Earnings Call: H1 2020

Aug 3, 2020

Ladies and gentlemen, welcome to the Dufry's Half Year twenty twenty Results Conference Call and Live Webcast. I am Alessandro, 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. The presentation will be followed by 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. You will now be joining to the conference room. 1 minute, you can. 1 more minute. Good afternoon, everybody. Here we are in Zurich. Welcome to our half year results 2020 presentation. I am relieved that we can hold a physical meeting. We have very few people here, but still, obviously, it's important that we are face to face. And we also welcome the participants via conference call. There is a long list. With the presentation today is with me is also Yves Gester, our CFO, as always. Let's move to the Slide 2 of the presentation. Here is a glance at our agenda for today's meeting. And as always, we are going to dedicate a significant time, I hope, at the end for your questions. If we move to Slide number 4, I think what we have here is the highlights of what happened during the first 6 months. In the center is organic growth minus 60.6%. Sales negatively impacted by, obviously, the pandemia, but with different evolution. 1st, we started with a significant increase of sales in January. February gradually is slowing down, especially for the impact in Asia and in international destinations with minus 7%. And finally, in October, during the Q1 with the same trend than in February sorry, in October March, with the same trend than in the 1st 2 months and the second part with minus 93%, 90%, minus 94% compared with previous year. And we closed down the first 3 months, the Q1 with a minus 21%. During April, May June, what we have seen is a slowdown in May, but with obviously an increase compared with the previous months, we were generating around 4%, 5% of the sales of last year. In May, around 9% of the sales of the previous year. And in June, where we will we had obviously around 9% of the sales of previous year. In July, and we are going to see that in a minute, we have reached very close to 20% of the sales of previous year. During the 3 1st days of August, we have been very close to 40% of the previous year. The message is, obviously, we are still far away, But what we have seen is a positive trend from, obviously, the moment that the situation of life has to close down most of the shops. On the left side is the €1,000,000,000 the €1,000,000,000 savings that we have commented on in the past that are obviously a significant is a significant challenge. But at the same time, it's also an opportunity for explaining that this company, and we have done in the past, is a company with a very good flexible fixed variable cost structure. The €1,000,000,000 that is commented on in this slide on the left is fixed cost, and this is what we are expecting for the year full year 2020. So far in the P and L, what you are going to see is €470,000,000 impact in fixed costs plus €137,000,000 that are minimum annual guarantees waivers that due to the pending documentation have not been reflected, but it will be reflected during the next months. Specifically, talking about €200,000,000 in personal expenses savings, around €115,000,000 related to operational expenses and around €161,200,000 regarding minimum annual guarantees reliefs of cost. Continuing with the highlights, I think it's also very relevant that this company has been able during the last 3 months to really enhance and reinforce the financial situation with a significant number of initiatives that Yves will present and will introduce that as a consequence of, we reach by June 30 very close to €1,600,000,000 liquidity. On the right side of the organic growth, one of the probably numbers that I would like to remark more because it's the most is the closer to the proxy of the former EBITDA before IFRS 16, minus €103,000,000.5 This is a consequence of all these initiatives of savings that have been implemented and also the consequence of obviously the cash protection that we have done. On the right side, the equity free cash flow this time is €750,000,000 negative is a consequence of what we are obviously discussing today. But it's also relevant to mention that the most important part of this is due to 3 factors, 3 facts. 1 is payments coming from the previous year, concession fees and other type of payments that were originated in 2019. There were also expenses that were related with the halt of purchases that we have started. And finally, obviously, there is a significant impact also here about the slowdown of the sales. And as a consequence, the as a consequence of the purchases that we have done due to the possible, at that time, high season, we acquired a significant level of inventory. Moving to page number slide, better explained in number 6. Turnover in half year amount €1,600,000,000 is €2,600,000,000 less than previous year 2019. The closures, as I mentioned, started in March 2020 and have been implemented in most of the locations where we are operating in April May. Now with the travel restrictions being lifted, what I have commented on is obviously my view, light at the end of the tunnel, is we have recovered from minus 94.1 percent of sales compared with previous year in May to July minus 82.3%. During this early phase of reopening, we are experiencing a higher spend per passenger compared with 2019. This is another, in my view, relevant information. It's what we have seen due to the passenger profile is that the passengers buying something in our shops are increasing per head tremendously compared with previous year. These indications are encouraging, but it will be too early to extract any conclusions. In our view, here what we need to consider is that the persistence of the passengers' recurrence is key for confirming these trends. If we move to Slide number 7, turnover and organic growth by region. In this slide, represented obviously the total sales per division and also the performance in organic growth compared with previous year. The organic growth by region comparing all segments, the best performing has been Central and South America with organic growth coming at the minus 55.6%. Why? Because this division was impacted the latest in terms of the process, because obviously the crisis started in middle of February, beginning of February in Asia and then gradually moving to the West. And the last one impacted was division number 4. The division was, at that time, operating international flights with total normality. Europe and Africa saw the highest decrease with total sales, 558 8,900,000 Swiss francs in the 1st 6 months and organic growth minus 66.1%. Performance was negative across most locations due to the restrictions in force from March onwards. From middle of June 2020 from June 2015, travel restrictions were lifted or eased and intra European travel, especially in Southern and Central Europe as well in the UK started to resume. Organic growth in our North America operation was minus 57.9%, the 2nd less impacted in the period, with other slowdown in both segments, but especially in duty free, which is exposed to international flight schedules. The relatively stronger performance compared with other segments is based on the prevalence of domestic travel, which accounts for around 85% of the U. S. Flight movements. But we are also considering here that North America got impacted later than Europe and Asia, and the domestic started to resume already. Organic growth reached 60% in China and South Korea. This is division number 2, being impacted especially during Q1 2020 by resuming domestic and bilateral travel in Q2. Other parts of Asia Pacific and especially Middle East region were impacted mainly in the Q2 and are still continuing to be impacted with a low level of open shops. If we move to slide number 8, net sales by region etcetera is a consequence of what we just discussed. Europe was impacted and the restriction started early compared with North and Central and South America. Therefore, the split by region is slightly shifted compared to previous year. Europe and Africa amount for 36 percent of turnover, down from 44% in the full year 2019, North America with 25% and Central and South