Avolta AG (SWX:AVOL)

Earnings Call: H2 2019

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Mar 12, 2020

Ladies and gentlemen, welcome to the Full Year Results 2019 Conference Call and Live Webcast. 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. 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. Please go ahead, sir. Thank you very much, operator. Good afternoon. Thank you for joining us. Obviously, in this time, it's very appreciated. Thank you for being participating directly here and also the people participating via call. Today, we have scheduled this presentation in 2 parts. One part that is regarding the full year results 2019 and the second part is obviously the situation of the business in general and specifically the impact of the events that are happening in the company. As always, participating from Dufry, we have my colleague Yves Gester, CFO and myself, Julia Andia, CEO. Let's move and using the presentation that we have published this morning in our website. Let's move to Page 3. In Page 3 of the presentation is the obviously the most used type of approach. Number 1 is we are going to talk about the business performance. Then I will hand over to Yves for discussing the financial performance. And then I will finish with a conclusion and Q and A. Let's move to Page 5 of the presentation please. Last year, finally, even as you probably all know that we started the slowing down, thinking that obviously the problem in South America could impact the performance of the company. In fact, impacted the performance of the company because we grew total sales by 1.9%, but excluding South America organically, the company grew 5.5% or 5.6%. But finally, because the acceleration of growth in the 3rd quarter that was the most the most important one is the most important one due to the seasonality and the acceleration of the Q4, we were able to reach the 1.9%. But the most relevant information and I think is clear is the 3% increase in organic growth. 3% that were generated by 0.6% increase in like for like, positive by year end and 2.4% due to the net of openings and closes of new concessions. Also, it's remarkable in my view that during the last quarter, organic growth accelerated 3.1%. If we move to Page 6, 1 year more, I have to say that the company has been able to increase the gross profit margin, reaching 50.2% compared with 59.8% previous year. The reasons, I think I already mentioned it during the different quarters in 19 were number 1 is obviously the negotiation process with local suppliers, the planned plans with global suppliers and the acceleration of implementation of the platforms of the global platforms we have in 3 locations worldwide. Adjusted operating profit reached EUR 7 67,000,000 with a margin 8.7%. Again, I have to repeat because IFRS 16 really is not very comparable with previous years. But in terms of comparability, we were very similar. The problem is that because we are talking about discounted cash flows, the 1st year is not like the 2nd year. I think it's better that we fix the idea that the company reached EUR 767,000,000 operating adjusted operating profit with an 8.7 percent margin. I think in 2020, the comparable is more realistic. In terms of adjusted net profit, we reached €350,000,000 Equity free cash flow, that is the most important KPI that we have mentioned since the beginning of the year, we reached EUR 383,300,000 compared with EUR 370,000,000 last year, above the expectation because we were telling that between €350,000,000 €400,000,000 target, but with the condition that we are increasing the €371,000,000 previous year minimum with increase of sales. And the business, obviously, we're able to deliver that. In terms of cash flow, Yves is going to comment with more detail. And I think it will be very useful because the equity free cash flow has been or has reached the highest level in the history of the company. Net debt was reduced, including obviously the payment of the dividend, €184,000,000 and we have reached since the moment we acquired the big companies and we have digested the big companies acquired in 5 years ago, the best level in December net debt EUR 3,100,000,000. Covenant EUR 3,520,000,000 again I want to remind that this covenant is not the previous covenant net debt EBITDA. This is net debt adjusted operating cash flow. It's more obviously based in cash with addressable of 4.5. And finally, I want to say that Board of Directors last week with the information we provided, including cash flows, including projections, including obviously different scenarios for the situation we are living, decided to submit to the general assembly the payment of a dividend similar to the previous year as we have in our dividend policy. And it's obviously important to mention that this company at the time that we, the Board of Directors decided to submit this to the general assembly had the information enough in order to justify to do it. Then the situation is obviously gradually changing. Page 7, organic growth again. Why? Because I think it's important always to remind about how the company is generating growth. And more important in this time is the pillars of the generation of growth. There are 2 pillars. 1 is organic growth, like for like is similar square meters, similar shops and new concessions and acquisitions. And I think this combination of things will continue in the future to deliver the growth we are expecting. Last year, continuing with the presentation in 2019, like for like increased by 0.6%. Two lines of explanation. 1 is the refurbishment of shops. I repeat many times, it's not refurbishment. It's obviously a renovation of the shop, including assortments, including many of the things, traffic flows, locations, many aspects for increasing the business. And the second one, commercial initiatives in order to drive more sales. Basically, three things, promotions, novelties and exclusive products. Probably those are the most important things that we are using in order to increase the life for like, not now is for the future too. In order of new concessions, contributed 2.4 percent of the total. We have added 34,000 square meters of commercial space, new commercial space to the portfolio. And on top of that, we have already signed 15,000, 14,900 square meters of commercial space that will be open, most of them, along 2020. In terms of the 2nd pillar, this is organic growth. 2nd pillar, acquisitions. We have signed 3 small and middle sized acquisitions already commented on. Think probably the most relevant is Nucovo in Russia. This acquisition is very strategic. On top of that, it's a very good company and very profitable company because it's completing the portfolio of airports in Russia for us because we are now operating in Seremitivo, Domodedovo, Nucoboda, that is this one and also in San Pedro on top of other 2 or 3 small airports. We have a completely set up in Russia. The second one is Brookstone, Brookstone in the U. S. Brookstone is one of the most famous electronics shops, as you may know, and this is going to be probably very useful in the conversation later. The U. S. Is a market that is a duty paid market for us. And the duty paid market is basically today foods and beverage for us and electronic products. And Brookstone is one of these initiatives invested in this direction to develop more electronic products. And the second one or the third one sorry, the third one is OHM. It's a food and beverage company that we have acquired in the U. S. In order to fulfill the equity story that we have been communicating to the market is the way to accelerate sales in the U. S. Basically will be delivered through fruit and beverage. And this OHM that was signed already in at the end of last year is in the process of closing. We move to Page 8. There are other events that also I think are relevant in terms of one of the most important things, the concession portfolio. Last year, we have extended the contract with AENA with no significant increase in CapEx. I think the information is already disclosed. It's around 1.5% increase per year in the minimum guarantee. It's a very, very important contract for us. We have been able over the past months to accelerate sales at the level of 7.1%. Never in the history of this specific contract these sales were achieved. And the reason is very simple, is we have tested in 5 or 6 locations in different airports, initiatives, commercial initiatives jointly with AENA in collaboration with the commercial department. And these initiatives were delivering significant results. And then we are now expanding to all the locations the commercial initiatives. The second one is the extension in Toronto, PISSON. Toronto, PISSON is one of the most important concessions we have in America. Is one of the most important concessions we have in America. We have been there for many years, and we have extended the contract for 8 more years in similar conditions. And then the new contract in Mexico City, Mexico City Terminal 2. I think, obviously, those are the more relevant. We have extended many others, many square meters. But the reality is that in order to mention something specific, we decided to put these three ones. Other events that were positive in terms future developments. Brazil, the number one is the increase of the allowance from USD 500 to USD1000 allowance in the arrival shops. This has two characteristics. 