have, as usual, the cash EPS. Cash EPS was $0.29 in the first quarter. Because of the seasonality of our business, the overall contribution is small in the first quarter. But as you see, the development is trending in the right direction. So the improvement year on year was $0.34 Then on Page 20, we have the cash flow statement. And similar as for the P and L, also the cash flow statement is strongly seasonal. And the first quarter is the lowest quarter in terms of cash flow. Typically, we would expect a neutral to a negative cash generation for the quarter, and this was no different in the first quarter twenty seventeen. Having said this, there were some additional elements that reinforced that trend. So let's start with the net working capital. Overall, we invested $137,000,000 into net working capital. Different elements were, on one hand, the buildup of inventory ahead of Easter. That has always a negative impact on cash flows in the first quarter. Now this year, this effect was even more pronounced because Easter fell effectively than in the second quarter of the year. Furthermore, we also have a higher order volume in locations where we had a benchmark. The increase is 0.1 percentage point. And as such, the first quarter twenty seventeen is in line with the development of the business generally. Personal and general expenses as a percentage of turnover remained unchanged as the higher relative weight of the fixed cost compensated for the synergies. So we expect that the remaining synergies from World Duty Free integration will be visible in the financials in the coming quarter. As a result, EBITDA for the first quarter was $154,700,000 with a 9.1% margin. Then below EBITDA, depreciation was fully in line with last year, and amortization was lower compared to last year in absolute terms and also when measured as a percentage of turnover. The improvement in the amortization is due to a positive translation effect from the British pound as well as the full amortization of certain assets and extension of contracts. For the full year, we believe that the first quarter amortization is a good indicator generally to extrapolate. Other operational results for the quarter were minus CHF 6,700,000.0, where the majority of costs were related to new projects and local restructuring costs. Financial results improved by CHF 8,800,000.0, mainly due to the earlier repayment of the U. S. Dollar bond and the related cost savings, this repayment we did in December. Income tax was positive at 10,200,000.0 for the quarter. As usual, I would like to highlight here that tax rate does vary significantly across the year. So the first quarter is typically not a strong indicator for the full year tax rate. Noncontrolling interest increased by $1,300,000 mainly due to the good growth in locations where we do have minority partners. Overall, net earnings to equity holders improved by $24,800,000 Cash earnings, which add back basically the acquisition related amortization, were $15,400,000 for the quarter. Then if we move to Page 19, we have, as usual, the cash EPS. Cash EPS was $0.29 in the first quarter. Because of the seasonality of our business, the overall contribution is small in the first quarter. But as you see, the development is trending in the right direction, so the improvement year on year was $0.34 Then on Page 20, we have the cash flow statement. And similar as for the P and L, also the cash flow statement is strongly seasonal. And the first quarter is the lowest quarter in terms of cash flow. Typically, we would expect a neutral to a negative cash generation for the quarter, and this was no different in the first quarter twenty seventeen. Having said this, there were some additional elements that reinforced that trend. So let's start with the net working capital. Overall, we invested $137,000,000 into net working capital. Different elements were, on one hand, the buildup of inventory ahead of Easter. That has always a negative impact on cash flows in the first quarter. Now this year, this effect was even more pronounced because Easter fell effectively than in the second quarter of the year. Furthermore, we also have higher order volume in locations where we have accelerated growth. There is a certain time lag as the increased sales are not reflected yet in the financial, but the buildup of net working capital is upfront. Having said that, as we will see later, the core net working capital as a percentage of turnover still improved year on year because of the strong performance of the overall group. In addition, we have some other elements with seasonal deviations such as sales taxes, concession fees as well as advertising income. We expect that these components should normalize along the year, so really that Q1 should be the low point. Then moving to CapEx. This was in line with as an absolute demand for the full year expectation with $77,000,000 for the quarter. But if it's measured as a percentage of turnover, it was above our target corridor. Again, same reason is seasonality. Below