America with 21%. Tufry distribution centers experienced an increase in share from 1% last year to 3% this year. This is one of the reasons that we are going to comment on later because this impact obviously the margin gross profit margin mix. The wholesale business represented this year 3% and last year 1%. If we move now to slide number 9, net sales and performance by category. Looking at net sales per category, the product mix only shifted slightly. For example, the biggest category in regard the share of percentage of net sales, perfume and cosmetics was slightly up by 200 basis points compared to full year 2019. However, the decline year on year in net sales was slightly stronger compared to food and confectionery or electronics, as most of our stores were closed during Q2. It is too early to make out that trend regarding product categories. But in the past, what we have seen is obviously more resilient performance in spirits, tobacco, packaging and cosmetics and food and confectionery and more impacted categories basically talking about the luxury products. If we move to slide number 10, net sales by channel. Split by channel provides an idea about obviously that the most important impact happened in the airport and retail channel. We're down and reaching around 63.6% in net sales compared with half year 2019. All the other channels were very close to 50%, 51% in most of the cases. If we move to slide 11, yes, we're continuing with obviously the same rationale that we have used in the past for announcing how the company is evolving in terms of square meters of commercial space. We have respect in this respect opened 2,850 square meters of commercial space and renovated 6,350. Most of them, probably all of them, were open or renovated before the crisis, the stronger part of the crisis started. The total number of square meter that we are operating today is 470,000. We have also under negotiation, and this is also relevant to mention, around 32,000 square meters of commercial space that will be negotiated and or, let's say, allocated to the portfolio during the next months. If we move to slide number 12, what we are going to see from now on is the financials. And I would like to hand over to Yves for continuing with the presentation. Thank you, Julian, and welcome, everybody, here in Zurich and those who have joined on the phone. On Slide 13, the P and L, as we typically show it, our half year statement 2020 clearly reflects the various cost reductions measures already mentioned by Julian earlier on with an adjusted operating profit of minus CHF 464 600,000 for the 6 months of 2020. Let me guide you through the different lines of the P and L. Gross profit reached CHF920,500,000 with a margin of 58%. The gross profit margin was mainly affected by the turnover mix from the retail and wholesale business. In fact, our retail related gross profit margin was only 60 basis points lower as compared to the full year 2019. We achieved to maintain a resilient margin despite the sales decline. We expect a normalization of the business recovery, I. E, once the business recovers, the margin should go back to the initial number. Looking at the next line, lease expenses amounted to minus CHF 75,700,000 in half year twenty twenty compared to minus CHF 633,800,000 in the same period last year. Lease expenses reflecting the variable component of concessions naturally decreased due to the lower sales level. In addition, we successfully negotiated reliefs on the minimum annual guarantees, the MAC, with airport authorities and landlords amounting to CHF161,800,000. We expect to recognize additional MAC reliefs of CHF137,000,000 for the period of March to June 2020 retrospectively. These additional MAC reliefs are not yet reflected in the financials for the half year twenty twenty. Personal expenses decreased by more than 30%, general expenses by 40% compared to the same period last year. We implemented an efficiency program, which included reducing costs on all levels, making use of government support schemes, voluntary salary reductions and also supported by Global Executive Committee and the Board, including ourselves. The increase in depreciation and amortization is mainly related to the recognition of impairments on intangible assets due to the COVID-nineteen pandemic. Impairments were CHF131,500,000 on goodwill, CHF 198,700,000 on other intangible assets and CHF 10,400,000 related to right of use and property, plant and equipment. Financial results, including lease interest and foreign exchange differences, amounted to minus CHF 72,300,000. Interest paid increased due to the refinancing of the senior notes in November 2019. These effects were partially offset by changes in margins for amendments and new facilities as well as one off expenses related to the different financing initiatives taken during the last month. Income tax reduced income tax reached CHF 40,400,000 and the income was mainly driven by the loss situation of some of our operations. Minorities were at CHF 101,400,000 for the half year due to negative net profit achieved. Considering CHF 2,600,000,000 less turnover for the period and adjusted operating profit of CHF 464,000,000 proves the flexibility and our fast adaptability to the new environment. Moving to Slide 14 with the cash flow overview. Cash flow metrics were also impacted by the lower level of sales. Cash flow before working capital change was CHF 180,500,000. Adjusted operating cash flow reached minus CHF103,500,000 in the 1st 6 months. As a reminder, adjusted operating cash flow is a very good proxy to the former EBITDA. However, it is typically slightly below the former EBITDA. Keeping that in mind, one could argue that we have almost reached breakeven on the former EBITDA. I have briefly mentioned the macro reliefs already, which have been accrued on the respective period in the P and L. In the cash flow statement, excluded in the operating cash flow and shown as part of the lease payments. Our overall concession fees paid, which consist of the variable components shown as lease expenses and fixed components declared as lease payments were nearly 60% lower compared to last year. Now please bear with me the lower graph to guide you through the main impact on the equity free cash flow 2020 compared to the financial or the half year twenty nineteen. We already addressed adjusted operating cash flow. In addition, change in working capital had a negative impact, which reached minus CHF473.9 million in half year twenty 20 compared to minus CHF17 1,000,000 in 20 19. Our trade payables decreased in the second quarter as we stopped purchasing new merchandise. The decrease was also related to the 2019 comparative base when we had an increase of CHF 97,000,000 in trade payables. Additionally, other accounts payable, especially accrued concession fees payable, decreased as well. Income tax paid was slightly higher as payments in the half year were related to 2019. For CapEx, we have reduced it by more than 50%. Net interest paid was lower as the refinancing of our senior notes in November 2019 had a positive impact. Payments to non controlling entities decreased based on the decrease in net profit in the first half of the year. Other financing items contain the one off net expenses related to the different financing measures we have taken in Q2 2020. Summarizing, we report an equity free cash flow of minus CHF 749,100,000 for the first half of twenty twenty. Moving on to Slide number 15. This slide provides some additional details on our core networking capital and CapEx movements. Core networking capital consisting of inventories, trade receivables and trade payables stood at CHF581 1,000,000 at 30 June 2020. Not surprisingly, core networking capital as a percentage of sales increased due to the lower sales level. Main driver was the decrease in trade payables. CapEx as a percentage of our sales also increased slightly at the beginning of the year, we were still investing in refurbishments. We spent CHF 60,000,000 in CapEx in the first half of twenty twenty, mostly related to refurbishment. For the second half, we expect Slide 16 gives you an overview on the expense reductions and cash savings in the first half year twenty twenty. We have included