1 is we are able to deliver and to display products above $500 We were not able to do it due to this limitation. Imagine in travel retail selling products only below $500 In travel retail arrivals in Brazil, we generate 65% of the business. This is a significant improvement that we can obviously use as a trigger for continuing with the growth. And the second one is the border shops. We have opened the 1st border shop in Uruguayan. We are testing the border shop. Soon as the situation is confirmed, we will expand it or we will try to expand it to another 32 locations in the identified twin cities. Twin cities is Brazilian border shops with other international cities on the other side of the border. Then we move to Page 9. I think I already commented on that. The only thing that probably is important is to say by division. Europe and Africa, and I will comment on the details, increased organic growth by 5.8 percent, Asia by 10.8 percent on top of obviously what happened last year. Last year was a significant improvement. The third one is North America continuing with 1.8% and turning positive during the last quarter. And Central and South America is still negative, but for several number of quarters, this is the first time that we are reaching positive organic growth like obviously is happening today. Moving to the different divisions, Page 10. In Spain, as I said, we have developed this program in the test, 5 tests. And we started with 5%, 4% and now the acceleration in the division, especially during the last quarter was 7 point something, 7.2%, 7.3%. Then U. K. Also performed very well. And not only because the cruise business, that is a new business, cruise and ferry business, it's because the most important airports in the U. K. Performed very well, including Hero. A strong performance also in Turkey, Malta, Greece and Italy, as well also like most of the African countries. The African countries last year were very strong in terms of performance and this year we are starting also very strong. Especially, I would like to mention countries like Morocco, Kenya and Egypt with double digit growth. We move to Page 11. Double digit, as I said, 10.8% in this division. Beauty free stores in MTR, Perth, obviously, facilitating new stores, the continuation of the high growth. And then very positive growth in Russia, Serbia and Middle East. Even that in Middle East, the comparable as well as very tough. Finally, North America, we are continuing, as I said, with the deterioration of the situation compared with previous year, minus 6%. But the turnaround that happened during Q4 with plus 0.8 is obviously is a very good sign. That continued also during the 1st months of 2020. Moving to I was talking about now South America. Let me talk about now North America. I was not looking at the screen and I was talking about South America. Let me talk about North America like the last division. In South America, it's already commented on. In North America, the situation is what I said, it's turning around 0.8% in the last quarter. And we reached finally 1.8% increase division North America growth in 2019. And then in Page 13 is finally South America, what I explained about the growth minus 6.3 percent, then positive territory in plus 0 0.2% in Q4. And then Central America, good performance in Caribbean, especially Mexico and Dominican Republic. The cruise business growing very fast too. In South America, it's still challenging because of the situation, especially in Brazil and Argentina. But again, it's the first time in a very low number of very long number of quarters where we turnaround the situation. Let's move to Page 14. 2nd part of the organic growth. We have opened 33,900 square meters of commercial space. In Russia, 50 new stores, including Newcovo, Kuwait North America, 75 new stores in different locations Mexico, Brazil and Greece and Ferries, 19 new ships and renovated sold 41,000 square meters, especially in Spain, Sweden, Jordan, Antalya, Casa Blanca Macau and Buenos Aires with a new generation store. Let's move to Page 15. Contract already signed and already disclosed. The new shop in the circle in Zurich, the new shops in Corfu, Helsinki, Singapore, New York, Boston and Brazil. And regarding the pipeline opportunities in the bottom side of Slide number 15, the situation remains quite stable. I think 40,000, 40, 5,000 is an average of new pipeline opportunities every quarter with report. Then total number, just for putting a perspective on numbers, total number of square meters we are operating today is 470,000. If we move to Page 16, I think from now on, we are going to comment on ESG. For us, it's very relevant. We have not done any communication probably during the quarterly presentations. But I think it's important that we are all aware about what we are doing. And I think we have progressed a lot over the past 3 or 4 years in the three areas: environmental, social and governance. In terms of environmental, we have accelerated many initiatives, especially reduce the supply chain related emissions, continuing with the substitution of plastics bags by paper and other materials bags, started to develop initiatives to reduce footprint. But the most important, we are working together in the ACI Climate Tax Force for contributing to all the airports, especially in Europe, and this is specifically first step to reduce the emissions by the year 2025. In terms of social, we have expanded the Dufry supply code. We have today received 84% of confirmation by the suppliers. And we have 42% now representing 42% increase the acknowledgment. Increase the rollout of Dufry Connect. Dufry Connect is a platform only for the employees in order to obviously to facilitate the communication and also the opportunity to create this channel that is very famous. And we are reaching today 90% of the total employees. It's not easy because not all the employees are having Internet. We have employees in many places where they don't have Internet or they don't have access to Internet. Second one or the third one is the survey. We have done for the 4th year or 5th year an engagement survey. And I am very satisfied to say probably the most interesting thing is that 73% of total employees are really proud, very proud to work in the company. And within the other different areas of dissatisfaction, let's say, we are the lowest in the industry and the lowest in the similar companies like we are. We are a global company. Finally, we have reached an agreement with the Equity Salish Certification Organization in Switzerland And we have been audited with the confirmation and obviously with the certification that is done. In terms of governance, we have appointed a lead independent director. Application to the Union National Global Compact submitted early 2020. There are only 2,000 companies in the world listed in this type of initiative. We have revised the materiality IT security metrics and data protection, strengthening our Dufry code of conduct, expanded and communicated now via Internet. We have the code of conduct over the past 4 or 5 years, but we didn't publicly announce it and now it's publicly disclosure. And we are continuing supporting the first company worldwide with the Union Nations goals acquirers. This is a campaign that we started 4 years ago in collaboration with Union Nations and the idea is to reach by the year 2030, 3 no 2,000,000,000 people are aware of the international sustainability targets of Reunion National. This is only one page. I've seen in the Internet, you probably explore more what we are doing with detail. But in terms of our presentation, probably put a bit of light. Until here is from my side the information about 2019. Let's move now to the information regarding the actual situation of how we are performing. I want to start with Slide number 17. In the Slide number 17, I tried to put a couple of or 3 examples. It's September 11, SARS and the global recession. There were many others. I remember in 1991 or 1992, the 1st Iraqi war. I remember the 2nd Iraq war, very similar events in terms of impact during 2 or 3 months, really set of sales in one of them. I remember that is exactly in travel retail. There is a characteristic that normally happens. It's an event that is always limited and the recovery is very fast. Is this an example for today? I think so, because the rationale behind what is happening today has a reason. And as soon the reason is mitigated or is in the way to be mitigated, I think the situation from the approach point of view in terms of governments is going to change dramatically. One of them, obviously, the more relevant is what is going to happen in China, especially today in China. Typically, what we have learned in these processes is 2 things. We need to react very fast. We need to focus in generation of cash and we need to protect the P and L. And we started in January 2020 with that. At the time that we heard that something was starting to happen in January 2020, in the 3rd week, we created a specific group of people, top management in the company, Group Executive Committee, for analyzing, first of all, what the situation was. This is a normal thing in order to understand the reality. But second is to really implement initiatives in these three lines, okay? Number 1, Dufry has very good fixed variable cost structure. And I think this is one of the relevant things that happened in 2,009. In 2,009, and I don't want to be obviously explaining things about 10 years ago, what happened is very similar to what happened today. During the 1st 6 months, we dropped the organic sales by 16%. During the year 2,009, the sales dropped by 10%. The drop in EBITDA margin was 120 basis points. Why? Because we went obviously in the same process. We identified from the P and L point of view, €25,000,000 fixed cost that should be at that time attack in order to overly mitigate the problem. And we end the year with €39,000,000 or €38,000,000 That was obviously an important part. What was part of this? Negotiations with, obviously, unions, employees, decisions about cost or indirect cost and also discussions and interchange of, let's say, proposals with airports. And at the end of this year, what we saw a slightly and a step by step recovery that during the last quarter of 2019 was really reaching this level. What happened at that time in terms of the product and the passengers' mix? We were, during many months, dropping luxury products tremendously. And I remember 30%, 35% in luxury products. 