free cash flow, the cash out for interest reduced mainly due to the bond repayment, as mentioned before. As some of you may remember, in the last presentation, we mentioned an additional cash out of more than $100,000,000 in the first and second quarter related to a number of projects. The first quarter cash flow reflects about $33,000,000 of these cash outs, and they are included in CapEx. The remaining amount, I. E, approximately $75,000,000 is expected to be booked in the second quarter of this year, and it will be reflected in working capital changes as we talk about prepay concession fees and cash deposits. This means the remaining amount will not be included in CapEx but in working capital. So this means we will have an additional cash outflow in 2017, but the $75,000,000 will be recovered over time. Then if we move to Page 21. There, we have our usual KPI cash flow the cash flow KPI, sorry. As mentioned before, CapEx as a percentage of turnover was 4.5% because of the low seasonality, but we expect this to revert to our target range over the next quarters. So our target CapEx remains unchanged at 3% to 3.5% of turnover. Core net working capital improved by 40 basis points to 5.6 year on year despite the increase in core net working capital. Hence, the improvement that we mentioned in earlier calls is also confirmed in this quarter. Then to if we move to the balance sheet on Page 22, the situation is very stable, and there are no major shifts since year end. To conclude on Page 23. Net debt increased in the first quarter to $3,830,000,000 as explained by the cash flow. Covenants, as mentioned, were 3.79% for the first quarter against a maximum threshold of 4.5x. As to the financing mix and the duration, there weren't any material changes. So I think there everything remains unchanged. So this concludes the financial part of the presentation, and I'd like to hand back to Julian. Thank you, Andreas. Let's move to Page 25. As a conclusion, I think the first conclusion remains the same is we have returned to the growth that the company used to deliver in organic positions. To continue with this organic growth in 2017, we required and is obviously going to happen, the implementation of the digitalization of the business, the acceleration of commercial initiatives that are already mentioned in this call and previous calls, the refurbishment and continue with the refurbishment of the operations and the increase of the retail space, 23,000 square meters that so far we have increased. The total number of square meters we were operating by year end 2016 was 420,000. The implementation of the business operating model is one of our main priorities. So far, the first wave includes 17 countries. All the countries, the 64 countries of the company will be implemented from the business operating model point of view by December 2018. The new generation STORT, that in my view is one probably the most relevant initiative from the commercial point of view, we have implemented will be open in Heathrow Terminals 3, Zurich, Merwin, Cancun, Madrid and all of these are in progress. The first one will be in Merwin. This is the comment I made when I was commenting on the performance in Melbourne. Melbourne, 70% of the space from the commercial point of view was closed down because we are in total renovation. And finally, focus on cash generation and deleveraging as is very well known is going to be one of our main priorities for 2017 too. That's all from our side. And now all the comments or questions are welcome. Thank you very much. The first question is from Jon Cox from Kepler Cheuvreux. Congratulations on that organic sales growth acceleration. Looks very impressive. But of course, we want more. And Julian, you seem to be saying double digit growth in all of the regions or most of the regions in the first few weeks of the year. Of course, we know it is Easter related. But adding it all up, I guess, it's growing at double digit rates for the group as a whole. That's my first question. Second question, just on the margin. And obviously, as you saw the stock performance this morning, there are some market concerns given the fact that the EBITDA margin only rose by 10 basis points when consensus is for 100 basis points rise for the year. Are you confident that this will accelerate as we go through the year? And just maybe as an add on there, you mentioned concession fees. You seem to be saying that should be 10% sorry, 10 basis points higher this year compared to last year versus the almost 1% organic positions. To continue with this organic growth in 2017, we required and is obviously going to happen, the implementation of the digitalization of the business, the acceleration of commercial initiatives that are already mentioned in this quarter in previous calls, the refurbishment and continue with the refurbishment of the operations and the increase of the retail space, the 23,000 square meters that so far we have increased. The total number of square meters we were operating by year end 2016 was 