a bridge displaying changes in the first half of twenty twenty versus the first half of twenty nineteen at P and L and also cash flow level. Vibil had a loss of turnover of CHF 2,600,000,000. Change in equity free cash flow was CHF889,500,000 in the first half year twenty twenty compared to the first half twenty nineteen. Just for the avoidance of misunderstanding, this considers all cost items, not only fixed costs. Concession fees, personal expenses and general expenses were reduced by more than CHF 1,000,000,000 compared to last year. In percentage, concession fees by 57.7%, personal expenses by 31.6% and general expenses by 39.9%. At cash flow level, CapEx declined by CHF 65,000,000 to less than half of previous year's level, which were partially reversed due to the net working capital swing with a negative impact of CHF557,100,000 in the semester. Our potential to reduce expenses as well as the high flexibility on our cost structure supports us in the current crisis, as you can see on that slide. We expect sustainable savings from 2021 onwards, further strengthening our cash flow, preservation and generation. On the next slide, an overview on the again, on the financing actions we have taken earlier this year. In April, we announced a comprehensive set of initiatives to also strengthen our capital structure and liquidity position, thus allowing us to sustain a prolonged period of operational disruptions and reinforce our competitive positioning in the longer term. The different measures are outlined in the overview slide and includes the new 12 months committed credit facility of in the equivalent of CHF 390,000,000 the CHF 140,000,000 COVID related backed loans the successful placement of new shares generating gross proceeds of CHF 151,000,000 the placement of the convertible bond of CHF 350,000,000 and the agreement with the banks to waive the covenants until and including June next year, I. E, the first testing will be in September 2021, where the leverage covenant will be tested against the 5 times threshold. In addition, the Board of Directors recommended shareholders to cancel the 2020 dividend of around CHF 200,000,000 to reduce short term cash outflows in this unprecedented situation. On the next slide, an overview of our debt evolution and maturity profile. Net debt as of June 30, 2020, amounted to around CHF 3,700,000,000. There are 2 developments I would like to point out. First, compared to June 30, 2019, the increase was only CHF368,000,000, taking into consideration the seasonality of our business and the strong cash generation, which normally only starts in the Q2 and extends into Q3. Secondly, the change in the net debt in Q1 was an increase of around CHF435,000,000. In Q2, net debt increased by only CHF120 1,000,000, positively obviously impacted by the financing initiatives executed in April, but also by a strong reduction in cash usage. The right chart reflects the debt maturity profile, including the newly received term loan of EUR367,000,000 maturing in 2021. Again, this facility has the possibility or the option to extend it twice by 6 months. However, we have the possibility to extend the loan. And the chart also includes various COVID-nineteen related government backed loans with a total amount of CHF160 1,000,000 maturing in 2025 and another CHF27 1,000,000 2022. And as of June 30, 2020, we had around CHF 703,000,000 of undrawn bank facilities and close to CHF 740,000,000 in cash on the balance sheet. With our cost reduction measures and cash preserving reopening program, we do not anticipate any liquidity problems during the crisis. We will proactively and early address on the refinancing '22 maturing debt and will inform the markets accordingly about any actions taken there. On the next slide, I would like to provide an overview on the liquidity position as of June 30, 2020. Slide refers to pro form a liquidity as we have included 2 COVID-nineteen related government loans, which we have received approval only in July. This amounts to around additional CHF 30,000,000. The waterfall shows you the liquidity as of December 2019, which stood at CHF 1,259,000,000. Cash consumption For the 2nd quarter, we were able to reduce consumption cash consumption significantly, also thanks to the cost reductions achieved already in the quarter. Also in Q2, we received the inflow from the already mentioned financing measures detailed here. Including these financing measures, change in net debt amount to CHF 122,000,000. In total, this resulted in an increased pro form a liquidity position of around CHF 1,583,000,000 as compared to year end 2019. With this positive note, I hand back over to Julian. Thank you, Yves. Let's continue with the outlook. I think for the outlook, I would like to start with some comments regarding first what happened during the last two and a half months. On the left side, it's very important that we at that time secured the liquidity position and also we introduced initiatives for protecting the company with the cost structure we had at that time. The number one regarding the liquidity secure is already confirmed by the performance in the Q2. Cash flow was obviously as Yves presented. And also the liquidity available by June 30 €1,600,000,000 The cost control and the cash management system implemented also explain how we have reduced the personnel expenses during the last two and a half months is around €200,000,000 already reflected in the P and L. And the Global Executive Committee and Board of Directors also contributing with a reduction of their salaries with a total amount of 30%. Supported programs by governments also contributed with a significant part of it. Agreements with landlords waived so far reflected in the P and L, EUR 160 7,000,000 with EUR 137,000,000 that will be accrued during the next months as soon as they are documented. Finally, the introduction of initiatives for improving the working capital and CapEx that we are going to comment during the last part of the presentation, but are also will be reflected in the slides. The second part is the change of the organization. We have introduced a new group executive committee that will be on place starting in September 1 with a lower number of participants. We have integrated the headquarters and the divisions, simplifying the management level in all the former divisions are now operated directly from the headquarters. And we have created an opening plan that has been already commented on. But the reality is that by August 31, this company will have 70% of their capacity of sales available. Finally, just to confirm, obviously, the long term strategy and to clearly explain that we have the intention to continue to be a global company that will generate synergies in global travel retail basis. We will continue focusing in cash generation. Dufry will, and as a consequence of the diversification we have today, will be a stronger company. And the geographical footprint that we will focus in the future will be the development of the company in Asia. And regarding the continued digitalization, what we have today is a project that is a real more than a project, it's a reality that has the opportunity to engage with the customers before they travel. And this has been also one of the main drivers during the last 3 months of engaging with the customers. If we move to Page 22, just a clarification of the reorganization from the regional composition. What we are going to operate is different clusters that will be allocated in the territorial clusters too. In North America, we'll continue with Canada and U. S. A. As a cluster. Central and South America, we will have 4 clusters: Argentina, Bolivia, Brazil Chile, Colombia, Ecuador, Peru, Uruguay, Colombia, Ecuador, Peru, Uruguay, Caribbean, etcetera. And the same in Europe and in Asia Pacific. There are today 9 clusters including the U. S. This is the way that we are going to report from now on. Slide number 23. As obviously, we are starting in the reopening phase, I think it could be interesting to comment on what is in the market today available about the future. Different industry associations for Air Transport, Civilization Authorities, Cyprus and other institutions are assuming dropping passengers between 50% 