2nd, less affected was fashion and cosmetics. And the other product categories, especially tobacco and spirits, were affected but not strongly. Obviously, we had negative performance. But the main impact was this. Today, what we have seen so far is very similar. This is the digital day of impact. The initiatives in terms of P and L that I am going to explain are based on that is focus in acceleration of sales, gross profit margin maintenance and initiatives to protect the cost structure of the company, especially attacking the fixed costs. On the other side is the cash flow and the liquidity, because one of the more important if I have to put in a situation like that, the priority is priority number 1 is to protect liquidity. And this is basically something that in the type of company we are and I am going to explain why, liquidity is something that you can manage very quickly because we are a global centralized company. It's not 65 companies working independently. We are controlled globally by IT, obviously, and by the system we are operating. Let's move to page 18. There are 3 characteristics of our company today in order to understand what we are going to explain in the next slide. Number 1, the cost structure. As I said, obviously, there are a significant part of the cost that is going to be reduced because the activity is variable cost. Number 2 is the Dufry's risk diversification strategy. There are not important concessions that individually consider could really impact the company. We can balance that depending on the region, depending on the division. Sometimes we had in the past bad performance in South America and then we had performance good performance in Asia or in Europe. Now we may have a good performance in South America and the U. S. And then more aggressive of our performance in other regions. But this diversification is also an important part. And what I said, we are a highly integrated company, meaning decisions can be implemented very quickly. If tomorrow we need to do something, it's implemented because we have the control of the gas, the control of the merchandise and the control of the expenses of the company globally. It's not something that we need to call or we need to say. Everything is controlled globally. As a consequence of that, if we move to Page 19, we are at this stage of the process, already started. It's not something that is going to start. It's already started. First of all, it's trying to accelerate sales. One of the most important things that we need to do is really use the capacity of the company for selling more. And this is only one way. We need to accelerate in the locations more sales. What is the main purpose of this first step? It's to accelerate more sales via volume. What we want to sell is more volume. In the locations, if you visit Zurich airport or you visit any other airport, you will see that we have a global promotion today. Any product of the same supplier, you pay to and you bring home free. And it's not expected to have an impact in the gross profit margin because we are working with the suppliers in the same direction. They want volume, we want volume. And what we are we have agreed is to protect the gross profit margin. The second one is on gross profit margin. 3rd one is a negotiation or concession fees. What is the meaning of that? We have, in most of the cases, we pay today debitable. But assuming that the business is dropping tremendously, we had in 2,009 the same experience. And we were able to adapt the reality of the concession to the reality of the business. Sometimes it's not forever. It's for a temporary base. But this is also variable cost. From our perspective today, concession fees have variable cost. Why? Because independently that most of the concessions are today variable. In case of a significant impact, we are in the position obviously to collaborate and in fact we have received today calls from airports in order to really collaborate and understand what the solutions are. I think this is one of the most probably relevant things. Personal expenses. Efficiency, number 1, is to put on hold of the seasonal hirings number 2, is to use these figures for holidays and number 3, in case needed, and this is also identified, to really reorganize the companies and put in the companies temporary basis because we need the employees later on with the right size in order to operate the company with obviously the business we will have if we need to drop. All these initiatives at the fixed cost level, not at the variable cost level, will impact €60,000,000 This full year basis will impact the adjusted operating profit. In terms of cash, on top of the €60,000,000 because obviously €60,000,000 is also impacting the cash, is extra €40,000,000 in 2 different levels, net working capital and CapEx. With CapEx, we can even, obviously, depending on the circumstances, we can even increase. And in terms of net working capital, it's more complex because we are, in my view, very efficient. But we have also a gap for improving this type of net working capital rate. Considering what I said, and I think based on the information we have today and assuming that the situation is going to deteriorate in March for sure and in April for sure and maybe slowly, obviously, recovering May and maybe in June, we will see better recovery. The company is not having or is not projecting to have any liquidity problems. What is the meaning of that? The meaning of that is that we have protect today the cash for going in a normal, terrible process in March April in case it's needed. But in case it's not needed, we are there. Finally, the situation in 2019. I hope that there are not many questions about what is going to happen in 2019, because it's very difficult to answer that. 2020, sorry, is better than we were being in 2019 than in 2020 but in 2020. The situation today with information we have today and with the projections we have today and I want to remark that because probably the situation could change. We will be negative single negative organic growth by year end. It's the situation we are projecting today. But again, the situation, we have a committee that is weekly revising the situation and changing the will depending on where we are going. Then we will probably comment many other different subjects during the Q and A. Page 20, this is the list of the different KPIs that we communicated in December. If more KPIs are needed, don't worry, we will obviously report because the uncertainty is also important for us. We need to really communicate properly the situation of the company. We are starting with what we agreed is basically report on top line sales and many other subjects related with sales. But if needed, don't worry because information will be available, okay? We understand the situation we are and we will be able to deliver whatever is needed in the market. This is from my side, Yves. I hand it to you and you continue. Thank you, Julian, and good afternoon, everyone. Julian already commented on organic growth, but just quickly from my side, on Slide 22, I would like to emphasize on the improvement in like for like, which reached 2.2% for the year sorry, in the Q4 and reflects the ongoing improvement of the business during 2019. Net new concession reached 2.4% growth in the year and 0.9% in the 4th quarter, as some of operations such as MTR in Hong Kong, but also Perth annualized in this quarter. Then organic growth for the full year came in at 3% and 3.1% for the 4th quarter. This is in line with our medium term guidance of 3% to 4% per year. Last but not least, the FX impact in the year reached negative 1.2 percent and 1.5% in the quarter. Now let's move to the next slide to further understand the FX implications. On Slide 23, negative translation in the currency impact seen in 2019 is a direct consequence of the strengthening of the Swiss francs basically versus all the other currencies. Looking at the bottom left chart, you will see that both the euro and also the pound sterling devaluated very consistently versus the Swiss francs along the year. Even the U. S. Dollar, which started relatively strong into the year, lost steam towards the Q4. Moving now to Slide 24, looking at the usual P and L statement, starting directly from gross profit. Gross profit margin expanded by 40 basis points in 2019. The increase reflects the continued improvement in Dufry's negotiations with global and mainly local suppliers as well as the further standardization of the supply chain and implementation of the commercial platforms. Lease expenses were in line with the previous year as a percentage of turnover. As you remember, these expenses are related to the variable concession fees and the variable part of concession fees or concessions, which contain a minimum annual guarantee. Personal expenses as a percentage of turnover increased by 60 basis points in 2019. As we mentioned in previous meetings, most of the increase relates to North America, and there specifically to the increase in the minimum wages on one hand side and then on the other hand to a one off charge related to changes in the management. Depreciation, excluding right of use, measured as a percentage of turnover remained stable at 2.3%. Depreciation of right of use increased by around CHF 80,000,000. As you know, changes in this line are related to renewals of concessions and signing of new contracts. Amortization in absolute terms stood at CHF403,000,000 versus CHF 370,000,000 in 2018. The increase is related to some impairments. Other expenses net also remained practically stable as a percentage over turnover, so nothing to be commented on that line. As already mentioned last quarter, the line sales tax recovery in Brazil reflects the indirect tax refund of CHF 64,000,000, which we became entitled to claim back in Brazil and which we have previously paid as an indirect tax starting in 2,009. Financial results reached CHF 128,000,000, an improvement of around CHF 7,000,000 for the year, mainly due to improvements in the financing structure. Looking at lease interest, this has also decreased in the period. As mentioned in previous call, there is a significant front loading effect there due to IFRS 16. Further down, income tax is lower when compared to last year, mainly due to lower tax in some of the jurisdictions. Having gone through most of the relevant lines of the KPI of the P and L, let's now move to the KPIs at the bottom of the page. Adjusted operating profit came in at CHF 768,000,000 versus CHF772,000,000 in the previous year. Adjusted net profit reached CHF349,000,000 versus CHF354,000,000 the year before. And finally, adjusted earnings per share reached CHF 7 versus the CHF 6.83 of the year 2018. Please note that in the annex, there is some additional information on the calculation of the KPIs. If I move to Slide 25, we find a summary of the cash flow. Adjusted operating cash flow reached CHF 960,000,000 in 20.19 from CHF 973,000,000 in 20.18. Despite a decline of 1.4% in this line, we managed to grow equity free cash flow by 3.4 percent, reaching CHF383,000,000. The result comes at the higher end of our guidance range of CHF 350,000,000 to CHF 400,000,000. And I'm especially glad to with this achievement because given the high comparison compared to last year, if you look at the top right chart, you will see that between 2017 2018, we have already doubled the equity free cash flow. And in 2019, we managed to maintain that high level. Moving to Slide 26, where you can see the bridge of the equity free cash flow components. Changes in net working capital reached minus CHF 24,400,000 this year versus minus CHF 4,100,000 last year. Looking at the bottom left chart of the table, you can see that we continue to manage working capital very well, reaching a good performance at the lower end of our indicative guidance