Earnings Call: H1 2016

Jul 29, 2016

Ladies and gentlemen, good morning or good afternoon. Welcome to the Dufry Half Year twenty sixteen Results Conference Call. I am Shari, 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. Please go ahead, sir. Thank you very much for the introduction. This is Julian Diaz speaking. There is also participated in the call Andreas Schneider, Dufry's CFO. Welcome to this half year results Dufry's presentation. As in previous calls, we are going to use the presentation disclosure this morning in our website. Please go to Page six of the presentation. Turnover during the first six months of 2016 reached EUR 3,600,000,000.0, increasing 62% compared with previous year. Pro form a organic growth, including WoT Free, was minus 1.6%. Despite the positive trend during the first three weeks in April, our turnover organic performance deteriorated during May and June, mainly due to the bigger weight and seasonality of our operations in North Of Africa and the further deterioration in Turkey with a significant drop in total number of passengers and especially in Russian passengers. As a positive, I would like to remark the gradual improvement in all our operations in South America, especially in Brazil. The performance in half year at divisional level was as follows: in Division one, Southern Europe and Africa, turnover reached Swiss franc €744,000,000 compared with €364,000,000 last year. Underlying growth was flat in the same period. Spain continues with double digit positive growth and single digit year. Growth in the other European operations, except in Greece with a slightly negative performance due to the lack of Russian passengers. Mixed performance in Africa with negative performance in North Of Africa, Morocco, Argelia and Egypt and good single digit positive performance in Central Africa, including Ghana and Ivory Coast. Division two, Central And Eastern Europe, turnover reached CHF $964,000,000 compared with CHF $350,000,000 on previous year. Underlying growth in the division was flat. UK with moderated positive performance with single digit growth. Sweden, Finland and Switzerland reached single digit positive performance. Still negative performance in Russia and Eastern countries, including the significant drop in number of international passengers and the deterioration of the Russian ruble. In Division three, Asia, Middle East and Australia, the turnover was Swiss franc €372,000,000 versus 267,400,000.0 last year. Underlying growth was flat during this period. The performance in Middle East and India was single digit positive growth, a special good performance in India and Jordan. Southern Asia Pacific had good performance, Bay and Bali with single digit positive growth, the most important one. North Asia Pacific continued with negative performance, including China, Hong Kong and Macau and very high double digit positive performance in Korea. Division 4 Latin America turnover reached CHF 7 and 19,900,000.0 versus CHF 6 and 49,400,000.0 last year. Underlying growth in the division was minus 11%, minus 13% in the first quarter and minus 9% in the second quarter, with improvement in all the operations, especially in Brazil and Argentina, but still both with double digit negative performance. Good double digit positive performance in Dominican Republic and flagship and single digit positive performance in Ecuador, Mexico and Puerto Rico. Division five North America turnover reached CHF $790,000,000 compared with CHF $5.74 points last year. Underlying growth was positive, plus 3.2% due to the excellent performance of the duty paid operations in The U. S. And the duty free operations in Canada. Continuing with the gross profit margin, we have reached 58.4% during the first half compared with 57.9%. Most of this increase mainly was driven by Nuance contribution synergies. EBITDA margin at 10.6% and EBITDA in absolute terms increased by 61.1%, reaching 3 and €81,300,000 EBITDA was positively impacted by higher gross profit margin and impact of personnel expenses and general expenses and negatively impacted by the concession fees as a consequence of World Duty Free consolidation. Free cash flow increased by 66.1%, reaching CHF 200,000,000, far above CHF 120,600,000.0 last year. Finally, the net debt reduced by CHF 83,000,000, now accounting thousand €788,000,000 Cash EPS in Q2 reached 1.74%, doubling the amount in second quarter twenty fifteen. Despite the organic growth performance, it is important to remark, Dufry has shown the strength of our business model with a good performance in total sales, gross profit margin, EBITDA value and margin and very good performance in free cash flow and cash EPS. Showing once more our organic growth performance is not impacted our levels of profitability and generation of cash compared with other companies without our flexible cost structure and regional diversification due to the solid concession portfolio we are operating. Finally, one comment regarding Water Duty Free integration. Everything is on track. We have a couple of slides later on. Synergies, 105,000,000 are confirmed, and the new organization structure in the company has been announced last February and everything working as expected. Regarding the trading update. During the first three weeks of July, the second most important month in terms of turnover, we have seen an overall acceleration of total and organic sales compared with previous quarters. Division one, Southern Europe and Africa. All the operations performed well, excluding Turkey, with a significant deterioration affecting the division due to the high seasonality. Division two, Central And Eastern Europe, very good performance in The UK with double digit growth, better relative performance in all other operations, including Russia, also still low double digit negative performance. Division three, Asia, Middle East and Australia, still low performance in China, Hong Kong and Macau, mitigated by the good performance in other operations