60% in 2020 compared with 2019. Only IATA, International Light Transport Association, gives an outlook for 2021. The overview shows the limited visibility of all parties involved. More independent data providers are a forecast, assume a sharp decline in 2020. However, a fast recovery and subsequent years with passenger volumes back to 2019 in 2022. And InterVistas, another independent reserve house provides different scenarios for 2020 ranging from minus 44 to minus 73 passengers drop as expected recovery in 2022 beginning 2023. The last two assumptions are closely in line with Dufry assumptions to see in the recovery of the plans that we are going to comment on in a minute. And we are expecting the recovery during the last part of 2022 and beginning 2023. The start of the reopening have assets, obviously, to both on up, shop by shop and location by location. And we are going to gradually open all the shops as far as we confirm 3 things: number of passengers, minimum required rent that we pay adapted to the reality and also the personal expenses in each of the locations. If we move to the Page 24, what we are here is repeating something that we have already commented during the results is how the different scenarios are performing in the different lines of the P and L and the cash flow. Scenarios considering minus 40%, minus 50% and minus 70% of turnover compared with 2019. In 3 scenarios include the following cost reduction and saving levels updated since Q1 trading report. In a decline of our business by 40%, 70%, the concession fee related expenses would amount between 33 percent 39%. We are talking here about concession fees considered pre IFRS 16. Personal expenses to be reduced by 20% to 35% compared with the previous year, including restructuring related costs. This year, we have accrued so far EUR 62,000,000 as restructuring related costs. Other expenses to be reduced by 30% to 43% compared to the previous year. We are assuming a CapEx spend of around CHF 100,000,000 in all the three scenarios, but could further reduce it depending on the needs of the company. During the reopening in the second half of twenty twenty and depending on the recovery trajectory, we expect an average monthly cash flow of around plus CHF 60,000,000 in a minus 40% scenario and around plus CHF 10,000,000 in a minus 55% scenario and cash consumption of around CHF 60,000,000 in a minus 70% scenario. We will reach cash flow breakeven in a second half during the second half of twenty twenty at around minus 60% of turnover compared with 2019. That means our net debt position from June 30, 2020, will be the same on December 31, 2020, or better if we could achieve 40% of last year's sales 2019 during the second half during this time in 2020. Again, this shows you the adaptability of our fixed cost base and the strong cash generation capability of Dufry. Just a few comments regarding the sales evolution during the last weeks. Since the mid June, travel restrictions have been increasingly lifted, and domestic and international travel started to resume, especially in Asia, Europe and the U. S. We started to reopen our retail operations gradually based on single locations productivity scenarios and in close collaboration with all the airport authorities and landlords. The charts provide you a weekly sales evolution starting in last week before borders in Europe have been started to open June 15. 7 weeks later, we are still on low level with minus 79% year on year. However, the gradual uptake is visible as July 21, where we are reporting minus 82.3 percent organic growth at this time, compared with down minus 91.1 percent in June and minus 20 94% in May. In terms of the different areas performing, North America was only minus 66% sales compared to July 2019, the best performing region due to the high exposure to domestic travelers. Europe and Africa was minus 84%, Asia Pacific and Middle East minus 87.6%. If we move to Slide 26, this is showing the number of shops opened so far. By the end of July, more than 1,000 of our 2 1,400 shops were opened with a capacity of sales of around 60%. We are expecting that by August 31, the total number of shops reopening will be around 12.50 with a 70% sales capacity. If we move to 2 slides that I consider interesting from the point of view of understanding the passenger behavior and the passengers' motivation so far. The first slide is a very simple one, showing the 3 most important drivers that all customers declare pre pandemic that drive at that time their intentions to buy. First one, price and promotions the second one, assortment and the second one, behavior of the staff and attention of the staff. This is a biannually research that we do in with 25,000 customers in the 50 most important locations globally. And the second one is in Slide 28 that is based in all consumers and is done a small sample compared with the other one, but we had 2.9% margin error and was down during June 2020 at the time of the pandemia. 58% of the customers, EUFISH customers interviewed in June have scheduled a flight in the second half of twenty twenty. And 77% of this confirmed that they have the intention to fly. 30% of these customers and 10% for both, 10% of the customers confirm that they are even willing to buy more products than before. In addition, I would like to comment on one thing that I mentioned at the beginning is so far, the expenditure per passenger in Dufry shops is 20% above last year. Finally, the conclusion, and I don't want to repeat many things that we have already commented on. Situation has been very really difficult, but we have been able to manage and to adapt the cost structure of the company to the reality with an impact in the P and L first half of around €470,000,000 as savings. And that we have reached €1,600,000,000 liquidity by June 30. Then we have also aligned the organization to the situation, and we have adapt the organization to the situation, creating different cash burn scenarios depending on the drop of sales, minus 40% with plus 60% cash flow, monthly cash flow, minus 55% with plus €10,000,000 monthly cash flow and minus 70% scenario with minus €60,000,000 sales minus €60,000,000 cash burn per month. The reorganization initiatives are created, in my view, a stronger company and more efficient company for the future. The gradual recovery of the passengers is also very relevant, still far away from 2019, but jumping from one mass to the other. Still, the visibility is very low. And the information that we have collected from the passengers that have been customers in the past confirms that 80% of all past customers will behave exactly the same or without any significant change than in the past. That's all from my side. Thank you for participating in the call. And I think the interesting thing now is the Q and A. All the Q and A are obviously welcome. Thanks, guys. So just two questions from my side. First one would be on the implied cash burn for the second half year. So it looks like the market is a bit disappointed about the implied second half cash for pre working capital. But in my view, it seems like you have built in quite a bit of macro relief that has or basically you're building a very cautious view on the MAX there for the second half year. So is that correct? Is there some margin of safety built into that number that could allow you to actually outperform the figures you have provided to the market? And the second one would be on the government backed loans, any room there to access additional line of credits? Look, let me start with the second one first. On the government backed loans, yes, there are 2 or 3 additional ones we are currently looking at. They are in one is in Africa, one is in the Mediterranean area and one is in the UK. And they amount to more or less CHF 50,000,000, CHF 60,000,000 equivalent. In total or the CHF No, no, in total, in total, give or take, maybe a little bit more. And then in respect to the cash flow, so you look yes, there is a certain level of prudency in respect to concessions. So we have taken into account some relief of minimum annual guarantee, but obviously not the full potential in that sense. The first question from the phone comes from David Holmes from Bank of America. Please