of 5% to 6%. Income tax paid reached minus CHF 97,000,000 versus CHF133 1,000,000 the year before. The difference reflects mainly the refunds we have received at the beginning of 2019 in Spain. CapEx reached CHF 245,000,000 in the year versus CHF 251,000,000 in 2018. Again, if you look at the chart at the bottom, this time on the right side, you can see that we have also been very successful in controlling CapEx. All other items are relatively similar to last year. As you can see, looking at the cash flow, it's very clean. So I do expect that this will provide even more confidence to the market that our ability to not only generate cash, but also to manage the cash on an ongoing basis. If I move on to Slide 27 with the usual summarized balance sheet, There is nothing specific to report it here. The only difference basically to last year is related to IFRS 16. It's the right of use asset on one hand side, on the asset side, the lease obligations on the liability side, which have changed due to IFRS 16. Moving on to Slide 28 with the financing situation. Given our cash generation, our net debt was reduced by around CHF 184,000,000 in 2019 and amounts now CHF 3,100,000,000. Julian has already mentioned it. It's basically the lowest level since the big acquisitions in 'fourteen and 'fifteen. Looking at the covenant. The covenant stood at 3.52 by year end against the threshold of 4.5 times, so still a relatively high threshold sorry, a relatively high headroom to the threshold of 4.5 times. Then on the right hand side reflects the debt maturity profile, including the new €750,000,000 bond issued last November, which is maturing now in 2027. The new bond has a coupon of only 2%, which leads to interest savings of €16,500,000 per year as of 2020. As you can see, the maturity profile, about half of the revolving credit facility has not been used at the end of 2019. So there are still around EUR 700,000,000 of cash available under those committed credit lines. So from a liquidity perspective, as Julian has mentioned in his presentation, we don't see any issues in the next couple of months. With that, let me pass over to Julian for the closing remarks. Thank you, Yves. Okay. Let's move to page 30 of the presentation. 1st part of the conclusion is just fixing the picture in 2019. We reached 8,900,000,000 sales 8,800,000,000, 48,000,000 Organic growth reached 3% and important wins in AENA, Spain, Mexico City, International Airport including obviously extensions and new wins. Acquisitions as discussed and presented during many obviously quarters already performed and the strong free cash flow confirmed once again EUR383,000,000 As a consequence of obviously as I said, the financial information, the Board of Directors has considered to submit to the general assembly the CHF 4 dividend per share. What is important here? And I think this is we can learn about 2019 for understanding the evolution in 2020. This company is very flexible, can generate cash and in circumstances where the situation is not different locations the business in a positive way. This is the lesson for 2019. I know that probably 2018 is already over and nobody pays attention. But just to mention that there are lessons that can be learned in 2019 for understanding the evolution in 2020. Regarding the 2nd page, 30 1, in January, we started even faster in terms of growth during the 1st 3 weeks than in 2019 Q3. We were reaching around 5% or 5 point 6% something like that. In February, including obviously all the problems more located at that time in division number 2 minuteus 7.3 percent. Europe and Africa performing slightly negative, but not very negative. There were many operations in Europe and Africa performing very well. The second one is Asia Pacific and Middle East reporting negative double digit growth. So at that time, the problem was really focused in China and around China and in operations probably with Chinese passengers. North America performing single digit negative and Central and South America starting again to perform positively. Year to date, February 2829, we were performing minus 2.3%. During the 1st week of the 1st 8 days of March, the performance until the March 8 was minus 3.8, which had obviously double the deterioration. I think it's difficult to say where we are going now, but in March it's going to be a very difficult month. It's very strong. I think the double digit negative growth in March is for granted, it's for sure. And then in April, we are also thinking that will be negative, but we are seeing in the second part, especially on May June, a slowly increase, obviously, based in the statistics that in the second part of the year will be mitigated, I hope, for the recovery of the traffic and the recovery of the most important operations we have. Provided the situation, I think what we could say is the company is in the position to protect the cash generation and the P and L with initiatives I already mentioned, especially attacking in this case the fixed cost of the different operations. In terms of the net working capital and CapEx, the €40,000,000 saving could be improved. It's something that is underway? We will have obviously ready 2 more scenarios regarding these 2 specific KPIs. But I got the impression that the company is not flexible in order to really implement initiatives in this area. With this model prepared with this basis, we don't foresee any liquidity problem in the Neatrucha meaning obviously from now to the end of June. I think this is a situation where we are more or let's say confident that we are going to be during the next months. That's all from my side. I think the questions as always will be welcome. Yes. Rene Sohne from Octavian. Maybe two questions, 1 on the dividend. If you would see that the situation is deteriorating worse than you expected? Would you consider or reconsider the dividend payment to protect the cash level? And secondly, on net working capital management, you said there's more room. Or generally, how much more room would there be if things would be worse versus the €100,000,000 you announced now? Yes. Regarding the dividend, I think the only thing I can say is what it is. The Board of Desktop Basin information we provided, they say yes. What is going to happen? I prefer don't I don't want to guess because obviously everybody is very negative now, telling no, it's going to be a disaster. Personally, I think the company is healthy enough in order to really protect this part of the business. But again, it's what it is today. The second one, net working capital. Yes, there is room for improvement. The answer is yes. And it's but the problem now is that depends on the evolution of the different product mix sales. Because if we have to accelerate in specific high luxury products is one thing. You have to accelerate, I think, the improvement. In tobacco and spirits, it's a different thing. In terms of luxury products, the situation is clear. We have today, the inventories prepared for the season. We have the inventories ready. But if we need to accelerate the stock out of the inventory, we can accelerate. How much is going to be added to that? I think we have planned it now around €15,000,000 could say €20,000,000 €25,000,000 if we accelerate. Any other questions here in the room? You can check also. The first question from the phone comes from the line of John Cox, Kepler Cheuvreux. Please go ahead. You were mentioning that certain airports would be willing to kind of reduce certain concessions. Can you quantitatively kind of elaborate on that? I mean, how many airports out of all the clients you have? How about the railway stations and others? The airport business is the major business, but not the only one. Just add some more flesh on the bone. Yes. Most of the contracts are variable because they are based on percentage on sales or in rent per passenger and if the passenger drop, the rent automatically drop, especially in cruise lines and businesses like There is a part of the business. Today, we have, I don't know, 1200 concessions, I would say. It's very difficult to say in percentages, but I would say the most important part of the concessions will not be in Mac. We need to focus on a specific group of concessions. In my view, not very relevant in terms of size and importance that should require. I would say it's a renegotiation. I would say it's to adapt the concessions temporarily to the reality of the business because obviously this is the situation. But it's not only for Dufry. It's for 99% or for 100% of the people working in the same type of business. It will happen in aviation. It will happen in many other things. The reality is we need to adapt we all need to adapt the reality of the concession payment to the reality of the business. And this happened in the past. This is something that is not new, already happened in 2,009 and even in 2,000 and 3 and even before. The reality of the business will require 3, 4 months of adaptation, but then the situation will be normalized. This is what we have seen in the history of travel retail. But being specific, the most important part of the concessions today are variable, based in passengers' rent or based in percentage on sales. There is a part of the concessions that if the sales drop significantly, we will be in mark, But this mark will be adapted to the reality temporarily, for sure. The first question from the phone comes from the line of John Cox, Kepler Cheuvreux. Please go ahead. Yes. Thanks very much. Good afternoon, guys, and well done for a decent looking set of 2019 results. I have a couple of questions for you. Just on the coming back to this variable and mag, obviously, we're all trying to work out what the impact would be of a 10% or a 20% or a 30% decline in revenue for you this year. I'm just wondering, I assume maybe 60%, six-0% of your concessions and I include right of use, the concession fee itself plus the lease expenses is variable. Is that a correct guess? And I'm wondering in terms of the mag component, if we were starting to see a 20% decline in revenue this year and you haven't been able to reduce that mag component, I'm just wondering how much is it just in case you can't actually are able to renegotiate the mag component. So any sort of visibility you can give us on that, that would be very, very useful as I think many of the people covering you and investing in 2nd question, just based on your base case, question. 