and the excellent performance in Korea. Division four, Latin America, all the operations performed better compared with previous quarter and significant improvement in Brazil for the first time in several quarters, only single digit negative performance. And Argentina with gradually improvement. Division five, North America, overall significant improvement compared with previous quarter, single digit positive growth, led by Canada Duty Free and Hudson Duty Play in The U. S. This is so far what we have seen during the first three weeks of July. Then if we move to Page seven, I think I have commented on most of the themes, including the deterioration of organic growth and sales performance that are in the chart at the bottom of this slide. Let's move to Page eight, where I would like to summarize the different initiatives that we have started since the beginning of the year for accelerating sales and organic growth. The first one is the refurbishment program of 60,000 square total square meters. So far, we have renovated 25,000. This 25,000 sorry, this 60,000 will impact in the growth 2016 around 0.8%. And the full year impact of this 60,000 square meter renovated will be 1.9%. I would like also to remark that every time that one of these shops is renovated, the spend per passenger increases between 1520%. There is also a significant program of new openings, contributing so far 15,800 square meters of commercial space that were opened during the first six months. The total number of square meters that we have signed so far in 2016 is 30,000 square meters. The new openings will contribute 0.9% in the total growth of 2015, and in a full year basis, will be 3.5%. Then we have two important activities that are very relevant because, obviously, represents more than 50% of the sales. We have accelerated the increased activity in promotions, and we have accelerated the strong novelties program introducing, obviously, in the shops all these projects that were approved in the headquarters. We have also accelerated the standardization of the pricing policies in World Duty Free. We have started specific action plans depending on the circumstances in several countries, the most important ones, Spain, U. K, Mexico, Russia, Brazil and Turkey. We have continued with the implementation of the VIP voucher program. I mentioned in the past also, this is specific program because every time that we introduce this program in an operation, sales increase between 57%. And finally, we have started implementation of a new incentive plan in order to drive sales in the shops in trying to obviously increase and improve the productivity. If we move to Page nine. As in previous conference calls, I would like to comment on the healthy international passenger growth projected. The sources A forecast, 2016 forecast is 5.7% increase 2017, 5.3% and the same in 2018. Two comments here. One is, obviously, the expectations are very positive on top of whatever is happening in the world today. And the second one is the main drivers in terms of regional diversification will be Asia Pacific, Middle East and LatAm. If we move to Page 10, in the same line of explanation, I think there are three organizations talking about tourism, travel retail, future sales and passengers forecast. I think Eulo Monitor is well known and has expected the demand in terms of tourism will grow globally around 4% by 2020. There are obviously different increases depending on the regional approach, but Spain, Portugal and Croatia will benefit in the Mediterranean, and the main problem will be seen in Middle East and Africa. The reality in the travel retail sales is that it's a very healthy business. I think the projection that Main One said generation published a couple of weeks ago is very useful. This business today, in 2015, total sales were €62,000,000,000 with a probable average growth per year of 6.8% in a period of ten years. I think this is confirming first the trend in number of international passenger growth. And the second thing is the innovation and the improvement that this business still has as a target for reaching this level of profitability that we are expecting in the projections. And then in terms of passengers, IATA is confirming what AForCast is forecasting there. For the next five years, the average increase in number of passengers will be around 5.3%. Then if we move to Page 11. I don't want to extend my comments on Page 11 because Andreas is going to comment on the fluctuation and the volatility of the different currencies where we are working. Page 12, as I said, total number of square meters signed so far in the year, 30,000, 50,800 already opened and 14,500 that will be opened during the rest of 2015 and beginning of 2017. Specifically, 8,600 of this 14,000 will be opened in 2015 and 5900 next year. Dufry opened in twenty sixteen eighty eight new shops. And we have, as in the past, a significant good project pipeline, 42 square meters. The most important of these part of these square meters are located in North America and the second most important in Asia, Middle East and Australia. In the first case, 35% of the total in the second 31% of the total. If we move to Page 13, as I said, and I don't want to extend my explanation too much, the new organization has been launched in February. The divisions and the companies have today a different business operating model that gradually will be improved and implemented from now to middle of twenty seventeen. The integration started in all the functions. We have launched more than two fifty initiatives in supply chain, category management, that master data integration, commercial planning and execution, IT, finance, retail operations, standardization and digital transformation. All these strategies and initiatives will be implemented along the next twelve months. In terms of the synergies, the only thing I can say is we confirm the 100,000,000, CHF 105,000,000 synergies, 50,000,000, 60,000,000 generated through cost