420,000. The implementation of the business operating model is one of our main priorities. So far, the first wave includes 17 countries. All the countries, the 64 countries of the company will be implemented from the business operating model point of view by December 2018. The new generation store that in my view is one probably the most relevant initiative from the commercial point of view we are implemented will be open in Heathrow Terminals 3, Zurich, Merwin, Cancun, Madrid and all of these are in progress. The first one will be in Merwin. This is the comment I made when I was commenting on the performance in Melbourne. Melbourne, 70% of the space from the commercial point of view was closed down because we are in total renovation. And finally, focus on cash generation and deleveraging as is very well known is going to be one of our main priorities for 2017 too. That's all from our side. And now all the comments or questions are welcome. Thank you very much. The first question is from Jon Cox from Kepler Cheuvreux. Congratulations on that organic sales growth acceleration. Looks very impressive. But of course, we want more. And Julian, you seem to be saying double digit growth in all of the regions or most of the regions in the first few weeks of the year. Of course, we know it is Easter related. But adding it all up, I guess, it's growing at double digit rates for the group as a whole. That's my first question. Second question, just on the margin. And obviously, as you saw the stock performance this morning, there are some market concerns given the fact that the EBITDA margin only rose by 10 basis points when consensus is for 100 basis points rise for the year. Are you confident that this will accelerate as we go through the year? And just maybe as an add on there, you mentioned concession fees. You seem to be saying that should be 10 sorry, 10 basis points higher this year compared to last year versus the almost one percentage point we saw in the first quarter? And then just a last housekeeping question. I wonder if you can just give me the figure you used in absolute amounts to get to the cash EPS level linearization and the amortization after tax. Thank you. Okay. Thank you, John. For the Q1, obviously, the organic growth 7.2% is impacted by seasonality. One day less of sales in February is a lot in one quarter. And the Easter period in the Q2. What I said is obviously the consequence what I said is confirmed, is the organic growth during the first three weeks of April 2017 has been double digit growth. Yes, but obviously, it's also supported by the seasonality. Regarding the margin EBITDA, in my view, what we are disclosing in Q1 is tremendously impacted by significant cost the fixed cost structure and in several operations like, for example, The U. S. Or UK, we have performed well, but not at the level to really generate the EBITDA margin that probably the market was expecting. I remembered or you mentioned it in the past also, everybody was expecting around 9.5%. I am not concerned about that, because when the sales will and the EBITDA accelerate in Q2 and in especially Q2 and Q3, the EBITDA will grow and will reach the level expected. In terms of concession fees, I don't remember to mention one anything specific, but in this time, on top of the seasonality, you have a mix effect, higher sales in The UK and other countries with high concession fees. The second one is the increase of the mark in Spain and in Finland. There is not a secret that we said that mark in Spain and in other countries, especially in Finland, due to the contract signed at the time these operations were in one case acquired and in the other case awarded in a tender process, the mark is increasing year by year. The main two increases in the Spanish mark happened last year and the year before, but all years from now to the end of the contract, the mark will increase. What else? The cash EPS, Andreas? Yes. So on the cash EPS, what we added back is 76,000,000, which is the acquisition related amortization. That's the only adjustment that we made for cash earnings or cash EPS. So there's no adjustment for linearization at all? In the cash EPS, we don't adjust for linearization or deferred taxes. This is just add on information for people who want to do their own adjustment. Thank you. Thank you, John, for the questions. The next question is from Felix Ramers from Credit Suisse. Please go ahead. Yes. Hi, everyone. Three questions, if I may. Coming back on the EBITDA margin, maybe if you can share some more lights on the OpEx, excluding the concession fees you need to pay, if I calculate rightly, the increased percentage point we saw in the first quarter. And then just a last housekeeping question. I wonder if you can just give me the figure you used in absolute amounts to get to the cash EPS level linearization and the amortization after tax? Thank you. Okay. Thank you, John. For the Q1, obviously, the organic growth 7.2% is impacted by seasonality. One day less of sales in February is a lot in one quarter