go ahead. Hi, good afternoon guys. Thanks for taking the questions. So just on the cash burn numbers, would you walk us through what the monthly cash burn evolution looked like in Q2? And also if you could comment on what the cash flow burn number is looking like it's going to be in July? That would be helpful. And then just on your monthly cash flow guidance that you provided today for the second half. Could you clarify exactly what you're assuming with respect to working capital movements within that guidance? I'll leave it at that for a moment. So on the cash consumption, what we have seen in Q2 is, as we have announced previously for April, around €200,000,000 of cash consumption. As we have mentioned before, that was mainly related to invoices, which relate to the Q1 or even 2019. In May, the cash consumption has drastically reduced to around EUR 50,000,000. We originally guided for, give or take, €100,000,000 So that was already below that. In June, it was around €25,000,000 And in July, I have just received information this morning, it is slightly below €20,000,000 And then for the second question you have asked, we assume a slightly positive change in the core net working capital for the second half of the year. So the cash consumption guidance we have given assume a slightly positive change there. Okay. So just to follow-up on those two things. I guess number 1 on July, the slightly below $20,000,000 of cash burn, when you line up that organic growth of minus 82 within your monthly framework of guidance, obviously, that minus 20 is much better than the cash flow number implied by that. So would be interested to hear why that's the case. And then secondly then, just to confirm on the working capital, your guidance isn't assuming a full reversal of the 4.73% working capital. It's just a reversal of the core working capital, which I think was an outflow of about SEK130 1,000,000 in the first half. Is that correct? So look, to the first one, I'm not so I'm not sure if I understood both questions, but let me try to answer the first one because I think I understood it. So there, yes, indeed, the cash consumption is lower than what we give now as a guidance. But having said that, look, that's why we give the guidance for the second half like we do. We say it's an average monthly cash burn. There might be certain swings between the months. And therefore, you cannot take a single month and isolate that and take it as a kind of a proxy for the overall evolution. So July was relatively low. It was as low as expected, but you cannot take that as a proxy for minus 80% drop in sales, obviously. I'm not sure if this answers the question. If not That's perfect. Yes, that question. I guess the second question, I'll maybe simplify it. Are you assuming a reversal of just the core working capital in the second half? So what I've mentioned before only reflects the core net working capital, yes, exactly. Got it. The next question comes from Jorn Iffert from UBS. Please go ahead. Yes, good afternoon and thank you for taking my questions. The first one would be, please, a follow-up on the cash scenarios you are providing. I try to make the math here a little bit and I come to a little bit different outcome. I'm sure I'm wrong. Just want to ask you, I mean, in the concession fees and personal expenses, business ratios you're providing, is there quite a lot of non cash expense included here? And the second question would be, please, on the gross profit and negotiation with suppliers. I mean, is this done now for the new terms until year end? Or do you have visibility already into 2021? Or you have to renegotiate again with your suppliers? And the same also with the landlords regarding the MAC release. If it's now for the next 6 back running into 2021 or different revenue scenarios? Thank you. Thank you, Jorgen, for the question. So let me quickly start with the cash scenarios. So look, there, I'm more than happy to have call and look at the assumptions in that respect. I think what we have done is or what where you need to be super careful is on the different view between P and L and cash flow. So especially when it comes to concession fees, but also when it comes to personal expenses, you need to make sure that when you calculate the cash consumption that you consider also the seasonality you have in our business, especially in relation to concession fees. Then for the gross profit there, do you want to comment on it? Regarding the gross profit, I think what is happening now is we have agreed with the suppliers, especially during the last part of 2020 and as far obviously the situation remains as challenging like today. A formula that we combine gross profit margin and net working capital at the same time. And I think this is for us very supportive and this allows us to adapt the business to the reality in each of the times. Regarding the concession fees, there are as you know, there are more than 1,000 different contracts. And if the question is regarding have you already agreed some of these reliefs of March for 2021, the answer is yes. Okay. So you assume also on the MAC relief that this is really structurally going also into 'twenty one, so you're really operating on a lower cost base here also for 2021? Doesn't matter really what the revenue scenario would be? It's obviously difficult to say with all the detail, but the answer is this is the intent. Sure. Okay. Thanks a lot. The next question comes from Edouard Aubin from Morgan Stanley. Please go ahead. Yes. Hi, guys, Julien and Yves. So just one question for me, sorry to start on trading and then on cash flow. So on trading, as you said, if my memory is correct, I think you are down 84 sorry, the exit rate for July was 79%, I'm sorry. So it looks like things are improving around 200 basis points sequentially per week. So when I know you guys have visibility obviously on flight plan in the coming weeks. So should we more or less expect a decline of around, what, 75% on average for the month of August? And to what extent the lockdown in Spain, which is a big country for you, might or might not be an issue? So that's the first question on trading. And then just sorry to come back on cash flow. Regarding personal expense, you mentioned in the release that you had CHF 34,000,000 of governance support in H1. I was just curious, is that the money received by Dufry and just the money received by Dufry? And what is the to what extent government has supported directly employees in some countries where these guys are paid by the government and not by you? So just a magnitude of that. And what I'm trying to get at, obviously, is that is there a risk that some of these guys would come back to your payroll in September, October, November when these schemes end? And so just one last one on negotiation with landlords. Again, you've made since you've made good progress waiving some of the MAG closes. But do you have better fortune kind of closes or earned out close for 2021 2022 with the airports, which would which could cap your upside next year in terms of cash flow potentially? Thank you. Regarding the I think I understood the question, if not, repeat it, please. Regarding Spain, I think the situation has been slightly changed in what sense? We had ex growth to Spain of passengers and now is slowing down, but non negative. But most of these passengers that were scheduled to Spain now are deviated to other countries. And we have seen a significant impact, positive impact in Turkey and Greece mainly. The 21% of sales of the last week that I have presented until July 26 is improving significantly now, but still there are very few days. I cannot say that this is going to be maintained. But today, during the 1st 3 days of August, we have reached around 40% of the sales of last year. Regarding the concession fees, and I think I mentioned that before, we have obviously many different contracts, more than 1,000 contracts. Only part of these contracts are subject to minimum annual guarantees. And some of these minimum annual guarantees are also subject to minimum per passenger. When you have a minimum per passenger, the situation is adopted automatically. We have also contracts that have been renegotiated in terms of the total