synergies, 40,000,000, 50,000,000 generated through gross margin synergies. Then I think we'll move to one of the probably subjects over the past four weeks in Europe is Page 15. First results after the announcement of the Brexit on June 23. The first thing that we have seen in The U. K. Is an acceleration of sales. Obviously, this sales growth in The UK are a higher level compared with the previous weeks, week 27, '28 and '29. The increase also is generated by the increase in spend per passenger. And there are good news, almost nonconferred yet. One of them is confirmed. It's 10% of increase in terms of flight bookings to Britain so far. And there is a significant movement, and I would like to understand these movements very soon in terms of potential visits from China and from The U. S. To The U. K. The only thing we know so far is China's biggest operator has had 200 increase in searches for U. K. Holidays. And bf.com reports onethree more Americans looking for flights with detonation in U. K. This is in The U. K. Outside The U. K, the only thing we can say so far in the same weeks, that is sales are growing at the same speed. We haven't seen any change in the trends due to the Brexit. Spain probably is the most representative country outside U. K. For us in terms of British passengers. And overall, the growth in Spain is still very positive. In Page 17, the short term analysis conclusion is first data suggests that the pound devaluation so far is neutral or even positive. In my view, it's positive. The negative translation effect is something that we need to consider when converting into Swiss francs, but we need also to consider the increase of the business in pounds. That obviously will mitigate this translation effect. There is no transactional impact because we are a company in natural hedge, and there is nothing important to mention regarding the covenants. No material impact expected in the covenants. In Page 18, in the middle long term, I think the most relevant probably is to comment in the case of what is the legal status of this Brexit. It is still very early. But in a scenario where the Brexit will generate a separate market for The U. K. Versus Europe, And if the sales become duty free, I think it's probably one of the best scenarios for us because the duty free will be implemented in The U. K. For all the European destinations. And all the countries in Europe, when the passengers will travel to The U. K, will be also duty free. I think this will have a tremendous impact. Minimum is we are going to implement the tobacco in intra European flights that we cannot sell tobacco due to the margins today in the intra European flights. And also, the business in duty free, as you all know, has a significant higher margin than in the duty paid. But again, it's very early. The only thing is, it's middle, long term. We will try, obviously, to confirm along these next months and depending on the negotiation processes what is going on. One, in my opinion, positive characteristic is that more international passengers to The U. K. Will travel. And this will mitigate, if it happens, a possible drop in spend per passenger for the British passengers. I personally don't see anything. The only information that we can share is that over the past five years and with the volatility of the pound from 1.2 to 1.4 the average per year growth in spend per passenger was 1.8% in The U. K. And the number of passengers increased by international passengers by 3.8%. I cannot see anything negative, but in any case, we need to go, obviously, step by step understanding the consequences. So far is my explanation. And now I pass through Andreas for the presentation of the financial results. Thank you, and good morning and good afternoon, everyone. So if we move directly to Page 20. So there, have included the details of the growth components. Like for like performance declined in the second quarter, as already mentioned by Julian, and this effectively carries through the organic growth, excluding and including World Duty Free. So for the half year, organic growth was minus 1.6%, including World Duty Free. Growth from acquisitions accelerated to 68.5% in the second quarter, and this was 5.5 percentage points higher compared to the first quarter. So apart from the stronger seasonality of the old World Duty Free business compared to the old Duty Free business, it also shows the good organic growth from the World Duty Free business that we have seen in the last quarters. And then last but not least, in the first half of twenty sixteen, we also had a positive translation effect of 2.4%. Reported growth in the second quarter was 63.7%. Overall, we accelerated by some 3.7 percentage points compared to the first quarter twenty sixteen. Then if we move to Page 21, there we have the growth by division, and I suggest we move directly to the chart, which shows the underlying growth for half year 2016. What we do see there is basically that both Southern Europe and Central Europe, the performance was flat. In the case of Southern Europe, this includes Turkey, which had a very, very weak performance due to the lack of the Russian passengers and ongoing political turmoil, as mentioned by Julian. In the case of the division U. K, Central And Eastern Europe, this includes effectively our Russian business, and that's also the reason the lack of the Russian travelers, why this the result is there in the division. For the case of Asia, Middle East and Australia, this is largely unchanged compared to Q1. There, also, we see the slowdown in the Chinese spend continued also in the second quarter as did the strong performance of South Korea. South America was still negative but improving from Q1. The impact of devaluation of the Brazilian real continued to ease and should be fully washed out in the third quarter. In Argentina, the performance slightly improved, but there we will see the impact of the devaluation of the Argentinian peso. This will only annualize at the