and the Easter period in the Q2. What I said is obviously the consequence what I said is confirmed. If the organic growth during the first three weeks of April 2017 has been double digit growth. Yes, but obviously, it's also supported by the seasonality. Regarding the margin EBITDA, in my view, what we are disclosing in Q1 is tremendously impacted by significant cost the fees cost structure and in several operations like, for example, The U. S. Or UK, we have performed well, but not at the level to really generate the EBITDA margin that probably the market I remembered or you mentioned it in the past also, everybody was expecting around 9.5%. I am not concerned about that, because when the sales will and the EBITDA accelerate in Q2 and in especially Q2 and Q3, the EBITDA will grow and will reach the level expected. In terms of concession fees, I don't remember to mention anything specific. But in this time, on top of the seasonality, you have a mix effect, higher sales in The UK and other countries with high concession fees. The second one is the increase of the mark in Spain and in Finland. There is not a secret that we said that mark in Spain and in other countries, especially in Finland, due to the contract signed at the time these operations were in one case acquired and in the other case awarded in a tender process, the mark is increasing year by year. The main two increases in the Spanish mark happened last year and the year before, but all years from now to the end of the contract, the mark will increase. What else? The cash EPS, Andrea? Yes. So on the cash EPS, what we added back is $76,000,000 which is the acquisition related amortization. That's the only adjustment that we made for cash earnings or cash EPS. So there's no adjustment for linearization at all? In the cash EPS, we don't adjust for linearization or deferred taxes. This is just add on information for people who want to do their own adjustment. You. Thank you, John, for the questions. The next question is from Felix Ramers from Credit Suisse. Please go ahead. Yes. Hi, everyone. Three questions, if I may. Coming back on the EBITDA margin, maybe if you can share some more light on the OpEx, excluding the concession fees you need to pay. If I calculate rightly, they increased by 19,000,000 So there in that, there were no one off costs or special things we need to consider. So that's really OpEx, we should also further extrapolate through the year. Then on CapEx, there was this 36,000,000 CapEx in intangibles. Can you be a bit more specific what exactly that is? Is that prepaid concession fees? Or how should we think about that? And then finally, on I don't know how much you can say about it, but on H and A, obviously, they announced that they acquired 16% or intend to acquire 16% of the company. Have you been approached by them? Have you been in discussions with them? Any thoughts on that move? Okay. Thank you. Regarding the expenses, there are today with a new structure of the company, the personnel expenses level and the other operational expenses, fixed cost in several operations that are accrued in equal parts during the different quarters. I don't think that excluding some new operations that we started and are not relevant, I am not going to say that this is a change that impacted the cost structure of the company. I think the issue here is personnel expenses and other operational expenses, I am talking about above EBITDA that are fixed and as a consequence impacted more in the lowest quarter of the year. Regarding the CapEx, what we have accrued there is an extension for several years. I would say, I think it's ten years of our contract. And what we have paid is a fee for the extension. And for the reason, we accrued as CapEx. And regarding H and A, I think we it's clear one thing. We have not been contacted yet. We have not met with H and A representative yet. And what we know is the communication. They forward to us on one side, HNA, on the other side, Temasek and JAC explaining that they have the intention to perform a transaction covering sixteen point six nine percent of the total shares of the company that this transaction has a long stop day of, I think, August 21 and subject to customary conditions, including official approvals and regulatory approvals. That's all. From my side, it sounds very in principle, very positive because obviously, there is a lot of interest of our company to expand the business in Asia. The opportunity with a company with this size and with this specifically managing millions of Chinese customers from the tour operator side to the hotel side. It sounds positive, but I cannot tell you anything else from the other side because we have not discussed anything yet. Okay. Thank you very much. The next question is from Thomas Baumann from Mirabaud. Please go ahead. Yes. Good afternoon, My first question refers actually also to concession fees and maybe to Andreas' remark. And I would like to understand what you actually meant. Concession fees year over year went up by €19,000,000 