amount paid or will be paid during 2020. And there are also contracts that are in the process to be documented properly that will consider also the evolution of the passengers in 2021. How much is each? I cannot comment now because it's not something that has been totally documented and properly documented. But we have a significant number of contracts that have been renegotiated not only for 2020, also for 21. Jan, regarding personal expenses, sorry? On regard of personnel expenses, what we have projected for this year in full year is savings that will be very close to €450,000,000 €460,000,000 This is a combination of initiatives that are starting with dismissals, temporarily workers on hold and also support government programs during 2020. Okay. Sorry, but my question is a bit more specific. Can we have a rough idea of what percentage of your employees? I'm not asking for any precise number, but just a rough idea of a number of your employees which are paid directly by the states just so we have a sense? It's very difficult because as you know, this is depending on the legislation in each of the jurisdiction. And there are consultancy projects or programs that should be, 1st of all, complete with the authorities in each of the countries. We cannot comment on things that obviously have not been totally closed down with the different legislations and jurisdictions. But the number that I gave you or I am giving you, the €450,000,000 is a very realistic target, especially thinking that so far we have reflected in the P and L €200,000,000 Okay. Thank you. The next question comes from Mr. Ejafar from Exane BNP Paribas. Please go ahead. Hi, good afternoon. Thank you for taking my questions. 3 for me, please. Firstly, just in terms of gross margins, you're talking about a clean retail gross margin that's only down 60 bps. So I'm curious what sort of mix impacts are big enough to take your reported gross margin down over 200 bps. My understanding is that the wholesale business, for example, was now becoming very small for the group. So what is diluting your margin that much beyond clean retail? And second question on new concessions, minus 4.3% in Q2 net. I appreciate a lot of terminal openings are just not happening at the moment. But equally, are you seeing any terminal closures? How do you end up having 4% net exits? And lastly, even more qualitatively, it looks you've gathered quite a bit of intelligence from customers through your survey this summer. So since you've gathered this intel, what main changes have you been doing to your commercial strategy, to your mix, assortment, promotions, etcetera, to stick to what they want even closer? Regarding the gross profit margin, the 60 basis points in retail is basically promotions and obviously savings in terms of projecting savings to the customers. It's specifically that because still the mix has not changed dramatically as you have seen. It's very similar in all the categories to the one that is compared 1 year ago. Regarding the closings Sorry. So thank you very much. I think this is very clear what's happening in retail. My question was how do you get to 200 bps lower gross margin outside of retail? Yes, yes. Sorry, I didn't understand the question. The difference between the 60 basis points and the 220 basis points is the mix of wholesale sales last year and this year? As obviously, it's obvious, retail sales dropped significantly when retail sales maintained the level of previous year. In terms of participation in the total mix of sales last year, retail was sorry, wholesale was 1% and this year is 3%, but specifically it's a mix issue. Do you need any other explanation regarding the gross profit margin? Well, yes, if it's so small, I'm just wondering how 1% becoming 3% is diluting the group's gross margin by close to 200 bps? It's impacting in this way, okay? Okay. Thank you. Regarding the closing, it's something that is not related with anything of this event, the pandemic. It's something that we already planned. And some of the operations at that enclosure here were some most of them were already decided before the pandemic for the beginning of this year. Then is the customers' behavior. Yes, if the question is, are you using the information that has been collected through this last research for preparing commercial plants, the answer is yes. We have been during the last 30 days analyzing the information. The different operations are preparing plans based on the information collected and will be probably in place during the next 30 days. But there are a lot of things that we have learned, mainly obviously due to the type of product that the people will buy and the significant development that other categories may have, including food and beverage and including spirits and drinks. Thank you. Could you give us an example or two of what you're going to be tweaking? For example, one thing that seems to jump out is that dining is not a big priority for customers. Are you going to be offering takeaway food, for example, or any other tweaks like that to capitalize on those trends? Yes. For example, when the customers started to get in the shop, what we have done now is to prepare layouts in the floors to address the people and to go to the places where this products that they comment on are prepared. And you can see this in Madrid. You can see the Madrid airport. You can see it in Barcelona airport. And you can see this in London Hydro. It's addressing the traffic flow within the shop to the products that we believe that will be more successful. All right. Thank you for taking my questions. Your next question comes from John Cox from Kepler Cheuvreux. Please go ahead. Yes. Hello. Good afternoon, guys. A couple of questions from me. Maybe just to back into that question about the savings in a different way. Just based on what you know today, how much should we expect on a sort of continuous basis, the personnel lines and the other lines should be down next year, say, compared to 2019? And that's the first question. Just on the rents, it looks like everybody's moving away from the MAG and everybody's happy to do that. But from what I heard from AENA and others, they are hoping to make up and be part of the upside. I'm just wondering sort of structurally, if we do get back to where we were in terms of revenues in the next couple of years, would actually your concession fees be higher because these guys are saying, okay, we'll get rid of the MEG, but we want maybe more rent as a proportion of revenue? That was the second question. And then just a question on the you seem to be exiting some contracts and you can see that in your financial statements, you seem to be saying disposal of leases. And just in terms of the sort of book value of these leases, it looks about 15%. Can you just say that does that mean that the like for like component or the net new concession line, that's going to be down now about 15% because you've removed capacity overall. Then the last question is just, Julian, you were saying that sales now in the last couple of days are running at 40% of last year. But from what I see on the slides, you're saying that as of the end of the month, stores only 40% of stores are open, representing about 60% of sales. So you're saying that those stores that are open are basically only running down about 25%, 30% year on year currently in those 1st few days of August. Thank you very much. Regarding the personnel expenses for 2021, I cannot answer the questions exactly because obviously depends on the different provenance that we are involved. But a significant part of the €450,000,000 will be recurring. And this is depending at this stage of the process of government support programs too that obviously should be confirmed. Regarding the range and the MAX, what do you expect from me, John? I am telling you what I know. And you are telling about AENA. And AENA has recognized officially and the minister in Spain has recognized officially that during the pandemic time, there is not minimum guarantee. And during the rest of the time, depending on the number of passengers, they will adapt the rent. I don't know what to say. This is what they say. I don't have any comments regarding that. What I know is what we are