end of this year. So we will see this impact in the third and also in the fourth quarter for sure. North America had a solid quarter, overall growth rate 3.2% and as already commented by Julian. If we then move to Page 22, there we have the overview of the main aspects related to foreign exchange rates. On the emerging market FX rates, we already commented a bit. For most currencies, the devaluation has continued to ease with the exception of the Argentinean peso and Russian ruble. But equally for most currencies, we do have a negative impact in the first half of the year, which weighed on the results in terms of organic growth. As to our key currencies, The U. S. Dollar and the euro both strengthened against the Swiss franc, which resulted in a positive translation effect for Dufry. The British pound devalued on the back of the Brexit vote. And in the last week of Tubingen, we will have a negative translation effect of about 10% for our British pound business, assuming that the exchange rate remains unchanged. Now overall, and always assuming that there's no changes in the FX rates, we will have overall a slight negative translation effect for the third quarter and the fourth quarter, whereby the British pound more than compensates the positive effects that we will see from the U. S. Dollar and the euro. Moving then to the income statement on Page 23. So if we compare the half year results, the difference that we see in this period is similar to the ones that we saw in the first quarter. Principle, there are no big shifts or changes in trends compared to the first quarter. But going line by line, looking at the gross margin, it's 50 basis points higher in half year twenty sixteen compared to the same period last year. Main reason for the improvement is the Nuance synergies. EBITDA margin in the first half has been unchanged compared to last year at 10.6%. There, the increase in concession fees due to the consolidation of World GT Free were compensated with lower personnel and general expenses. Given the deterioration in organic growth, the fact that we have been able to maintain the margins actually does illustrate that we manage our costs quite effectively. Then going down further down the income statement, both depreciation and amortization were stable in the second quarter compared to the first quarter twenty sixteen. Linearization for the second quarter was $10,000,000 compared to $43,000,000 in the first quarter. As already highlighted in previous calls, the linearization pattern is fluctuating along the year, and we do have a slide later on where we can explain that once again in a little bit more detail. Financial result for the half year was $98,500,000 And again, this was in line with the Q1 numbers. Income taxes were positive $8,300,000 mainly driven by deferred noncash taxes. If we do the math, tax rate on EBT was 12%. And as usual, I would like to reiterate that tax rates do vary along the year, so this should not be taken as a number that is stable. Then to conclude, net earnings to equity holders were 75 minus $75,000,000 for the half year and a positive 10,600,000 for the second quarter. If we then move to Page 24, there we have again shown two details. One is the seasonality and the other one is linearization. We have shown that slide in the past. But given that both these elements are relevant, we wanted to repeat it once more. So firstly, the important point here business, and the third quarter is our most important quarter, especially when we look at EBITDA down to net earnings, there it becomes particularly relevant. And secondly, we have this line called linearization, which basically follows seasonality and enhances it. So as you see in the bottom chart, we will have a positive contribution of about 6,000,000 to $8,000,000 from linearization in the third quarter, but in the fourth quarter, it turns negative again with a charge of about 30,000,000 For the full year, we do expect a linearization charge in the area of CHF75 million. To remind everybody what linearization in principle includes, it comprises of two non cash elements, both related to the Spanish contracts. Firstly, we have the straight lining of the minimum guarantees, which increase over the duration of the contract. And secondly, we have the noncash impact of the prepaid concession fees. If we move then to Page 25, there we have the details on cash EPS. So cash EPS in the second quarter doubled from last year to $1.74 from $0.87 last year. This increase is basically a result of the good operational performance that we have and, to a lesser extent, also due to the lower nonrecurring costs from the acquisitions. Given the higher seasonality of our business, as mentioned before, we do expect a significant contribution to cash EPS in the third quarter. On Page 26, we have then the cash flow statement. Net cash flow from operating activities increased by 81% to €325,000,000 and free cash flow increased by 66% to €200,000,000 And we will look at the details later on. I think generally, what we can say is that we manage the cash flows tightly. Historically, cash generation has been lower in the first half of the year. And therefore, the cash flow generation is reflective of a strong operating performance in our view. For the half year, the cash out related to the World Duty Free integration was $10,200,000 There were no further extraordinary elements that impacted the cash flow statement in the first half twenty sixteen. So in a way, it has been relatively straightforward. On Page 27, we have, as usual, the details on the two key metrics in relation to cash flow. One is the core net working capital and the other one is CapEx. In terms of core net working capital, we have made another effort in the second quarter, and we achieved a 5.5% ratio over turnover in June 2016. In our view, this is a sustainable level, and it's well within the range of 5% to 6% of turnover, which is basically our target range. As to CapEx, we were at million or 4.5 percent