So there in that, there were no one off costs or special things we need to consider. So that's really OpEx we should also further extrapolate through the year. Then on CapEx, there was this 36,000,000 CapEx in intangibles. Can you be a bit more specific what exactly that is? Is that prepaid concession fees? Or how should we think about that? And then finally, on I don't know how much you can say about it, but on H and A, obviously, they announced that they acquired 16% or intend to acquire 16% of the company. Have you been approached by them? Have you been in discussions with them? Any thoughts on that move? Okay. Thank you. Regarding the expenses that are today with a new structure of the company, the personnel expenses level and the other operational expenses, fixed cost in several operations that are accrued in equal parts during the different quarters. I don't think that excluding some new operations that we started and are not relevant. I am not going to say that this is a change that impacted the cost structure of the company. I think the issue here is personnel expenses and other operational expenses, I am talking about above EBITDA that are fixed and as a consequence impacted more in the lowest quarter of the year. Regarding the CapEx, what we have accrued there is an extension for several years. I would say, I think it's ten years of our contract. And what we have paid is a fee for the extension. And for the reason, we accrued as CapEx. And regarding H and A, I think we it's clear one thing. We have not been contacted yet. We have not met with HNA, the representative yet. And what we know is the communication. They forward to us on one side, HNA, on the other side, Temasek and JAC, explaining that they have the intention to perform a transaction covering 16.69% of the total shares of the company that this transaction has a long stop day of, I think, is August 21 and is subject to customary conditions, including official approvals and regulatory approvals. That's all. From my side, it sounds very in principle, very positive because obviously, there is a lot of interest of our company to expand the business in Asia. The opportunity with a company with this size and with this specifically managing millions of Chinese customers from tour operator side to the hotel side. It sounds positive, but I cannot tell you anything else from the other side because we have not discussed anything yet. Okay. Thank you very much. The next question is from Thomas Baumann from Mirabaud. Please go ahead. Yes. Good afternoon, My first question refers actually also to concession fees and maybe to Andreas' remark, and I would like to understand what you actually meant. Concession fees year over year went up 0.9 or 90 basis points in the quarter. And I understood you're saying that adjusted by the seasonality, that would translate into a 0.1 or in a 10 basis point increase. Now what I didn't understand is whether when you say adjusted for seasonality, whether you refer to the Easter effect that we had in Q1 or whether you refer to the, let's say, the yearly seasonality. So if you could provide some clarification, that be great. My second question is really new concession growth. I would like to understand why you only had only in Verticomas a zero there, given the fact that you opened several thousand new square meters of shops last year and would have expected at least kind of a positive spillover effect into the first quarter this year? And then maybe my third question is, in a slide you referred to Turkey, Russia and Brazil, where you said we'll get back to these targeted EBITDA margins of 13% to 13.5% once these three markets have normalized. So what I would like to know is, well, all we know from today, how far away are we from, let's say, normalized twenty fifteen business levels? Is that, let's say, 10% or is it 30% or 40%? Just kind of an order of magnitude would help me here. Thomas, so let me start the first question, and then Julian will answer the second and the third one. So on the concession fees, what I actually wanted to say, probably I was not very clear here. So of course, you do have also a seasonality in the concession fees along the year. And I don't want to suggest that the Q1 concession fee is, if you want, stable and fixed, and that is the numbers to use. But what I wanted to say here, if you take the Q1 concession fees and then compare it against the average or the full year concession fees of last year, the increase is only 10 basis points. So what I actually wanted to say is like, look, don't take me wrong, don't say, well, now concession fees every quarter is only going to increase 10 basis points, and that's it. I think there is to be some volatility or seasonality for that matter. But what I wanted to say is like the 90 basis points of last year of the first quarter last year for various reasons, and I think Julian already commented it, is maybe not the only comparison point that we should use. So that's why what I wanted to say, look, if you look at the full