2nd question, just based on your base case and you're talking about a single digit decline in revenues, where are your equity free cash flow and your underlying operating profit based on this base case? I wonder if you can just give us some of your thoughts where you'll come in on that base case scenario. Of course, we know it could be better, it could be worse, but just to see what sort of planets we could be on this year. So they are my questions. Thank you very much. I will try Jon, this is Julian speaking. I will try to explain it because obviously it's important. In this in our concession portfolio, most of the concessions are subject to buyable. Is 60% obviously, I can say exactly the number, but it's higher than 60%, okay? It's a possibility. And then the only thing we need is, obviously, talk with the different landlords and discuss the situation. But today, I can say with the drop of sales we are looking at, the situation is adapted to the reality, meaning the rents will be adapted to the reality. If you tell me 70%, 78%, I cannot say that because I never disclosed with the information, but it's very high, okay? Regarding the base case equity free cash flow and operating profit, I think, Jan, we prefer that you do your own calculations, access whatever question you want. But I think to tell you what is the target for equity free cash flow today, the operating profit today is very difficult. But ask the question because we will try to put light in order that you build your own model. Okay. Well, maybe let me come back to the mag question then. Let's just hypothetically say your sales are down 20% this year. What does that do in terms of how much mag you have to pay if you cannot renegotiate with the landlords to adjust the mag? Again, it's the same question, Jan. I have to tell you the percentage of contracts with variable clauses. And I think this is I told you, most of the contracts today are variable based in percentage of sales and in spend in rent per passenger. How much is the specific volume of motorboat is higher than 60%. Just for confirming your own information, it's higher than 60% in the case of 20% drop of sales. Okay, great. Good to know. Thank you very much. Next question comes from the line of John Ifert, UBS. Please go ahead. Yes. Hello, and thanks for taking my questions. The first one would be, please, on the adjusted EBIT growth of around 30% year over year in Q4. Can you elaborate a little bit on this, how sustainable this is? What were the special elements here? It seems like other operating income plays a role. Second question would be, please, on airport sales. It seems it was relatively robust and flattish in 20 19, maybe at a good consumer environment, good passenger growth. In the future, is it again cruise lines and other locations and distribution channels you have, which will be the main growth contributor and airports are likely flattish over the cycle? And the last question would be on the caverns, please. Let's assume a scenario your sales are down 20%, 30% for a certain time period and you are breaching caverns. How flexible are your potential options you have as holidays or you pay higher interest and have higher covenants for a certain time period? Many thanks. I didn't understand the second question. The first question, sorry, could you repeat the second question? Yes. Sorry, the second question was on airport sales. I think it was relatively flattish organically in 2019. Is this something you also would expect for the future over the cycle? And this means that your growth is coming from cruise lines and train stations, etcetera, in the future. How you see this? Starting with the first question on the adjusted EBIT or adjusting operating profit. So there, yes, this is sustainable. So look, if we quickly go through the lines, you know where we have seen some pressure in the last year. It's basically personal expenses. We have commented on that many times. And then the other line, which was affected, is depreciation of right of use. And as we have also commented many times, the depreciation right of use is, to a certain extent, a moving target because when you enter into new concessions or when you renew concession, which contain a MAC, that number basically is volatile to a certain extent. But coming back to your question, yes, it's sustainable. And then going to the second part in that sense, look, even now in the downturn scenario where we see some effects from the coronavirus, basically also there, it should be sustainable. And the reason for that is basically the following. Julian has commented on it. There is a plan in place. We will generate some savings on the cost structure. And on top of that, when you look at the gross profit margin, purely the decrease of sale should basically not lead to a decrease of the gross profit margin. That should remain relatively stable in that sense. Regarding the second question, John, what you said is correct, is the most important part of the growth was generated through the new operations, including the cruise lines. In my view, outside of the obviously, the situation we have today, the driver for the sales of this company will be airport retail in terms of importance and in terms of dedication of the teams. And in fact, we have ongoing operations that will be announced at Duly, not now because obviously it's not going to be appreciated a lot. That will be significant and will be welcome. The second question regarding the drop possible drop 20%, 30% during the next 2 months. All the initiatives that I mentioned, EUR 40,000,000 savings are already implemented, meaning that all the employees that were seasonal employees have put it on hold, All the employees that we were in the position because the sales were affected are already on holidays. All these initiatives are already done. We have even a second plan that will obviously impact stronger. And I said this reorganization of companies, but this is not the case yet because obviously, you cannot destroy the structure of the companies if you think that this is going to be a temporary issue. We are still thinking that it's a temporary issue that will be recovered in a very short period of time. And as a consequence, what we are doing is temporary measures and initiatives that impact the P and L in the shortest period of time. This is already implemented. Okay. So if I understand correctly, in a scenario, you temporarily would breach your covenants, you don't expect that you would need to raise capital or so because there should be flexibility in the covenants to some extent. Is this my right understanding? So look, Bjorn, based on what we currently see, and it's difficult to make obviously forecast, But based on what we currently see, we don't foresee to breach any covenants. And look, even if an event happens where I mean, we will, under no circumstances, breach any covenants. So if a situation occurs where we would go above 4.5 times, I think that's the way we need to express it, above 4.5 times on the leverage level. In such a case, there are mechanics in place which we can take to basically mitigate the risk. And also, we need to take into account that we were working with our existing lending groups for the last 15 years. So with most of those banks, we went through a lot of crisis. Julian has mentioned it at the beginning, and there are solutions. You mentioned one which would be a covenant holiday. But again, based on the current assumptions and the forecasts we do, we don't expect to breach covenants or to go above the 4.5%. Okay. Very helpful. Thank you. Next question comes from the line of Jafar Mestari, Exane BNP Paribas. Please go ahead. Hi, good afternoon. I will go through if that's okay. Firstly, just in terms of how you build your guidance for this year, You seem to be basically assuming that you'll get the luxury of an almost normal Q3. So I'm very curious what the statistics are that you're referring to that suggests we will see an improvement starting in May already. And then have you flexed this scenario? That's the base case. But if you're disrupted until July, August, even September, where do you end up in terms of top line and in terms of leverage? And then second question, just coming back on those covenants. I appreciate there's many solutions you will find in advance if there's any issue. And we had the discussions before in 20 16. There's no covenant on the bonds. But again, you partly answered already, but what happens with the bank loans if you get to 4.5 percent? Because it sounds like there's no repayments, no increase in interest rates. It's basically a non event. So why is there even the covenant in the first place? And my last question is, and I appreciate that maybe a point of detail because 2, 3 points of like for like is mostly a rounding error these days. But at the same time as all of that happens, the Brazilian real and the Russian ruble have also been weakening in recent weeks. So have you seen lower spend from those nationalities like you did in 2018? I will start with the first question. I think what I said is basically based on the experience we had. There is a period of time, especially at the beginning of the crisis, economic crisis, and this is an economic crisis. It's a global economic crisis. And you have a significant deterioration during the 1st months, very strong during the 1st 3 months. This is what we had in the past business experience. After the 3rd month, 4 months and depending obviously on the performance, we start to see a gradual improvement. This improvement happens normally during the 4th 5th month in the worst case scenario. This happened in 2,009. What is the behavior here? The behavior here is, 1st of all, the most important affected categories are categories related with luxury products. It's something like a very straight and fast impact. And this happening today. It's more than obviously, it's a very high double digit drop in high level products. The 2nd most important impact is in products related with Passion and Cosmetics or Personal Care. And the lowest impact, very low impact in fact, is in tobacco and spirits. What is going to happen? Nobody knows because this is something that is very today is impossible. But in the plan or in the model we have, the big impact of this actual crisis is going to happen in March, April and probably May 1st part of May. After that, what we are going to see is a big and fast recovery. The answer is no. What we are going to see is a slow recovery, but thinking or taking into consideration that the most important quarter for us is the 3rd quarter. We expect obviously a better performance in terms of cash and in terms of profitability. The behavior of the customers is very