when measured as percentage of turnover for the half year. Apart from the usual expansion CapEx and investment in the refurbishment that was commended by Julian, This also includes key money paid for the contract extension and additional new space in Brazil. For the full year, our expectation for CapEx remains unchanged at 3% of turnover. On Page 28, we have the balance sheet. There has been no significant changes since the last quarter. And also, if you look at the intangible asset structure, this remains unchanged. Then move to Page 29. Net debt was reduced by $170,000,000 since the beginning of the year and actually somewhat ahead of plan. Leverage covenant was three ninety one against a threshold of maximum four twenty five. So again, we have sufficient headroom on the covenant side. We do expect a further reduction in net debt in the third quarter as it is the strongest quarter. And as such, we do expect a strong free cash flow generation also in the third quarter. Last but not least, we drew our debt in different currencies to match our balance sheet exposure and cash flows. And as Julian mentioned, this hedging has protected us in relation to the Brexit and the subsequent devaluation of the British pound. So we did not have any material impact on cash flows, balance sheet or covenants for that matter from this British pound devaluation. This is all from my side on the financials. So I would like to hand back to Julian. Thank you, Andreas. Let's move to Page 31 for Spain, the conclusion and possible outlook 2016. In Page 31, what we try to summarize the most important key aspects of the business that will impact the future and also impacted in the past. Number one is as priority and main focus of the company remains to accelerate the organic growth, increasing the retail space, refurbished in the existing operations and accelerating the implementation of the commercial initiatives I mentioned before is one, obviously, of our main targets and main tax during the next six months. I am optimistic about the future. In terms of organic growth, I believe that the company will start delivering organic growth during the third quarter. And then obviously, the seasonality in third and fourth quarter will condition the total growth. But my view is that in third and fourth quarter, the company is going to deliver organic growth. We are continuing to focus in cash generation and deleveraging. This €200,000,000 free cash flow, I think, is a good example. But part of this total generation of free cash flow was offset because an upfront payment, as Andreas mentioned, that we did in Brazil due to one of the extensions. A front payment that is not going to go to the P and L is an upfront payment, just pure financial issue. Then World Duty Free integration is on track, and we are going I hope this is the plan to deliver the first impact of the synergies during the second semester. I would like also to comment on the seasonality because it's today one of the main keys in order to understand how the business is performing. And the third quarter is basically the most relevant in terms of generation of sales and generation of EBITDA. I would add also to remark two other things. One of them is we have been very active in negotiating renewal and extensions. This year that, as we commented in the past, we are not going to participate in large transactions, acquisition transactions. In the year for accelerating the expansion and the renovation of the shops. We have announced several renovations, including Cancun, Sao Paulo, Rio and lately, Zurich. That is one of the most icon contracts we have because, obviously, we are a Swiss corporation. But there are some others that will be also part of this strategy in 2016 that we will announce as soon we can when everything will be formalized. And then as a conclusion, I think it's important I comment on this specific issue. The combination of our efficient variable cost structure and the gain in diversification added by the latest acquisitions, contributing with a more diversified concession portfolio, have generated this quarter despite the different events impacted travel aviation sectors, Dufry increases the financial performance, including a strong cash flow and improvement of leverage, maintaining at the same time the CapEx investment plan to ensure the future growth, but in my opinion, is the consequence of the operational performance. That's all from my side. And now if it's possible, we will open the Q and A section. We will now begin the question and answer session. Please go ahead. Yes, good afternoon, Julian, Andreas. A couple of questions for you. As you correctly pointed out, not so good on the organic sales growth, but still able to deliver on the P and L in terms of cash flow generation. But just on the organic sales, are you saying that organic sales and we'll use a definition including World Duty Free, I. E, this minus 1.6% we saw in H1, are you saying that organic sales are actually now positive in the first three weeks of the year of July? Because obviously, you seem pretty confident that there will be organic growth in Q3 and Q4. I'm just wondering why is that? That's the first question. The second question just really on the free the sort of EBITDA figure you mentioned, the sort of aspirational goal to reach $1,000,000,000 EBITDA for the year as a whole. Do you think this is realistic? Do you think maybe the market should be penciling in a figure maybe closer to $900,000,000 rather than $1,000,000,000 given the all of the developments we've seen with The U. K. Depreciation, Turkey, etcetera, etcetera? That's my two questions. Yes. The first one regarding organic sales, we don't calculate the organic growth especially accurate for the three weeks. But in my view, after the information I have seen, is slightly positive. That compares with previous, obviously, quarter is a significant improvement. But the answer is positive, but still, it's only three weeks. I cannot say specific