year 2016, the concession fees that we have in the first quarter look a lot more consistent than if you just look at it on a year by year basis. That's all I wanted to say. From my side, I think the new concessions, the 5,600 square meters of commercial space that were opened during the last part February and March. And you know that, obviously, I cannot be specific because I don't know all the when all the operations opened, but they were opened mainly in March, contributing plus 0.5% of sales. And the termination of the point nine or 90 basis points in the quarter. And I understood you're saying that adjusted by the seasonality that would translate into a 0.1 or in 10 basis points increase. Now what I didn't understand is whether when you say adjusted for seasonality, whether you refer to the Easter effect that we had in Q1 or whether you refer to the, let's say, to the yearly seasonality. So if you could provide some clarification, that would be great. My second question is really new concession growth. I would like to understand why you only had only invert a comma zero there, given the fact that you opened several thousand new square meters of shops last year and would have expected at least kind of a positive spillover effect into the first quarter this year? And then maybe my third question is, in a slide you referred to Turkey, Russia and Brazil, where you said we'll get back to these targeted EBITDA margins of 13% to 13.5% once these three markets have normalized. So what I would like to know is, well, all we know from today, how far away are we from, let's say, normalized twenty fifteen business levels? Is that, let's say, 10% or is it 30% or 40%? Just kind of an order of magnitude would help me here. Thomas, so let me start with the first question, and then Julian will answer the second and the third one. So Thomas. On the concession fees, what I actually wanted to say, probably I was not very clear here. So of course, you do have also a seasonality in the concession fees along the year. And I don't want to suggest that the Q1 concession fee is, if you want, stable and fixed, and that is the numbers to use. But what I wanted to say here, if you take the Q1 concession fees and then compare it against the average or the full year concession fees of last year, the increase is only 10 basis points. So what I actually wanted to say is like, look, don't take me wrong, don't say, well, now concession fees every quarter is only going to increase 10 basis points, and that's it. I think there is to be some volatility or seasonality for that matter. But what I wanted to say is like the 90 basis points of last year of the first quarter last year for various reasons, and I think Julian already commented it, is maybe not the only comparison point that we should use. So that's what I wanted to say, if you look at the full year 2016, the concession fees that we have in the first quarter look a lot more consistent than if you just look at it on a year by year basis. That's all I wanted to say. From my side, I think the new concessions, the 5,600 square meters of commercial space that were opened during the last part February and March. And you know that, obviously, I cannot be specific because I don't know all the when all the operations opened, but they were open mainly in March, contributing plus 0.5% of sales. And the termination of the contract in Dubai, because it was not a profitable contract that we terminated. And the temporary closing in March of Sri Lanka, I hope that is temporary, because obviously we are participating in a tender for the extension, contributing in negative 0.5% for the reason the final calculation is zero. Regarding Turkey, Russia and Brazil, I obviously I cannot say that is going to happen because what we have seen so far is just two quarters with significant improvement in Turkey, Russia and Brazil. The total business that we have lost in these operations or due sorry, due to Turkey, Russian passengers and Brazilian passengers was around 5%, 6% of the total sales. I think last year with sales this year, very close to five percent. And I think this 5% is what we need to recover. The reality is there. I cannot say something different. Most of these operations are growing high double digit growth. Around 2017, beginning of twenty eighteen, I guess the business will be again in the company. But this is futurology. Okay. Now coming back to this new concession, what I actually meant, well, I didn't expect that the 5,600 that you opened in Q1 would already contribute massively to sales in Q1, but I'm referring to all the thousands of square meters that you opened in 2016. When you analyze that, that should be a spillover and I would have expected in new concession growth to have a positive number from what you opened last year, not this year, last year. Yes. Sorry, I don't have the calculation here with me now, but let me check it and I will answer you. I cannot answer the question because I don't have the information here. But it should be positive and I think