similar, as I said in the past. What is happening today is regarding the spend per passenger. And obviously, we don't have information enough in order to justify anything. In most of the locations, due to the promotion we have or we have started, the spend per passenger is increasing. And this is something that happened in several locations. Regarding the 2% to 3% life for like, sorry, I couldn't understand the question in the like for like. Yes. So we're all talking mostly about the impact of the virus and the containment. But then separately, at the same time, there's also weakening of currencies like the Brazilian real and the Russian ruble. And this in the past? Yes, yes, yes. But in fact, in Brazil, we have seen better performance during the last months than to the previous year so far. The reality of the real is an impact. The answer could be yes. But we have, as you know, this initiative decided that this regulation approved by the government where we are able to sell product with higher value in arrivals. Arrivals is 65% of the sales. What happened in arrivals? In arrivals happened that the spend per ticket, obviously, we are now talking about the number of passengers, increased by 8%. And this is a good sign that I hope whatever situation we have to face in Brazil now will be mitigated by the increase in the allowance. That is the most important part in the arrival shops. Look, in respect to covenants, that was your 3rd question, basically. Look, again, I cannot repeat that enough. We are on the topic. We are analyzing the situation. Based on our assessment at the moment, we don't believe that there will be an issue with the covenant. However, if there is a scenario or the case that this indeed becomes an issue, we know it in advance. And again, as I've mentioned before, we have a very close relationship with our lending group, with every single bank, which are around 25 different banks. And the feedback we have received also over the last couple of days from our banks was very positive. So from that perspective, we don't expect any issue. And even if there is one, yes, what you have mentioned could be one scenario. If you are at a higher leverage, you probably pay an additional markup, but there is no risk per se in that sense. Okay. Thank you for clarifying. Thanks. Next question comes from the line of Daria Fumina, Goldman Sachs. Please go ahead. Hi. Thank you very much. You've been very clear on the covenants. So I'm just going to ask a slightly different question. Are there any cross default provisions in other parts of your debt, RCF, for example, that could be triggered if you hit the covenant, which you booked very clear that you don't expect to? And my second question is, given that you mentioned you run a lot of the scenarios for your board, can you please outline what needs to happen for your top line with your top line for you to hit the covenant? That would be very helpful. And my last question on CapEx. Can you please help to understand what would be your minimum level of CapEx that you're either contractually obligated or for any other reason cannot cancel for 2020, please? Look, in respect to cross defaults, Daria, there, yes, there are. Basically, all the financing arrangements we have in place contain such clauses. And what is relevant in this case, if we default under the bank if we would default under the bank facilities, there is a cross default under the bonds. For the top line hits in respect to covenants, it's not something we can't disclose at this stage. I mean, it really depends on what then happens, how quickly the initiatives are implemented, etcetera, but it's not something we can comment on at this stage. Regarding the and Daria, regarding this is Julian speaking. Regarding the CapEx, it's very flexible. Of course, we have obligations in terms of extending contracts that we need to fulfill. But when you have an obligation for extending a contract, you can always, and this is the case, negotiate to delay the investment in CapEx until certain time. This is not going to be an issue. The CapEx can be managed. The issue here, there are 2 different aspects here that I think probably are important. One is CapEx that is needed because probably the airport is changing the terminal and this terminal will be with a different traffic flow and you cannot leave the shop in this location because the traffic is going to be in another location. And the other one is new, let's say, new project new project new concessions that we have already signed and we need to open because, obviously, finally, we need to open. This part could be today in the company around EUR 80,000,000 But the rest of the concessions or the rest of the CapEx, it could be obviously managed. Thank you. Next question comes from the line of David Moon, Wells Fargo. Please go ahead. Hi. Thanks for hosting the call. Just a question on the outlook. You mentioned that you're seeing an uptick in the May and June statistics. So wondering if you could elaborate on that outlook, We couldn't understand here is the line is not very good. Could you please repeat the question? Mr. Moon, your time is disturbed. Yes. Hi. Can you hear me? Yes. Sorry, working from home issues here. You mentioned on the call, you're seeing in the statistics an improvement suggested for May and for June? Yes. This is the point. We are forecasting that the situation will turn around end of May or June gradually to better situation? Yes. But what statistics are you referring to? My statistics because it's the experience we had with all the crisis in the past. Okay. So that's 2008 and 2001? No, 2009 was the last time. Okay. So it's a base effect of 2,009? Yes. Okay. Thank you. Okay. Next question comes from the line of Rebecca McClellan, Santander. Please go ahead. Hi, Julien and Yves. Hope I take a follow-up with you. A couple of questions, please. Firstly, I'm just trying to understand inventory. You're just saying that even on a lower top line, there's no major gross margin risk. Does that mean that the brands are basically taking the hit on related to the sales slowdown Or how does that work? And also, what's the sort of obsolescence of inventory that's currently in the store and that's probably stacking up at the moment? I am not sure that I could understand your question. I'm just trying to understand inventory. And you're talking about there being no major gross margin risk. But obviously, sales are going are falling below budget and therefore, inventory is building. Basically what you're saying is that the brands are taking that cost themselves rather than Dufry having to bear the brunt of higher promotional activity? Let me try, Rebecca. I'm not sure if you understand the question, but there are probably 2 aspects. The first one is what I have mentioned. If sales drop, there should be no impact on the gross profit margin because you buy and you sell the same products as before. You probably sell less, but still at the same margin. And the second aspect is Julian have mentioned that we are performing some promotions. There's some promotional activity obviously to boost sales. There, we are getting some support from the brands. So we had close interactions with the brands and the brands are supporting the promotions and they pick up part of the cost in that sense. So yes, gross profit margin in that sense is protected. Right. And so but in terms of inventory ownership, where as it stands right now, what you're saying is that the ownership is only as far as the revenues are achieved. Is that right? No. It doesn't matter. Don't worry. And secondly, it seems that Carnival are going to be Let me understand because I am going through, but I don't understand the question. The question is regarding the days of inventory. The question is regarding the type of inventory. Sorry, I couldn't really understand the question. Could you please explain me what you want? In the shops right now, you've got a whole load of inventory, right? Suddenly, for whatever reason, people aren't going to the airports, they're not buying. So you've got an inventory sort of pile up. Because it's such a fresh inventory or it goes out of the because it's such a fresh inventory or it goes out of season or whatever. So I've just been trying to understand how that's managed in terms of the inventory flow. And if there is inventory risk, it seems to me according to your guidance of a flat gross margin that the inventory risk is with the brands, right? You know, luxury products in Dufry is 13% of the total sales. The inventory maybe is a bit more, maybe it's 20%. This is the seasonal product. The all the other products are not seasonal. You can buy this product today, tomorrow, the day after tomorrow. That is not of Solesence in itself. The reality is that this is a problem because we need to rid off this material or this inventory because if we want to have more inventory in the future, the reality is that we need to read off and sell this merchandise. What is the strategy? The strategy here is very simple, It's we are going to impact the sale price in order to make attractive this to the suppliers. And the second initiative, and it's also very relevant because it's probably the most relevant, is negotiations with the suppliers for the change in the merchandise that is today in the shops for merchandise for the new season. Why? Because obviously you want to sell merchandise of the new season, you need the space in the shop and you need obviously fresh merchandise. Both is to accelerate the promotions and to exchange merchandise with the supplier for continuing with the new merchandise during the next season. Right. And so what you're saying is that it's the suppliers that are taking largely taking the cost of that rather than the free, right? Yes. Most of the cases, the cost is not the cost of the discount in most of the cases is supported by us in this specific merchandise. They changed now because obviously we exchanged the merchandise. Right. Okay. Okay. Thank you, Julian. And my second question is it looks Carnival are going to be stopping pausing their cruise lines for 2 months. Is that something that you've got with some of your cruise ships? Yes. What we have today in the is different depending on the different companies. I don't know specifically Carnival. What we have seen now is an increase of the restrictions in terms of traveling due to the age, due to the health sanitary conditions at the entrance. And the drop that we have seen so far is around 20%, 25% in terms of passengers. What is going to happen during the next 2 weeks probably not probably is going to happen. The most important companies will be on hold, and they will reinitiate in 2 or 3 weeks. Right. Okay. And but does that mean that there's 0 OpEx when these cruise ships are on hold basically? It's entirely variable cost. It's a fee per passenger per day. Okay. Thank you. Thank you. Next question comes from the line of Neil Keeney, Credit Suisse. Please go ahead. Hi, guys. Thanks for taking the questions. I appreciate you've talked a lot about the 4.5 times leverage covenant. I just wanted to point to something in the offering memorandum for the new 2027 bonds. It states there that the 4.5 times covenant on the bank facilities can flex to 5 in certain circumstances. Can you tell us what those certain circumstances are? And my second question is, again, just on your guidance. I appreciate the base case for the full year. Some other airport retailers have talked about 35% hit to revenues in March April. Does that tally up with your full year guidance? Or is that more of a bear case than you're thinking at the moment? Basically, what I'm trying to get is you've given us your base case, but you obviously must have contingency plans for a worsening of top line declines. So I'm trying to get a sense of what that would be. So look, in respect to the covenant of 4.5 times and what you have mentioned about the latest bond issuance, so yes, the bank financing arrangements contain a clause which allows Dufry to increase the leverage or the threshold for the leverage 2 times in the duration of the contract, I. E, the 5 years to 5 times. And the requirement for that is basically, it's probably if you go into the details a little bit more complex than that. But to keep it simple, if Dufry is doing a project, whatever kind of project, which requires an investment or something similar, we are allowed to increase the threshold. Okay. So just to clarify, that's not something that would be that you could utilize in the event, highly unlikely event as you said, but in the current circumstances, it's only with regard to a specific CapEx project? Well, not specific CapEx project. So if I remember correctly, the contract test investment, it's pretty broad. Okay. So if I buy a new laptop, probably it's enough. Okay. Regarding the case, the basic case in this specific projection is very similar. We are expecting in March, April around 30% or similar drop in sales. Okay. That's helpful. Thank you. Next question comes from the line of Jonathan Ella, Financial Times. Please go ahead. Good afternoon. This is a question about Donald Trump's address last night. I'm assuming that the earnings statements and the annual report was written before the President basically banned almost all travel from Europe to the United States. Does that decision alter your outlook or worsen it in any way? Obviously, these news were after we announced the results. But let me explain what is the type of business we have. In the U. S. And Canada, because we consider both the same territory, around 70% 75% of the business is duty paid local customer, and this is basically the U. S. The other remaining 25%, most of them is duty free in Canada, and 5% is duty free in the U. S. This is in the front of the U. S. And Canada. On the other side is Europe. And in Europe, obviously, the most important destination we have with origin for the U. S. Is the U. K. Is in Heathrow. And I think this is important because obviously, Heathrow is still flying over the U. S. Then the consequence, we have not evaluated yet, but I am explaining you that in order to give you, obviously, the opportunity to understand how we could be impacted. We have a duty pay business in the U. S. The most important part of this is in Canada. And in Europe, the most important origin for the traffic to the U. S. Is U. K. But obviously, we will have an impact. We need to calculate. Okay. And can you give me an idea how big Heathrow is in the overall context of your operations? Is it the single largest contributor that you referred to in the slide? Yes. It's the most important one, individually considered. Okay. So around 7% of sales? Is what we disclosed in the past that there is a concession that around 7% is the highest, more or less is the highest. Okay. All right. And can you say anything about the MAX that others have referred to? Which airports or which geographies are being the most cooperative in revisiting Mag terms? Yes. So far, it's in Asia because we started before. I think in Asia, we are quite advanced in terms of the discussions in terms of Mags. But we are also starting in Europe. Now still Europe, at the time that we report the information, financial information was not terribly impacted. Now is the time to start. But we started in January in Asia, and we have had very good answers from the landlords in Asia. When I talk about Asia, it's from Middle East to Australia. This is the division number 2. Okay. All right. Thank you very much. Thank you. Next question comes from the line of Alexander Nordhagen, Goldman Sachs. Please go ahead. Hi. Thank you for taking my questions and for the lengthy call. It's been very helpful so far. I just got 3 quick questions. 1 on the liquidity, would the board consider cutting the I know you said at the beginning it's already been announced, but would they consider restricting the dividend? Because it seems that would, I guess, dissipate a lot of the questions you've had so far on liquidity. The second one is on 2,009 and 2010, how low did your or how did free cash flow to equity turn out in 2,009? And do you think that's the fair comparable for this year? And the third one is on just your labor costs. How much do you think you can flex those costs down this year? I know you've given us some numbers on potential cost savings, but I mean are we talking perhaps 5% down in labor costs or is it more? Thank you. In terms of 2,009, at that time, we were not reporting equity free cash flow. I don't remember the number now. I know the number, but it was not terribly impacted. What I want to put as a reference of generation of cash is that EBITDA dropped 120 basis points with 10% drop year end in organic growth, Meaning, obviously, the cash was well protected. I'm sorry, I don't remember exactly the name of equity free cash flow because we didn't report this like today. Today, it is a different thing. Regarding 2019 sorry, the cost savings that I identified before, are cost savings already implemented in the different companies. This EUR 60,000,000 the fixed cost is already implemented. And obviously, there is a significant part that is also buyable that will be adopted. How much is going to impact? I think the P and L in 2019 is very clear. In the personnel expenses, we have 14.1 percent of total turnover. And there you have one part that is variable. And then you have the savings today identified as €20,000,000 on top of that. And on the other side is general cost. General cost, most of them are variable. And the reality is that the €20,000,000 already identified, they are already implemented. And again, you have the starting point in 2019, you can obviously easily calculate. And the last one on the dividend on the Board? So if the board would reconsider the dividend at some point? I think the board has obviously another meeting before the NPL assembly for approving the invitation. The information we have today is obviously everything will be analyzed again, but I don't foresee any changes in the opinion. But again, who knows until we know exactly what is going on. Today, it's not. Thank you. Next question comes from the line of Aman Mahal, PGIM. Please go ahead. Hi, there. Most of my questions have been answered actually. Just one. On the February trading, you said that Asia Pacific was down double digit. Can you give an exact number for that? Not yet, but it was above 25%. And I don't know how much visibility you have on the 1st week of March, but has March worsened versus the February trading for Asia Pacific? In Asia Pacific especially, no. It's quite stable. The problem has started in the division Europe and Africa. Can you give any color on March trading for any of the regions? Okay. I already comment on what I say. It's March 8, I prefer to wait until March 31. And in fact, we have the quarterly reports for explaining in the detail. Okay. Thanks very much. Thank you. Next question comes from the line of Edouard Aubin, Morgan Stanley. Please go ahead. Yes. Good afternoon. So three quick ones for me. Just Yves, just to come back on Rebecca's question on gross margin and I guess the variability of cost. I guess you're getting some volume based incentives from brands. So would you should we consider that historically they've been quite minimal and therefore if your sales were to come under pressure that would not impact your gross margin as a percentage? So that's number 1. Number 2, Julien, sorry to come back on the guidance and traffic and trading. But I think you said, if I heard correctly, that you expected sales to be down roughly 30% March, April. If we look at just the European market, the airline market, I think some observers are saying in the Q1, passenger traffic could be down about 10%, but about 30% for the entire Q2. And I guess you're calling for an improvement in May. So would a 30% decline in passenger traffic for the entire second quarter be excessive to you? And my third and last question is, the U. K. Is clearly your most profitable market. Could we get a sense of the structure of the contract, the MAG for Heathrow and Gatwick? And I don't know to what extent these the informations are public or not. Thank you. Okay. There are obviously 3 questions I will answer these 3 questions. Regarding the gross profit margin is you know the system. The system is that some companies are compensating us in percentage of sales. Obviously, the percentage of sales drop, the possibility that this will be maintained in percentage is okay, but in value, we'll drop with the sales. And in any case, gross profit margin in terms of percentage of sales will remain unchanged so far. Regarding the guidelines, for me, 30% traffic during the Q2, I don't know, I am not an airline. What we have seen is 2 models in terms of income for the airlines is the model produced by IATA. Again, what they are talking is a basic year on year minus 11% in income per passenger by year end in the basic case and minus 16% in the, let's say, expanded case. How is this fitting with 1 quarter? I cannot tell you. I think it's better that you try to do your own calculations. For me, 30% sounds high, but I cannot guess because it's impossible. I am not, obviously, to tell anything regarding what the traffic is going to be because I don't know. Regarding the U. K, the contract is very flexible and don't require any adaptation. It will be adapted to the reality automatically. Right. So just I understand, so you have MAC clauses in Heathrow and Gatwick or not? I cannot disclose contracts that by obviously by the regulation of the contract, they cannot be specific because it's confidential. Okay. Thank you. Thank you. Next question comes from the line of Santiago Domingo, Solventis. Please go ahead. Hello. Thank you very much for taking my question. My question is related to China, to Asian countries, where we saw the first outbreak of coronavirus and we see some kind of recovery in the numbers of flights over the last week. I would like to know if you see any kind of improvement in that region in terms of this every week review that you are doing to your operations in all the parts of the world? I already mentioned that. There is a slightly improvement during the last week. This is for sure. This is what I said, and this is compared with the beginning of the crisis. But still, the crisis is there because the operations are impacted at the same level. But the intense performance of sales, I think the initiatives from the top line point of view that we have started in different of the operations. Again, we are not talking about China. We are talking about division 2. It's not only China. There are other countries there, including Australia, including Cambodia, including Middle East. The situation has improved, but not at the level to say that has dramatically changed. It's similar, but better than previous weeks. Okay. Thank you. Next question comes from the line of Mostafa Davouti, Credit Suisse. Please go ahead. Hi, there. Thanks for taking my questions. I'm sorry if the question was already asked, but are you able to isolate the sales in Europe for the week of March as you've disclosed? Given that you've only disclosed the year to date number, can you keep on The last information we have in March is March 8, and this is already disclosed, but it's in the presentation and in the press release is what it is. So what was the impact for March on a stand alone basis? That's my question. Sorry. Just for the week is minus 17.5%. Okay. Thank you. Very helpful. And apologies if this was also asked before. But in terms of what do you think is the possibility of potentially suspending the dividend is? Okay. I think we are trying to explain what we know, okay? Let me explain I have to be fair. I cannot say more things because it's not my responsibility. It's approved by the Board of Directors. The Board of Directors has decided to approve a dividend of CHF 4 per share last week during the war based on the information we have provided regarding the cash flows, the stress test, etcetera, etcetera, etcetera. That's the situation. Today, the intention is to submit to the General Assembly a 4 Swiss francs dividend per share. From now to this time, obviously, all of the directors could meet and could, in any case, have to meet because there is an important approval is the approval of the invitation to the general assembly that has to be published with 15 days in advance, etcetera, etcetera. This is going to happen during April. Is this a situation that is abnormal? No, every year happens the same thing. The Board of Directors decides to submit the 4 or whatever is the dividend. And then before the invitation is issued, they can issue whatever opinion they want. But today, the information is exactly the same than yesterday. Understood. That's helpful. Thank you. Thank you very much. Next question comes from the line of Thomas Zengler, R and D for Zifron. Please go ahead. Hello all. I have a question to the rating agencies. Do you have actual any comments from the rating agencies to the development of this business here in your company? This was the first question. The second question is, do you think you get support from the Swiss state if the crisis go on? And the last question is, we have some improvements in China. Do you see any improvements on your revenues in China? Thank you. So look, let me start with the first one, exchange obviously with the rating agencies, not because of the current evolution with the coronavirus, but basically on an ongoing basis also during a normal year. And so far, the interaction is the same as usually. I mean, we are exchange news, we are exchange budget and forecast models, and there is nothing specific to report it in that sense. Obviously, they're also keen to get some additional information from our side, which we are providing to them, but there is nothing specific to be reported. Regarding the Swiss state, so far, no, we don't consider any of these alternatives. What we are considering is really aligned with the stockholders of this company, excluding obviously the shareholders because this is operational side, the 3 most important pillars of this business. 1 is landlords, the other one is suppliers and the other one is financing is banks. This is an idea that is ongoing, is not something that will happen as new. And what we try is to align the interest of these 3 stakeholders in the business in order to go through the process whatever is the deep of the importance of the damage. Regarding the improvements in China, I think to say that China is improving, the answer is no. What I said is, this week, the information we received in Division 2 that is including China and other countries is better than the previous week. This is for sure. It has been deteriorating, but this week has been better. Next question comes from the line of Marco Vero, MainFirst. Please go ahead. Thank you, everybody. Three questions from my side, please. And the first one is on the sales tax recovery and the €64,000,000 which you booked in the P and L so far, but the cash flow is still outstanding. So do you have more visibility on the timing of the payment of this sales tax recovery? And the second one is of the split of the announced nearly 15,000 square meters in retail space for 2020 2021. Can you give us a split of how much of this retail space will be opened in H1 and H2 in this year? And then the third question is in relation to the Brazilian duty free allowances being in place since January 1. So do you already see a significant increase in the arrival sales in Brazil and therefore also meaningful tailwinds in your sales? Thank you. Thank you very much. Regarding the tax recovery, I don't expect the tax recovery until the year beginning of the year probably not beginning, end of 2021. The process is very bureaucratic, but for sure, it will be recovered. Regarding the number of square meters that we are going to open this year, 14,900, Everything will be opened during the first if everything is normal, during the 1st 9 months. And regarding the it's it's 14,900, it's 12,000 something because the remaining part will be opened in 2021. And then regarding the arrival sales in Brazil, in total sales, the sales in Brazil in arrival shops have not increased yet because the number of passengers also dropped. But there is one important sign. The spend per passenger increased by 8%. And the meaning of that is that they are buying product more expensive and better. As soon as the traffic recovers a bit, the situation obviously will be impacted in a positive way. Thank you. Thank you very much. All the best. Thank you. We have a follow-up question from Rebecca McClellan. Please go ahead. Yes. Just one final one for me, please. So the Q1 trading update is on May 12. And is there any sort of you feel that you're confident with your previous assessments? Or I'm just thinking about the communication with the market because at the moment, visibility is very low. I think, Rebecca, we will be, I hope, that very systematic and very respectful. We are going to report at the time that we are sure the information is obviously totally audited and fine. I don't expect any trading a day before the day that is expected that we have already scheduled. Okay. Yes, I would have a very basic question. Could you explain the higher volatility in reported net profit to equity shareholders than one to the minority shareholders? Why are minority shareholders growing more stable and always being positive? And why isn't it the case for the equity shareholders of Dufry? And can you boil that down maybe to geographies or single countries? Of contract? Sure. So thank you very much. So look, I mean, the growth of the minority interest is also related to in recent years to the IPO we had in the U. S. So due to the IPO, obviously, in the U. S, you have some additional minority shareholders there, and we need to account for that on the consolidated levels. Well, that's the major one, yes, absolutely. The others are potentially also changing a little bit from time to time, but it's really marginal. The U. S. Is the major change. So basically, it was stable for a number of years between €35,000,000 €40,000,000 and then it stepped Rune Sonder from Octavian again. Maybe quickly coming back on government help or support. I mean, there's a discussion of a payroll tax cut in the U. S. Could you quantify what that will mean for your business? Secondly, are you planning maybe to introduce or apply for short term work hours in Switzerland? And are you in discussions generally with other governments regarding help in a similar sense? Because I assume whatever fiscal help is coming, it will be very much focused on the travel industry. Thank you. First one is the government help. Well, in terms of the government help, we are not asking to any government to support our help. What is happening is that most of the concessions are the landlord is state owned. And in this case, if you understand this, like we are asking for help, the answer is yes, but not in the sense that was done the question before. We are not asking any help for any government point of view. What we are asking is as conditions, commercial conditions that will be adapted to the reality, Nothing else. Anything else from the audience in the call? No? Here, Again, we appreciate a lot, especially in these days of crisis, the questions and trying to clarify. I hope that we clarified most of the concerns. As I always said, in any case, we are always willing to receive calls or meetings if it is needed. Thank you for choosing Chorus Call and thank you for participating in the conference. You may now disconnect your lines. Goodbye.

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