numbers regarding organic growth. But my view is that during the third quarter, that is the most important in terms of sales and in terms of delivery of EBITDA. What I have seen is giving me the impression that I can confirm that it will be positive organic growth. Regarding the EBITDA, 1,000,000,000. I think there are two aspects here. One is the translation effect. If you don't increase or we don't increase the business in The U. K. At the level of the devaluation, there is a translation effect. And this translation effect has to be taken into consideration. In terms of the rest, I think we are having the same target, to maintain the level of the €1,000,000,000 minus whatever is the translation effect by year end. And obviously, this is a concern because we are talking about the performance in the most important quarters, in the third and in fourth quarters. The question is very specific. I try to answer the most specific possible. The reality is that if we will perform in the third and fourth quarter in the at the level that we were expecting when we talk about this EUR 1,000,000,000, I will maintain the €1,000,000,000 minus whatever translation effect had over the period. Okay. Just as a bit of a follow-up. On the Russian trend, obviously, Russians are very important. Any thoughts on why they haven't been going to Greece and haven't been spending maybe as much money per ticket as they have done previously? Because obviously, the currency is improving somewhat there. The spend per passenger is not dropping dramatically. It's not an issue. Obviously, it's dropping, but not dramatically. I think the point here is the conditions and the performance in the Russian airports. I think the drop in number of passengers between 2535% in the locations we are in. One of the terminals, even 50 drop in passengers. Why? Because obviously, they are not traveling internationally. I think this is a condition based in the economic crisis in the country, but also due to the strong devaluation over the past eighteen months, as you know, is 98%. And what I am confident about Greece. I think Greece is a destination, it's not only as you know, it's not a sand destination, it's also a religious destination for the Russians. This summer is going to be fine. Turkey, I don't have any expectations in Turkey positive expectations in Turkey. I think the combination between the three things that happened. One is the Russian crisis with Turkey. After that was, obviously, the terrorist attacks. And after that was what happened during the last weekend. I think it's not giving me the impression that Turkey will contribute a lot in 2016. And maybe just to be cheeky, one more follow-up on Chinese. Obviously, it's a big focus of attention for many industries and travel retail. What are you seeing in terms of Chinese traveling and spending in Europe? We obviously see global blue data down. It's down substantially in Europe. What are you guys seeing there? In terms of Chinese, what is happening today is a slowdown in spend per passenger everywhere. For us, it's positive in one place that is mitigating in total. If you see the total performance for the Chinese, we are more or less fine because, obviously, they are selling performance in Korea. But in general, spend per passenger, excluding Korea, is dropping around 15%. I think this year, what we have seen is that. But what we have seen also over the past, let's say, one two months is a significant improvement of the situation at the beginning of the year. I think the worst is already over. And I have a lot of expectations, especially in The U. S, in Europe and in the operations we are managing in Asia. The next question is from Jaafar Mestari, JPMorgan. I had three questions, please. The first one is on Nuance synergies. Can you confirm that all of the remaining synergies that you had after last year have been delivered now in H1? And secondly, on recent renewals and extensions, what is your new average contract length after those extensions? It was eight years, I think, last time you shared it with us. And finally, on Turkey, can you maybe quantify the weight of Antalya and possibly also describe the contract terms in a little bit more detail? Because obviously, it was negotiated by Nguyen's management at the time. But I was wondering how aggressive you feel they've been on the terms given that, for example, we know they've agreed to make a cash prepayment. So what about other elements of the contract? If Turkey revenue is under pressure, is there a risk here that you start hitting a minimum guaranteed amount and that sort of things? Okay. Regarding new synergies, I confirm, not the €35,000,000 because, obviously, the €35,000,000 cannot be. But whatever is the proportion is delivered in the P and L in terms of cost. And in terms of gross profit margin synergies, it's 0.5% of the total sales. I confirm the synergies from Nuance are already there. The second one is renewal and extensions. After the renewals, the average duration concession portfolio is nine point two years. And regarding Turkey, there is not a significant minimum guarantee. As a consequence with the circumstances we have today and is obviously are dramatic, the MAC or the minimum guarantee is not hitting. And my expectation is, obviously, it has to be a complete disaster, but it's not going to hit the P and L at all. The problem here is the volume. The next question is from Thomas Baumann from Mirabaud. I have four questions, if I may. First of all, can you share with us to what extent the flat I'm talking about quarter two, the flat gross margin and also EBITDA margin development was due to the negative mix between, let's say, Dufry exclusive, Will Duty Free and Will Duty Free? That's the first question. And secondly, now with an additional month of Will Free coming in, can you tell us how much sales that Will to Defree generated in July 2015? Or even better, if you could tell us what you expect Will to Defree to generate in July 2015 as we