it will be positive, but I cannot answer it. I don't know. Maybe a last one to Andreas. Did I understand you correctly that we can take the amortization charge in Q1 times four, that would yield would result in $360,000,000 which would be, again, kind of $20,000,000 lower that you guided back in March. Is that correct? Correct. So I think put it that way, I think the concession fee as we see now probably is closer to the $360,000,000 than it was to the $380,000,000 That is correct. No concession fee. Sorry, the amortization, I apologize. All Sorry, my clear. Thank you. The next question is from Jean Philippe Bertschi from Vontobel. I would have a question on the profitability on the EBITDA development. In the different regions, you just have negative in Asia with a margin of 4%. If you can maybe put some color on that. And with regards to the gross margin improvement, the 100 bps, you were mentioning the synergies, which were quite significant. But if you can put some color as well on the mix of the different categories. You're mentioning, I think, luxury was up 16%. What was the contribution on this mix? Regarding profitability in Asia, obviously, this is also impacted by the contract in Dubai because it was not a profitable contract that we terminated. And the temporary closing in March of Sri Lanka, I hope that is temporary because, obviously, we are participating in a tender for extension, contributing in negative 0.5% for the reason the final calculation is zero. Regarding Turkey, Russia and Brazil, obviously I cannot say that is going to happen because what we have seen so far is just two quarters with significant improvement in Turkey, Russia and Brazil. The total business that we have lost in these operations or due sorry, this operation due to Turkey, Russian passengers and Brazilian passengers was around 5%, 6% of the total sales. I think last year with sales this year, very close to 5%. And I think this 5% is what we need to recover. The reality is there. I cannot say something different. Most of these operations are growing high double digit growth. Along 2017, beginning of twenty eighteen, I guess the business will be again in the company, but this is futurology. Okay. Coming back to this new concession, what I actually meant, well, I didn't expect that the 5,600 that you opened in Q1 would already contribute massively to sales in Q1, but I'm referring to all the thousands of square meters that you opened in 2016. When you analyze that, that should be a spillover and I would have expected in new concession growth to have a positive number from what you opened last year, not this year, last year. Yes. Sorry, I don't have the calculation here with me now, but let me check it and I will answer you. I cannot answer the question because I don't have the information here. But it should be positive and I think it will be positive, but I cannot answer it. I don't know. Maybe a last one to Andreas. Did I understand you correctly that we can take the amortization charge in Q1 times four, that would yield would result in $360,000,000 which would be again kind of $20,000,000 lower that you guided back in March. Is that correct? Correct. So I think put it that way, I think the concession fee, as we see it now, probably, is closer to the $360,000,000 than it was through the $380,000,000 That is correct. No concession fee. Sorry, the amortization, I apologize. Sorry. My mistake. The next question is from Jean Philippe Bertschi from Vontobel. I would have a question on the profitability on the EBITDA development. In the different regions, you just have negative in Asia with a margin of 4%. If you can maybe put some color on that. And with regards to the gross margin improvement, the 100 bps, you were mentioning the synergies, which were quite significant. But if you can put some color as well on the mix of the different categories. You're mentioning I think luxury was up 16%. What was the contribution on this mix? Thanks. Okay. Regarding profitability in Asia, obviously, this is also impacted by the intercompany charges, but there is a decrease in the profitability mainly due to the Sri Lanka operation. Sri Lanka for several weeks was not part of the consolidation of the information. This is the main reason also the intercompany charges. Regarding the different families of product mix, the fastest in terms of growth has been luxury products with around let me check here, I got it here, with around 16% increase. Then we have Perspirants and Cosmetics and Wine and Spirits with plus 8% and Food and Confercentary with 5%. All the different operations performed quite well in this is obviously in constant currency. That's all, no? That's the question. Yes. And is there an impact on the margin? Is there like a positive mix impact? No, the mix, no. The margin was impacted by the synergies generated by the acquisition of War Duty Free and Original Inuance. Very clear. Thanks. The next question is from Arnaud Lopez from Credit Suisse. Please go ahead. Hi, thank you for taking my question. When