doing, and I cannot disclose what we are doing because it's obvious. This is a private information. In general terms, what I can confirm is that in most of the cases, the airports and landlords are very willing to support the companies. And the question is what the alternative is? Do you think that if they insist to get the minimum guarantees, they will get the minimum guarantees because this is the only way to go? I think it's very likely, and I can tell you that from the practical point of view, that in most of the cases, the minimum annual guarantees or rent, because we are talking also about variable rents, will be adapted to the reality of the business during the next 2 years where the situation, we all expect, will normalize. My feeling is optimistic on this regard. I think what we have seen so far is reflected in the P and L, €161,000,000 plus €137,000,000 already agreed in the process to be documented. And there is a significant amount that I cannot comment because it's not finally agreed. And this will be announced, obviously, as soon as we have the documentation ready. Regarding sorry, the last question was about? Can you please, John, repeat the last question? I don't recall. Yes. So you were saying that in the 1st couple of days of August, sales are running at 40% of last year's level. So that means down 60% roughly. But you're saying as well that only your stores are open representing about 60% of sales capacity. So you're basically saying those shops that are open are actually only running down by 30 odd percent currently to get to that running out 40% for the group as a whole compared to last year? Yes. It's a way of explaining. Yes, 60% capacity is what we have today. But the 40%, again, is just a sample that I have seen. The reality comparing with the past has to be based obviously in the number of shops open too. You are right. Okay. So you're just referring to those shops that are open, this 40% of sales of last year? With in August, the last the 1st 3 days of August compared with the last week of July, there is not a significant number of new shops open. Comparing the last week of July with the 1st week of August, 1st days of August, this is the change. It's multiplied by 2. Okay. So basically, those stores that are open are starting to see average spend per ticket doubling or whatever it may be? Yes. The spend per passenger has to confirmed because, obviously, I don't know in the 1st week of August. But the reality is that the spend per passenger is significantly increasing compared with 2019. Okay. Good to know. All right. And then the other question was really on this. You seem to be exiting some contracts. This is in your financial statements. And the book value of the exit seems to be about 15%. Should we assume that you now have reduced sales capacity compared to 2019 by 15%. Is that how I should read some of those some of the small print in the financial statement? Well, this is a calculation, but I don't know exactly the number now. This is a calculation assuming that the square meters that are closed down are having the same percentage of sales that the other ones, and I don't think so. It will be a lot lower because finally, these shops are closed down because they are not performing as we expect. Yes. But we should assume that, that sort of net new concession line goes from, I think it was down 3% or 4% in the 8%. Yes. And then that will go down to say minus 10% in the second half of the year, something like that. Well, I can I don't know? I don't know the calculation because it depends on the evolution of sales of the other concessions. But if the question is the 3% that is net of closes and openings in the disclosure is going to impact 10% of the total sales during the year? The answer is I answered that is not because obviously the subs that we have closed down are not subs with this productivity. Yes, yes. Okay. Okay, great. Thank you very much. Thank you. The next question comes from Gianmarco Ferro from MainFirst. Please go ahead. Yes, good afternoon, everybody. Thank you for this very detailed and helpful presentation. So I have three questions. First one would be in relation to your visibility on your May cash outflow. So we already talked about the cash outflow that you guided to be around €100,000,000 in May. So what has now changed significantly lower outflow in June? Can you give us a bit more granularity there, please? And then another question is just in relation to the MEG discussions and negotiations. I know you cannot give some precise details there. I mean, so far, you mentioned that the majority of the related contracts or the landlords is happy to discuss those contracts. But can you be a bit more precise, please, about this majority? Is it really around 70% or only 50% of those landlords who are really willing to discuss with you? This would be helpful. And then just another question on your FX gains and losses. So there I just saw that in the P and L, you had an FX gain of €43,000,000 But in the cash flow statement, it was a cash outflow. So can you elaborate on that as well? It was CHF 43,000,000 for your notice. Thank you. Perfect. So if I start quickly with the first one, in May, the cash consumption of €50,000,000 versus the initially indicated EUR 100,000,000. The reason for the lower amount, it's actually only half of what you have indicated initially, is the measures we have taken, the various number of measures, be it on the personal expenses, concession fees, etcetera, which we have announced earlier, which already started to kick in April, but then specifically also in May, June July, and that led to the lower cash consumption in that regard. Then to the 3rd question, the FX gains on the P and L and also the cash flow statement. I would need to double check once more, but I believe it's actually a positive effect on both the P and L and the cash flow statement. The reason for the positive effect there is basically an exposure which we have hedged over long plain Manila coal options, which, as you know, can only reach a positive amount or a positive revaluation and that resulted in that gain. But if I'm not mistaken, otherwise, we can take it off on again, off line. I believe it's a positive effect on both P and L and cash flow. Okay. Thank you. So it is negatively reported, but thank you, Yves. It's a negative amount, but I think it's defined as a gain if it's a negative amount. But I can double check that. Okay. Thank you. Regarding the minimum annual guarantees, to be specific, it's very difficult because obviously there are 1 on 1 negotiations and they are confidential. But in general terms, I would say that compared with the objective we had, we have reached or close to reach conclusions, positive conclusions with around 70% of the total MAX that we tried to negotiate. Thank you. So 70% of the MAX or 70% of all the landlords? So that's 70% of the MAX. Where you see some willingness to negotiate? No, that we are negotiating and very close to terminate the agreement. Okay. Thank you. Jean Marc, I quickly checked on the cash flow statement. So losses are reflected as a positive amount and gains are reflected as a negative amount in respect to foreign exchange differences. So it's indeed a gain. The last question comes from Veronika Snowy from Thomson Reuters. Please go ahead. So hello. I have one question. In case of new travel restrictions, what is your backup plan? Well, what is the backup plan of something that we don't know? It's a bit complex to answer, but let's say one thing. We have created a flexible company for adapting to the reality of the business today. The cost structure that I have been explaining during the last 30 minutes is exactly the backup plan. Because with this flexible cost structure, we can face whatever, let's say, worst case scenario may happen. And there are very good worst case scenarios that we have seen, especially in March. The situation regarding the openings or closings of markets is impacting the business. The answer is yes. But so far what we have seen is more domestic traffic in the U. S. And domestic traffic in the European Union. As far as the domestic traffic and in one place and the international domestic traffic in the second one in Europe is like today, what we have seen is gradually increases. Good news that I have to comment on is I heard that from yesterday, Russians are starting to fly to 3rd countries and Brazilians too. The consequence of that is that the direction of the reopening of the market is so far going in this direction more than in the closings. So would also that mean that there would be a new focus on domestic traffic in the future? Well, if there are during certain time, there are domestic passengers like today, we are not going to focus on domestic passengers. We are going to attend domestic passengers because we are ready to attend domestic passengers. Historically, our company has been around 60% duty free and 40% duty paid. For this reason, we have been, for many years, developing duty paid consents. One of them is Hudson, convenience store. But there are other ones. And this idea was to really attend domestic passengers in most of the destinations where we are already operating and when we are already welcoming this type of passengers. The next question comes from Mahala Maran from PGIM. Please go ahead. Hi, there. I had a couple of questions. One was just a point of clarification. On Slide 24, where you provide sensitivity analysis, and you provide the concession fees as a percentage of turnover. Could you just clarify what that would look like on a post IFRS 16 basis? So if we were take kind of the leases and the interest costs, would they be pretty similar? And then the second question was around you commented on looking at potentially actively trying to refinance the 2022 maturities. Kind of on what sort of time when would you start thinking about addressing those maturities? Thank you. Let me quickly start with the refinancing. So there, what we typically would do, and we will also do it in this case, is to refinance ideally 18 months ahead of maturity, which basically would bring you to a window between now 2021. Regarding the first question, is sensitivity analysis based in drop of sales that shows the possible percentage on turnover of concession fees pre IFRS 16. Why? Because in most of the cases, we have heard that with IFRS 16, especially in the way that this accrued the mark reliefs and the amortization of right of use, it's very difficult to follow-up for the reason we have put these 3 percentages. 33% on turnover with minus 40%, 36% on turnover with minus 55% and 39% on turnover with minus 70%. It's just a reference for showing how the evolution of the percentage on turnover is going to be based in the drop in volume of sales. But this is just a reference point for understanding the situation. In IFRS 16, it's very difficult to explain because it impacts different lines of the P and L, including lease expenses, minimum annual guarantee reliefs, depreciation of right of use and interest of financial expenses due to right of use. This is really complex to explain and very difficult. Sure. And just a follow-up on the refinancing. I guess, your bonds are trading and depending on the bonds sort of 7% to 9% yields. How do you think about sort of sort of how long you're prepared to wait versus the relatively high cost of refinancing in the current market and the current conditions? It's something we will need to review once we start the process for the refinancing. We are obviously looking into different products and different alternatives, but it's too early to comment on the final conclusion there. I mean, you can play with a lot of variables there the instrument, the duration, etcetera. So but it's too early to comment on that. Thank you. The next is a follow-up question from John Cox from Kepler Cheuvreux. Please go ahead. Yeah. Hello, again. Just to follow-up on this, the disposals in this right of use asset movement. This is Note 12 on the financial statements. You obviously have an addition in there as well, which is the new contract in Spain. Do the disposals include part of that old Spain contract? Again, I'm just coming back to that. How much should we think about this net new concession line? Because at the moment, €700,000,000 of €500,000,000 or €5,000,000,000 odd is quite a big number. Yes, absolutely. So basically, what you have is you have the new one, which is an add on to the number of right of use assets. And the old one, because we have signed and renewed it ahead of maturity, basically has to be deducted from that. So you're absolutely right. So do you know how much it is roughly? Is it like half of that disposals amount or I would need to double check that. I would assume it's probably well, yes, probably or maybe even more, but I would need to check that. Okay. All right. Thanks again. The next is a follow-up question from Jan Marcovaro from MainFirst. Please go ahead. Thank you, if I may. Just in relation to the spending per passenger you mentioned, so far you see that there's currently an increase of 20% year over year. So how can you explain that by yourself? Do you have a different profile of customers at the moment? Then just a question in relation to your impairment. So what I saw is that most of your impairments were in goodwill, mostly those EUR 330,000,000 mostly linked to Central and Southern America. But how about also potential impairments then of your activated concession rights on your balance sheet. Can you also elaborate about that and why you haven't done the impairment testing yet on that concession rights by yet? And then just a last question is also in relation to other, let's say, sales channels. So one of your competitors is also doing now live TV shows to dispose some of the inventories in Asia quite successfully. So would this also be something you are thinking about? Okay. I will start with the impairment and the concessions. So look, basically, we have done both. So we have tested goodwill, and we have also tested the concession rights. We have impaired also on both sides. So we have impaired goodwill as well as in some areas the concession rights. They are predominantly in Central and South America and also North America on both sides, goodwill and also in respect to side. Well, that's not exactly correct. Concession rights you also have to a certain extent in Europe. But we have done both, tested both and impaired on both sides. Regarding the spend per passenger, the main reason is the different passenger profile compared with obviously 1 year ago. And the inventories, the answer is yes, we are doing that, but the quality of inventory we have is really good and we don't need to rid off inventories because we need inventory for selling in the shops. What you identify as wholesale, there is a significant part of wholesale that is rid of inventories that are obsolete or in the, obviously, the process to termination in terms of validity. But the most important part of the inventory is very good and it has a very good quality and will be sold through the shops that we hope we will reopen very soon. Okay. Thank you. The last question comes from Jorg Nipperd from UBS. Please go ahead. Yes. Hello. Thank you for taking my follow-up question. It's again related to the cash flow scenarios, please. I mean, let's assume that you are at minus 40% for the second half on sales. This would be an active free cash flow generation than maybe SEK 300,000,000 or SEK 350,000,000 in between this. So much, much better versus a normal year like it was in 2019. And the question is, I mean, how sustainable really this cost base is? How sustainable this cash generation is? Does it also mean that for 2021, if you are 40% below 2019 sales level, that we should expect a similar cash flow generation? And if not, where really is the bridge here? No, look, you cannot assume for 2021 a similar one if you are 40% down. What we have given as a guidance, the three scenarios apply for the second half of twenty twenty. And as I've mentioned before, need to be very careful when looking at cash flows because there is a certain seasonality in there or certain cash flows apply probably earlier or later during the year. So So you need to be super careful with that. If you're looking at 2021, the guidance may be a different one. Okay. Thank you. There are no more questions from the audience here. Okay. Let's 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.