are pretty close to the month? Just an order of magnitude would help. And then thirdly, I think you mentioned in your comments, Julian, that you obviously no longer expect 3% to 4% pro form a growth for the full year. But just to clarify on that, you expect positive pro form a, it is pro form a organic growth in the second half. Is that correct? And maybe the last one, looking into next year, obviously, we have out there the goal or guidance or however you call it of 13% to 13.5% to 14% EBITDA margin. Now with the situation we are in today with all the challenges, is that still a realistic goal? Or should we crawl back on that one? Okay. Regarding organic growth and sorry, the gross profit margin. Regarding the gross profit margin, I think the underlying retail gross profit margin is still growing. The difference or not the difference, what is reflected in the second quarter is a mix and seasonal different of completely different operations. For example, this operation in Turkey has a very high gross profit margin. It was impacting negatively the performance in the second quarter. But the underlying is still growing and mainly due to the increase of the synergies. The reason is the increase of the synergies in Nuance. The impact of 0.5% increase from the year from the beginning of the year to June 30 is mainly driven by the synergies generated by Nuance. The offset in the second quarter is just a poor mix and mix of operations more than any other things. In terms of World Duty Free sales, I don't have the sales. I don't know. I don't know the information. We don't manage now World Duty Free. What we have now is different divisions, and the operations have been allocated in the different divisions. I don't know. In any case, I prefer not to mention World Duty Free because World Duty Free is just part of Dufry. And Dufry in July is going to reach a similar level of sales of basing what I have seen in the first six weeks compared with previous year, including World Duty Free and including the former Dufry's operations. Regarding the organic growth, yes, I said that. I expect a positive organic growth in the second part of the year. And as a consequence of the seasonality, I cannot confirm if this will be enough in order to say the full year will be positive. But my guess is, yes, it's going to be positive. Regarding the EBITDA margin, I maintain the same thing. What I say is the operations that are heated by this currency fluctuation, in most of the cases, are not heated by the number of passengers. And as a consequence, the volume of sales are not lost. At last in 2016, but in 2017, if the situation normalizes and Brazil is specific case, Argentina is a specific case, they are normalizing very fast. We generate sales higher compared with the sales that we are seeing now even with the same number of passengers. I don't want to say that the 13.5, the 14% is not going to be achieved. I think it's realistic target based in the performance and based in the delivery of the synergies that we are expecting. I maintain the same EBITDA margin. The next question is from Jorn Ifert from UBS. And the first one would be, please, on your EBITDA statement for 2016, saying around €1,000,000,000 minus the negative translation impact, which is maybe around €20,000,000 So we stay here maybe at €980,000,000 This would imply a growth rate of 20%, 25% for the second half versus second half twenty fifteen. And this would, if I'm not totally wrong, would imply around 10% top line growth, more or less organically. So I struggle to see how EBITDA could come close to the start, but I'm very happy to be, of course, to be corrected. Number two would be, please, after you have prolonged the recent concession, which I think is a very good achievement, And the step up in concession fee is still making you confident that you can reach the 13.5% to 40% EBITDA margin from 2017, 'eighteen onwards. Is this correct? Hopefully, have understood you correctly. And last question would be, when there are new concession out in the market, has Toffi recently won them or said, okay, no, look, the terms are not attractive enough? And what do we expect here for the future for new concessions that Toffi was not incumbent? Thank you. Sorry, I couldn't follow-up the first question. I was a bit lost. No, sorry. Am I I was saying you were saying around €1,000,000,000 EBITDA for twenty sixteen minuteus the translation impact, which is around maybe twenty million euros So we are still at €980,000,000 And this would imply second half growth of 20%, 25%, which seems quite high? Or that I'm just wrong on the math? I don't know because I have not seen the figures now. But what I see is what is the rest of the budget we have. And with the rest of the budget we have, it makes sense to say that if we perform compared with the budget, we will reach this figure. But I don't know if it's 20% or 15%. I know the figures, but in total number for this semester, I cannot answer. I don't know. I cannot follow you. It's my point. If you say 20% increase during the second part of the year, I don't know if it's 20% or 15%. What I know is that the budget for the company was X. Now I see what happened during the first six months. Now I see what is the possible impact of the devaluation possible devaluation. And the difference seems to me that is realistic. All right. Regarding the concession fee, I think the assumption is incorrect. The concession fee of this company, due to the communications we have shown the other day, is not going to be modified tremendously not tremendously. It's going to be modified slightly. I read in many reports around that there is a significant increase. It's not true. In some of these concessions, the concession fee drop. No increase, drop. And the second one is, I see new concession fees rising. If it's a tender process or an auction process, it seems that it's possible. But if you have a negotiation process, as I many times commented on, you can negotiate the same level of concession fees. As you know, after the consolidation of the two acquired companies, we are around 26.8% or 26.9%, I think, during the first six months. I think the consolidation is changing in Dufry's reporting line, but the underlying in terms of what we are doing in negotiation one on one is in this line. I don't see for Dufry a high risk in concession fees increases. This is for one reason. And the second reason is average concession duration of the contract after this renovation that I have announced is nine point one years. It's a long time for maintaining a sustainable rent concession fee in the P and L. All right. And on the new concession where Dufry is not incumbent, do you expect a couple of wins here in the next one or two years? What is your best guess what this can contribute? New concessions. Yes. But you haven't been incumbent? I think we have been very active, and we have achieved many of these concessions this year. I don't remember the number of square meters, but we are winning concessions every year significantly. Probably what we have to do, even in the case that added are important, but individually considered are not important, we should communicate that. But it's a very significant. I think that probably between 23% of the total concessions we add every year in a negotiation process, and around 1%, 2% is probably participating in tenders. All right. Very good. Thanks very much. Thank you. The next question is from Monique Pollard, Goldman Sachs. Please go ahead. Afternoon. Just one question from me. I was just wondering on the Spanish Aina contract, you had mentioned before that you thought particularly in Lot two, you'd be above the minimum guarantee in the second quarter. I was wondering if that had happened and the EBITDA contribution you got from it in the second quarter and what we could expect from that in the third quarter and for the remainder of the year? JOSE For the Spanish concessions, we don't provide specific information regarding EBITDA. What I can say is during the second quarter, still the operation is undermatched. It was not overpassed. This is the first part of the question. The second question regarding what we could expect in terms of EBITDA in the Spanish concession, I cannot comment on that because we don't disclosure specific information in the specific operations. But do you think that in the third quarter, it could get above the max? My expectation is, yes, it could be. But we are very close. We are very close. But obviously, it's difficult to say, but we are very close to be out of March. We have a follow-up question from John Cox, Kepler Cheuvreux. Please go ahead. Mr. Cox, your line is open. Thank you. I thought I'd come back for some more. Basically, on the free cash flow assumptions for this year, consensus seems to be somewhere above CHF400 million. I'm just wondering, maybe this is a question for Andreas. Do you think this is doable given the fact if you strip out all of the things you had in the first half, the net debt only went down by $90 odd million. So you still have quite a lot to do in the second half of the year. And I know the business become really much more seasonal. But do still think that sort of $400,000,000 plus free cash flow that would be after interest charges is still doable? Well, I think that's a tough question. From my side, I think if you assume that we will have a good second half of the year, I think we can reach it because obviously, the Q3 will be really, really essential. But at this stage, I don't have any reason to tell you, look, no, this is not going to happen. But it does depend on Q3, to be fair. Okay. And then maybe just a follow-up on the sort of the recent concession fee negotiations. You said some concessions actually went down. I think most people assume that could be the ones in Latin America. Just what about the ones sorry, in the Southern part of Latin America, should I say. What about in Mexico and Switzerland? Were the concession fees there actually raised? Or were they sort of more or less in line with the former contracts? Well, the information, as you know, is not disclosure. In Switzerland, there is a very complex deal because we have agreed many other things with extensions and more square meters. I think it's slightly increased. And in fact, in the other operation in Cancun, it was renegotiated. I cannot be specific, John. Okay. It's information that we don't disclose for And then just maybe a question on this whole Moncler transaction with Temasek yesterday. And obviously, Chairman, Torres, is part of that transaction. Have you guys are you guys involved at at all at the moment on this? I think I talked to some of you yesterday and you seem to be saying, well, no, this has got nothing to do with us. Do you see any sort of maybe a chance to work close more closely with Moncler in the future where they're opening running more stores for them? Maybe do you see Duffry as down the road being part of a larger because obviously travel retail is very close to luxury retail in many ways, not least the whole passenger part of the equation. Would you envisage maybe down the road that Duffry is part of a bigger group, which maybe includes some luxury components? First, as you know, and his disclosure, very clearly disclosure is a private investment of Mr. Torres. And Dufry doesn't have any relationship on any regard with this transaction. In fact, Moncler is not even today a supplier. Regarding the second part of the question, personally, I don't visualize this company doing high street luxury retail. It's a completely different business. It's out of scope, and we don't have this as a target in the company. That was the last question. Okay. Thank you very much, and thank you for the questions and for the participants in this 02:00 in the afternoon Friday on summer conference call. Thank you very much. Bye bye. Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in conference. You may now disconnect your lines. Goodbye.