you mentioned that 1Q was going to be the low point in terms of working capital, you're not including the $75,000,000 remaining of $100,000,000 cash outflows for projects, correct? Yes, that is correct. So the profile free cash flow profile for 2Q should be significantly lower than was last year if we assume that this 75,000,000 is on top of whatever it was last year, correct? Correct. But on the other hand, if you have you should have a certain, if you want, relative improvement, it's not because the normal working capital that we have now had a negative impact in Q1 partially should revert, not everything, but partially. I think that's the other element that should be on a positive note for the working capital. But you're right in the general way to think about working capital. That is correct. The next question is a follow-up question from Jon Cox. Andreas, maybe you can answer or Julian, what is your best guess then for the rise in concession fees this year? Obviously were 90 basis points in the Q1. You've talked about 10 basis points for the year as a whole. Do you have any best guess what you think will happen to concession fees at all? Jon, it's very complex because all depends on obviously the mix of the different operations. What you have seen in the first quarter is that operations with high, let's say, concession fees were more important in terms of growth and in terms of participating in the total contribution to the sales. I cannot guess obviously, we have the budget, but we have not disclosed the budget in the past. And I don't like the idea to disclosure a budget in this presentation. In principle, I think what you have seen during the first quarter, in my view, in 2017, will be very similar to the total if the important operations are performing like today. If the important operations, I mean, The UK and The US where obviously we have different higher concession fees and duty free are performing participating less in the total will be lower. But I think it will be depending on the mix. In terms of your model, suggest you put more or less the same thing than the first quarter. Okay, thanks very much. That was our last question. Okay. Thank you very much to all the participants in the call. We are always remain available if there is something else and let's see how the second quarter continues. Thank you very much. Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye. The next question is from Arnaud Lopez from Credit Suisse. Please go ahead. Hi, thank you for taking my question. When you mentioned that 1Q was going to be the low point in terms of working capital, You're not including the $75,000,000 remaining of $100,000,000 cash outflows for projects, correct? Yes, that is correct. So the profile free cash flow profile for 2Q should be significantly lower than was last year if we assume that the 75,000,000 is on top of whatever it was last year, correct? Correct. But on the other hand, if you have you should have a certain, if you want, relative improvement, it's not because the normal working capital that we have now had a negative impact in Q1 partially should revert, not everything, but partially. I think that's the other element that should be on a positive note for the working capital. But you're right in the general way to think about working capital. That is correct. All right. Thank you. The next question is a follow-up question from Jon Cox. Please go ahead. Yes, thanks. Thanks for taking another question. Andreas, maybe you can answer or Julian, what is your best guess then for the rise in concession fees this year? You obviously were 90 basis points in the Q1. You've talked about 10 basis points for the year as a whole. Do you have any best guess what you think will happen to concession fees at all? John, it's very complex because all depends on obviously the mix of the different operations. What you have seen in the first quarter is that operations with high, let's say, concession fees were more important in terms of growth and in terms of participating in the total contribution to the sales. I cannot guess obviously, we have the budget, but we have not disclosed the budget in the past. And I don't like the idea to disclosure a budget in this presentation. In principle, I think what you have seen during the first quarter, in my view, in 2017, will be very similar to the total if the important operations are performing like today. If the important operations, I mean, The UK and The U. S. Where obviously we have different higher concession fees and duty free are performing participating less in the total will be lower. But I think it will be depending on the mix. In terms of your model, suggest you put more or less the same thing than the first quarter. Okay, thanks very much. That was our last question. Okay. Thank you very much to all the participants in the call. We are always remain available if there is something else and let's see how the second quarter continues. Thank you very much. Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines.