Earnings Call: H2 2018

Mar 14, 2019

Thank you. Good afternoon, and thank you for participating in our full year results 2018. This is Julian Dillard, Dufry's CEO. Here with me today, we have Andreas Schneider that is going to be replaced by Ifri Gessner that is also participating in the meeting on the 1st April. Before anything else, Andreas, I would like to say thank you very much for all these years. Your contribution to what Dufry's today has been one of the most relevant and important. I appreciate you like a person, but also like a professional, okay? I want to obviously say this in front of everybody because you need to be in my case, I don't give these things away quite often, as you know, but I think you deserve it. Thank you very much. Then if we move through the agenda, this agenda is part of what we published this morning in our website, the presentation that we published this morning. In Page 3, we have obviously the different subject that we are going to explain and present today. The first one is the operational performance and the strategy update. I will do both. Then I will pass through Andreas for presenting the financials. And finally, I will talk about the update of the trade and the conclusion in the last point number 4. If we move to Page 5 of the presentation, I think finally after what happened especially during the 2nd part of the year, we have managed to deliver a resilient set of financial results. It was difficult because during especially during the Q3, what we have faced is a situation in specific parts of the world that impacted the whole performance in terms of reporting. Most of the companies last year performed well in most of the regions. I think what happened in Argentina, Brazil and Spain is explained properly when we see the organic growth excluding these operations. Total turnover reached €1,700,000,000 an increase of 3.7% compared with previous year. Finally, organic growth is in line with what we comment on during the last conference call, 2.7%. And excluding, as I said, Argentina, Brazil and Spain, the organic growth increased to 6.5%. Self development. The self development plan was based in the schedule that we agreed at the beginning of the year internally done completely. 26,800 of retail spread open across different shops. This is part of the new locations and expansions. And 34,800 of commercial area refurbishment in 94 shops. Just for putting in perspective the numbers, at the beginning of the year, we have around 410,000 square meters of commercial space and at the end of the year, we had around 437,440,000. Gross profit contract sorry, contract signed during the year that will be opened in 2019 2020 is 19,800 square meters. Those are new concessions. I am going to go through the detail in the following slides. Gross profit margin increased again 59.8%, 40 basis points compared with previous year. And EBITDA was stable in terms of margin, 12%, an increase by 3.3 percent reaching EUR 1,040,000,000. Due to the challenges, I think the most relevant obviously the evolution of the cash flows. Free cash flow and equity free cash flow increased by 32% and by 97% compared with previous year. In the case of free cash flow, what we have reached is EUR 620,000,000. In the case of equity free cash flow, we have reached EUR 371,000,000, probably the highest performance in terms of generation of cash in the history of the company. Cash EPS increased by 6.9%, reaching CHF 7.31 per share. And the acceleration, meaning the implementation of the business model, the business operating model deployed and delivered to the company EUR 40,000,000 in savings above EBITDA level and EUR 10,000,000 as expected will be delivered because it will obviously will be the scope of the 12 months during 2019. Finally, I finish a very good news. The Board of Directors due to this increase in the obviously generation of cash of the company has decided to propose to the annual general assembly of shareholders the dividend of CHF 4 per share. It's around 6.6% with previous year, even that obviously the total amount of cash that it will be out is similar to previous year. If we move to the next page, Page 6, is the organic growth comment. We started the year with a very good shape, continuing what happened in 2017, 7.1% increase in organic growth. The second part of the second quarter was also very relevant in terms of growth. We were very close to 5%, 4 point something. The summer, the highest season, so at this acceleration to minus 0.7 almost flat. And the reasons we're explaining at that time and also commented on today is especially what happened in South America and in Spain. And I will comment this with more detail in the future. I think in terms of the 4th quarter, we can confirm the company is again in a mood of growth in organic growth, 1.8%. Most of the growth of the growth is due to the new concessions opened. And it's important to mention the good performance in Europe and North America. The slightly performance increase performance increase in Spain, still tough conditions in Latin America and then lower like in terms of comparable in Asia compared with previous year because we started in the middle of 2017 to grow very fast in Asia. Let's go to Page 7 and let's comment the organic growth division by division. Division Southern Europe and Africa in Page 7, as I said. Organic growth fell by 2.6% in 2018. The main obviously reason of this slow move is Spain. Why Spain? Spain has increased passenger international passengers last year 1%. But the main subject is not the number of passengers. The main subject is the profile of the passengers. What we have seen in Spain, and I think I comment on that, is a swift between international passengers, especially Swiss sorry, Swiss because we are in Switzerland, especially British and other nationalities with high spend per passenger, substitute by Spanish passengers. The difference is 3 times, sometimes four times. These passengers that are deviated from Spain to another country now are generating 3 and 4 times more spend per passenger than the Spaniards. There are intrinsic reasons here that we can obviously go through the detail, but the reality is that the performance in Spain has been impacted by that and also because the devaluation of the British pound. The most important part of international passengers in Spain are British. And this is something that is going to continue in 2019. The advantage that we have now is that we have started initiatives already commented out in the previous call that will change the trend. And in fact, the trend has been changing. Now during January February, what we have seen is a slight increase, significant increase, I wouldn't say slightly, in Spain due to these changes. What are the changes? In principle, there are flight test, airport test that we are doing with AENA in order to accelerate the sales in the Spanish airport. This is basically based in assortment, based in pricing policy, based in square meters, based in location. There are many aspects of the business that today is required to be changed. Why? Because this contract was created, was launched 7 years ago. And the world and especially aviation has changed dramatically. And if we want to really reach a level of efficiency in this operation, what we need is to change the way we work, but we are limited due to the contract we have. As a consequence, the reality is that we change the contract in the sense from the commercial point of view, we do the things in a different way or never we will reach the level of excluding the minimum annual guarantee in the lot number 1 and number 2. That's for me the critical point is how to make it happen. Then just to confirm, Turkey is back. You remember at that time that we dropped 95% of the Russians going to Antalya. A day back. The operation is very good. It's performing very well and last year, we grew double digit in Turkey. Greece did not capture the sweeps of passengers. The sweep of passengers from Spain was captured in Turkey and in North of Africa. Italy, France and Malta performed well, positive high, I would say, single digit growth. And then Africa was flat, flat for us is 2%. 2% growth in Africa last year, especially with good performance in Morocco, in Egypt, in Nigeria and in Kenya. If we move now to Page number 8, what we could comment on is division UK and Central Europe. Organic growth plus 0.3%, But the real organic growth excluding Geneva that was obviously the operation that was accrued 9 months last year because we lost the concession in October 2017 was 3.4%. This division has had a very good performance, especially in the UK, very good and obviously solid, also confirmed in Q4. And the problem maybe in terms of showing the performance in the different countries in Europe is that the negative performance in Scandinavia, especially due to the devaluation of the Norwegian krone. The situation sorry, the Swedish krone. I said Norwegian because Swedish krone. The reality is that the rest of Europe was performing very well, especially Switzerland. In Switzerland, we had middle single digit growth last year. Obviously, assuming that Geneva was not part of the concession, the organic growth in division 2 was 3.4%. If we move now to Page 9, what we have is division, Eastern Europe, EMEA and Australia. Organic growth here was 15% in the year. In the last quarter, we increased by 14.7%. I would say that all the countries performed quite well. The reality of the new operations, MTR is a duty free train operation, the fast train operation in Hong Kong. And the new shops that we opened in Perth is very positive. In both cases, ahead of what we were expecting and contributed also to this development. In Middle East, most of the operations deliver double digit growth, Jordan, Kuwait and India and Saudi single digit growth. In Asia, most of the operations, excluding the operations I mentioned, performed well, especially Cambodia especially Indonesia, where we have seen double digit growth in all the cases. Australia continues with a very significant double digit growth again. And Eastern Europe has been trending with other European markets. What is the meaning of that? In some countries, we have been very good. In some countries, we have been almost flat. The reality is that in most of the countries, we have been positive. The only question here is that we are comparing with a very tough comparable last year, but we are positive in all these Eastern European countries. Latin America, this is the probably the most important in order to explain what the situation. We started the year growing 9%, in line with 2017. The 2nd quarter, we were flat, minus 0.2%. And then gradually, the performance in organic growth was deteriorating, minus 11% in Q3 and minus 10%, slightly better in Q4. The situation remains, and I am going to comment on this later on, remains unchanged. What the main problem here is still is the obviously the deterioration that happened 7 months ago of the currency in Brazil and Argentina and the impact that these two countries also have in other destinations in the same region. But the most important and relevant thing here is that the situation is and it has not changed. It's exactly the same. But we have obviously, the expectation that the situation will normalize in Brazil during the next 4 or 5 months. It happened in the past like today. The problem will remain in Argentina. In Argentina this time with the elections and with the situation in the country, it's not likely that along 20 19, we are going to see a recovery. In any case, Argentina, and just for information, is a very profitable operation. Then the cruise line business. This is a situation where I tried to explain in the past that is a change of scope in terms of the business. The cruise line business has a different P and L and a different performance in terms of all the financial aspects of the business. What is different here In principle is the P and L. The EBITDA is lower because the situation of the market in increased lines depends on the line of spend obviously per passenger and the consequence of this is because we pay rent every day that the passenger is traveling, not only one day or 2 days. And sometimes, if they are not very good customers, the rent normally is very high. But the returns are very good because we don't invest a lot. It's a very good business in terms of generating more top line growth. It's a very good business in terms of generation net profit and returns. The importance of this business will be materialized during 2019. We are in the process to operate today 38 new ships, 11 new more ships will be starting probably in April, May along this month and 4 more ships that will be in operation at the end of the summer. We move to division North America. North America had a very good year last year. All the quarters with a very positive growth. The last one was 4.7%. The main reason of this is not the duty pay business. The duty pay business was performing well. What's the duty free part of the business? Why? Because we depend a lot on Chinese there. And in the last quarter, what we have seen is a drop in spend per passenger in all Chinese destinations in the U. S. But in terms of the duty, the pay, the business was performing at the same level. If we move to next page, I will now comment on the passenger growth development in 2018. What we have here is overall is a positive development, 6.7%. Passengers at Dufry's operations were lower, mainly due to the obviously limited exposure to Asia we have. In terms of the future, I can confirm again the same thing. In 2019 2020, we have obviously this a forecast and ACI projection. In this case, it's a forecast increasing by 5.5% 5.2%. It's a very obviously good starting point in the number of passengers, the number of customers. If we move to Page 13, what I will comment here is about the 26,800 square meters of rural retail space that we opened during the year. I have put here some relevant ones, Madrid Terminal 4, 4 new stores, MTR in Hong Kong, Perth, Malaysia, new 60 new cruise lines with 48 stores. We are now working with all the shipping companies, all the cruise line companies, Holland America, Carnival, P and O, Cunard and the Norwegian Caribbean line and several new locations in North America, around 5,100 square meters of commercial space. In terms of the other side, the 34,800 square meters of shops that have been refurbished. What is the value of that? The value of that is obviously the possibility to improve the quality of the environment, engagement with the customers and also to increase the number of square meters and also the possibility to locate the shops in a better traffic flow. We have opened 3 shops in Malaga, in Heathrow Terminal 3, in Glasgow, in Bali and in Cancun. I think during 2019, we will have a very similar number of square meters that will be refurbished. Next page, I will move to the contracts that we have signed that will be opened during 20 19 and a small part in 2020. 1st in Australia, Kuwait, New Yaciras Terminal, Philadelphia, Pulcovo, Santiago, Boston and some other ships that I already comment on in the previous page, especially P and O. Pipeline opportunities still we have 37,300 square meters, most of them are located in Southern Europe and Africa, and we have a significant number also in the UK and Central Europe. All these opportunities are not only in airport travel retail. We have also opportunities in other channels, travel retail channels. We move to Page now 15. What I try here is to refresh again the idea of the changes that we are involved. And I am comment on these changes in one of the slides later on. But here is a brief explanation about where we are regarding the digitalization of the company and the initiatives that we comment on in the past. We are obviously implementing Recept and Collette, read by Dufry, sales tablet, social media and forum and new generation store. The functionalities are on the right side. What is the intention here is 2 things. 1, increase the organic growth. The second one is to really develop a new way of engagement with the customers. In terms of the update where we are, we have launched new generation stores in 2017, Melbourne, Madrid, Cancun Terminal 4 and Zurich. Later in 2018, we opened London Heathrow Terminal 3 and Cancun Terminal 3. And during 2019, we have already scheduled Buenos Aires is already open and Amman in Jordan. Receive and Collect. Receive and Collect is the tool we use as e commerce online. As you know, this is one of the ideas that we have been commenting on for many months. We have expanded the system in 39 countries in 153 locations. At the same time and in parallel, we have developed the CRM base of travelers and Red by Dufry presented this is a loyalty program in 40 countries and 200 airports. We have also started the social media project Forum that tries to communicate the values from the brands and from the travel retail to the markets. And finally, what we have done also is expanded the digitalization of our employees in the shops. We are talking about here sellers in the shops. We have expanded this in 30 countries along 50 stores. During the 1st months of 2019, we will complete the whole portfolio. And in 2019, the idea is to accelerate because the strategy behind these two different initiatives is increase the organic growth and increase the engagement with the customers. Let's move to Page 16. We have announced also a reorganization of the company back in January 2018. The idea is basically to increase the agility of the company and the efficiency of the company. In what sense? Is we need to react to the changes. Again, I'm going to comment to the changes in the market that are happening in the market faster. And if we don't change the way we work, we cannot do it. We couldn't do it before because last year was the year of standardization. Last year, we implement the business operating model. Now we are standardized again after the acquisitions of World Duty Free and Nuance. And now is the time and it happened with this reorganization that was planned since the beginning to be more efficient and more agile. One of the things that is driving all the decisions is to focus in the customer, focusing the customers through guided contact. And we are going to accelerate implementation of digitalization of employees in all the shops. And this is the focus, number 1. The number 2 is really from the commercial point of view to react faster to the changes in the market. And one of the most important initiatives already announced is we are going to merger the global platform commercial structure with a divisional commercial structure, meaning it will be only 1 structure deciding on the policy of commercial policies of the company. And then the combination of divisions 12, we believe that with this combination of these two divisions, Europe and Africa, the reality of the effect in the company on top of whatever, obviously, there is a synergy that will comment on in the future, we are in the process to calculate it exactly. It will be also a faster way of deciding in all these countries in Europe and Africa. The final obviously reason is improved sustainability. I would like to comment only in one of the projects, women at Tuphree. Women at Tuphree is a project that we started 1.5 years ago with 3 specific subjects. Number 1 is to promote equality, to promote diversity and to avoid discrimination. And this is something that when you are in a country, it's a very simple thing, but when you are in 65 countries, 60 obviously, 5 operations, the reality is more complex than that. And we have the firm commitment that any woman working in any country, independently of the region in the world, will have equal opportunities within Dufry. And this is one of the main projects. There are several other projects, but this is the more relevant one. If we move to Page 17, here what we are trying to summarize is the 2 proposals that I mentioned at the beginning. First of all is the Board of Directors is going to propose to the general assembly of shareholders the cancellation of the 3,300,000 shares that were part of the share buyback program last year. And the second one is the distribution on our CHF 4 per share dividend. The increase is 6.6% compared with previous year. The reality is that the company generates enough cash in order to continue paying dividend and doing small, middle sized acquisitions. And the Board of Directors have decided that it's obviously a good opportunity to return cash the shareholders. Then if we move to Page 19, I would like in these 3 or 4 slides to really put in perspective what happened over the past years. In this Page number 19, what we see is the performance in airport retail sales that probably is the most important channel that we have. That happened over the past 13 years, from 2014 years, from 2,004 to 2017. The market growth is also the market mix is also important. In terms of growth, the company has grown more than 3 times the average airport retail sales during this period of time. It's an accumulated average per year of 18%. And now we are positioned as the leader in the market. We control more or less 20 above 20% of the total sales in airport retail. This is in my view a very good starting point for explaining the obviously the refresh of the strategy that we will explain during the Market Day and Analyst Day on May 15. Let me move to Page 20. In Page 20, we have the different phases of development of Dufry. During the 1st 3 years, we grew 18% per year. The idea was to create an equity story to create an IPO that obviously was solid as has been shown over the past years. During the 2nd phase, the expansion and the ramp up of internal and external growth with 18% per year. And then we reach a level of development at the time that the transformation acquisitions the transformational acquisitions happen in 2013 and in 2015. From 2013 to 2015, due to the acquisitions, we grew 30% per year. And then the last phase is a more mature phase. It's from 2016 to 2018 is 5% per year. Where we are now? We are in a position as leaders of the market that in my view is giving the opportunity given us the opportunity to continue with elaborating the equity growth story in a way that will be very attractive for all the participants in the market. And I think I will try in the next slides to explain how and what important subjects are. Let's move to Page 21. In Page 21, we have April Retail growth on the top left side. On the right side, you have organic growth, Dufry's organic growth and total growth. If you see, we have been in terms of trend in the same way than the global airport retail growth. At the beginning was very fast, 13% and the median was 9% and then the business was 3.7%. More volatile, more volatile because obviously this growth is also a consolidated figure based in the currencies of many different countries. Dufry had different ups and downs in terms of organic growth, specifically in 2009 because the global crisis and everybody knows and I am going to comment on that later on. And then the 2 devaluation impacts, one that happened in 2015 and the other one that happened in 2018. But then the situation as you see, is always following a positive trend. This is a temporal issue. It's a one off impact that normally requires between 6 9 months to recover. But the trend in general, I think for Dufry has been always above whatever the market has grown. If we move to Page 22, this is a very interesting page. Again, I promise that we will discuss about this page during the analyst presentation and market presentation because in my view, it's one of the most important ones. We have tried to summarize the red part and the yellow part. The red part have been events that are really impacting the company in the short term. For example, geopolitical instability, we have seen, I don't know how many. I can't you don't know, but I can list you more than 20, okay, from Ivory Coast to whatever place. Trade wars. This is something that somebody asked me one day and has been used like a weapon. Is a trade war a problem for Dufry? Yes, it's a problem. Yes, but the taxes will increase in the countries and the duty free will be with better competitive prices. I don't know what the consequence of this will be, but is what is going to happen. Emerging market growth and volatility, this is obvious, including the currency volatility at the bottom at the Brexit. How Dufry has really faced these short term topics with 2 things. 1 was a flexible, viable cost structure And 2,009 is probably the best example, where with this 10% drop in organic, the company only dropped 100 basis points in EBITDA level. And the second one is diversification. Diversification meaning we are in several countries. In countries where every year maybe we have a problem, but the company is sustainable due to that. On the left side, we have a more long term subject. New customers, I put millennials. Millennials is just an example, but it's not only millennials. It's new customers coming to the business. Online price comparison, online shopping and low cost carriers. It's another subject that I also would like to explain. What is the way to fight really with these long term subjects. I think the only thing we can do and we have started 1.5 years or 2 years ago is adapt the business model. Adapt the business model in one sense. Adapt the assortments, we have now and I comment on that novelties, exclusives, convenient products only in promotions, novelties and exclusives, we are selling today more than 45% of the total sales. More than 55% of the total sales is in PULS in the shops. I think we are there, okay? We are really having a very good opportunity to really face this challenge of Internet, online and all that with the captive audience and with a different engagement with the customers. The second part is the new experiences. I think we need to create new experiences. The customers are requiring new experiences. And we have 2 good examples here. 1 is new generation store, probably you have visited one of them. And the other one is Forum. It's a social media platform that we have been using for communicating the values of the brands and the travel retail. And the last part is the new commercial concept. And again, the new commercial concept for the new customers. And I think the reality here is new generation store is the Hudson new generation store that will happen in the short future and Dufry shopping and many other concepts we have. Assortment, experiences and new commercial concepts. And this is something that we tried probably we didn't do it properly. We tried to explain regarding what is happening in travel retail and especially what is happening in Dufry. And this evolution is happening today in the company. If we move to Page 23, it's an example of one of these red squares. What happened in the Brazilian real? What happened in the Russian ruble and in the Argentinian peso? Huge devaluation and also volatility. This was the main problem. The Brazilian real devaluated 21%. Last year, the famous Argentinian peso 98% and still because obviously we sell in local currency sorry, we sell in mature currency in each of the local operations, the problem is the perception about price. We have natural hedge in the P and L, but the problem is the perception of price. Because if you are evaluating 98% for Argentinian, the price of whatever product you have is multiplied by 2. And this is something that with the time is solved. Why? Because with the time, all the local economies will import merchandise at the same exchange rate that we are paying. And the value between both the savings between both will increase. The second example here is the low cost carriers. I think in terms of the low cost carriers, it's obvious that Europe is probably the territory where this type of traffic has developed more. In the short haul, on the right side, you have in 2009, this was 34% of the total seats, available seats. Today, it's around 41%. It's going to be higher in the future. Is this a problem? I don't think so. I don't think it's a problem. I think it's a great advantage for the travel retail. What is the difference here? Is the propension to extend? And we need to adapt and present concepts, commercial concepts that will satisfy these customers. But as far as the customers are coming, doesn't matter. The only thing is the average spend per passenger will drop. Is this a problem? Not at all. Again, all depends on the commercial concerns that will face this situation. If we move to the next Page 25. Here what we have is something that I already comment on. Dufry is in the process to refresh the commercial concept and the commercial model. The answer is yes. Dufry is in the best position due to the size we have, the diversification of countries and the number of relationships created with landlords and with vendors, with suppliers to really accelerate the chain is what we want to do, accelerate the chain. But we are not going to forget 4 things that have been in Dufry's listed time life has been tremendously important. First of all, is the in-depth knowledge of the customer. The second is the financial discipline. The third is variable cost structure and the last one is careful risk management. We are not going to risk anything for having a concession in any part of the world. We can be wrong because nobody is perfect, but not intentionally done. If we move to Page 26, strategic elements of evolution going forward. I think it's better that the detail is left for the Analyst and Markets Day. But in general terms, it's also commented in the press release, the midterm growth in terms of organic, we position it 3%, 4%. Changed and we have to obviously learn in the future too. And the reality changed and we have to obviously learn in the future too. And the reality of the travel retail that we see without the changes we are without taking into consideration the changes that we need to implement in the business model requires this reconsideration. 3%, 4% is achievable, I think so. I think it's a perfectly achievable target. We are going to continue acquiring companies. It's the time we generate the cash. We have on top of the dividend policy, we have a significant possibility to generate cash for continuing with middle small size. What is middle small size? Between 400,000,000 and 500,000,000 companies. This is the middle small size. We see that can be digested very quickly and we can integrate in the business model very quickly too. Then we need to obviously to develop the new commercial concept, Hudson, Unions and Store, Dufry Shopping. We need to develop more exclusive products. All these things is also relevant. And we need to really find and identify ways of being more efficient and that will impact the P and L. Is this going to be a target? Yes. And this is part of the reorganization. Again, I cannot comment on figures because we don't have a final figure, but it's one of the realities. We are continuing to focus in cash flow generation and returns, and maintain a level between 2.5 and 3 times. The last one is very important to continue with current dividend policy. Let's talk about different considerations in 2019 for 23. Number 1 is the implementation of IFRS 16. Andreas will comment with more detail, but again, we have a complete presentation for the Analyst Day. And the impact of this, obviously, one of them is the most relevant. EBITDA is not going to be any longer than relevant KPI for the company. And we comment on that, I think, 3 or 4 conferences ago. The reality that we comment at that time is we need to identify with you also what are the reference KPIs that we can comment on. And we comment in the past organic growth, we can comment in the past free cash flow, equity free cash flow, return on equity and cash EPS. This is what we comment on that, but it's obviously also an important part of what we need to discuss at the Capital Day. Then we are going to set up the mid-ten targets based in the KPIs that finally will be used. And the best element today that we can comment on is organic growth, as I said, 3.4 percent and equity free cash flow performed in line with the increase in turnover with a base starting base of €350,000,000 €400,000,000 And now Andreas, I am passing you the conference for continuing with the financials. So if we can change gear again. And before I start, let me just say a few words. So as Julian has said, this is my last official presentation with Dufry. I've been with the company for 16 years, of which 14 in some sort of shape with IR. So first 7 years as an IR responsible and the last 7 years as a CFO. Now during these times, I have had plenty of opportunities to talk and to work with all you here in the room and also with the people on the phone. And I wanted really to thank you, everyone, for the trust in Dufry, the trust in me as a person. It has been an absolute pleasure to work with all of you. I'm definitely going to miss that, but I do hope that our path will cross again in the future. So looking at what Dufry is doing, I'm sure there's many good things ahead, and I hope privately we're going to see each other or in another role maybe. But now let's move back to the financials. Now starting with the growth, has already talked about in quite a level of detail, so I don't think we need to go through the details again. I think for me, there's just 2 key messages that I wanted to repeat because I think they're important. First one is Q3 has been the low point and ever since things have started to improve. That has also been confirmed in the 1st week of 2 weeks of 2019. So it looks as if we're back on track to accelerate the growth for 2019. 2nd point, and you do see that at the bottom chart is depending on which division you do look at, there is actually a huge divergence on how the business is performing. So you have extremely strong businesses, for example, in Middle East and Asia. You already have also some markets like Latin America, which continue to be quite complicated. Now if we go to Page 30, this is the FX impact. Full year FX translation effect was about positive 0.9%. Q4 was negative 0.9%. Now for the 1st few weeks, again, we're slightly positive on the FX side. But what you do see here on the bottom left chart actually is that in the past few quarters, the volatility of the main currency has been substantially or substantially has relatively reduced. Now it's going to be interesting to see what happens then with the pound. But in any case, I think for the time being, things look relatively stable at the moment. Then if we go to Page 31 to the income statement. Now starting with the gross margin, because you already talked about the growth. Year on year improvement, 40 basis points, mainly driven by negotiations with suppliers, a lot of focus on promotions, on marketing revenues. So I think that has been a pretty good result for the year. Then the next line concession fees, plus 70 basis points for the year. And if you do there the analysis on 4 quarter only, that is going to be even more extreme. So in the Q4, the change of concession fees has been 160 basis points, which is absolutely massive, okay? So let me talk about that first. What happened in Q4 2017 was that we had some rent reliefs that were basically agreed in the last quarter, which applied to the full year 2017. So if you want, we had a kind of a one off benefit booked in Q4 2017, which this time around we didn't have. That was the first thing. The second thing was that the effect of the Spanish contract in the Q4 was more pronounced than for the average of the year. So what I want to say here, the key point is don't use Q4 as an indicator for the future. Please do look at the full year change because that's a better indicator. 70 basis points that we're seeing here. First one, again, is the Spanish contract. So as you know, we have minimum guarantees in the Spanish contract. The Spanish contract has year on year increases of the minimum guarantees. And that, together with lower performance in Spain, accounted for just about a bit more than onethree of the seventy basis points, okay? So that one third of the increase was related to Spain. Then we have another 10 basis points, which are related to new businesses outside the airport channel. So Julian was briefly mentioning the Cruise Lines business. Cruise Lines business, for example, has structurally higher concession fees or rents. But on the other hand, there are lower investments required. So from a return perspective, it's a good business. But if you look at the P and L, it does have some impact there. And then about half of the seventy basis points, about give or take 30 basis points, are then really related to the normal business, to the Airports business, to the normal portfolio changes that we have. If I then move on, personal and general expenses together, we had an improvement of about 10 basis points. Now on one hand, we had the business operating model efficiency of about SEK 40,000,000 that go into these two lines, but they were partially compensated. That's why you don't see the full benefit there. On one hand, we had higher personal expenses in North America. On one hand due to increase of minimum wages in some of the states in the U. S. And on the other hand, because they had additional headcount due to the IPO that I did earlier in 2018. And then we did also lose a little bit of productivity or efficiency in the underperforming locations in Spain and Latin America. Then next one is other expenses. So sorry, the share sorry, the EBITDA. So that was stable at 12% flat. I think we already commented on that one. Then if I go further on depreciation, increase in absolute terms and also as a percentage. So out of the EUR 40,000,000 increase, about half again is from the U. S. In the U. S, we had two things. We had, on one hand, an impairment of an asset of a non airport asset that was a charge of about EUR 10,000,000 to EUR 15,000,000 And the other, let's say, give or take EUR 10,000,000 were due to S. Business did. They have grown quite a bit, and that is now reflected in a higher depreciation. Another EUR 10,000,000 of the increase is due to division Middle East and Asia, where we had lots of new projects, so that also added to the depreciation charge. Then amortization, on the other hand, that is lower by about EUR 50,000,000. Now last 2017, we had an impairment of EUR 65,000,000. So 2017 is not a good comparison point, but what we are seeing here for 2018 is the run rate amortization again. Then linearization, EUR 48,000,000 in line with what we guided for. I think the good news is once we start to implement IFRS 16 from 2019 onwards, this line is going to disappear. Then other operational result, again, big gap. Last year, you see a positive CHF 53,000,000. There, we released the provision in the order of magnitude of CHF 80,000,000. So again, this is a bad comparison. If you look to the EUR 53,000,000 this year, the main element was about EUR 20,000,000 for start up and restructurings, so the normal business development element. And then we had another SEK 17,000,000 which were project related, and that also would include costs that went through the P and L due to the Hudson IPO. Then if we move further on, financial result, that improved by EUR 80,000,000. So I think that's a substantial improvement. There, on one hand, we had the huge benefit from the refinancing that we did in 2017. So we have lower interest rates that we're now paying due to that. Last year, we also had one off costs due to the refinancing, which are not incurred anymore. And then overall, we also had slightly lower net debt. Then on the income taxes, there has been a little bit of increase, but not too much, about 9%. We had several one offs this year also, but on a net net basis, they almost compensated each other. So in my mind, the level of taxes that we're seeing here on the P and L is a relatively good proxy as far as I can tell going forward. Then last but not least, non controlling interests, plus EUR 10,000,000. This is due to the IPO that we did in Hudson. So we have additional minorities from that IPO and they are reflected there. As a result, the cash net earnings, so adding back the acquisition related amortization, increased by 3% to EUR 379,000,000. Then if we move to Page 32, to the cash EPS bridge. So cash EPS year on year grew 7%. So that I think is a fairly okay number. If you look at the biggest changes, then you see the contributors on a positive side were, on one hand, the EBITDA growth and the financial result savings. On the negative side, there were the one offs the positive one offs that we have that we had last year, which are not there anymore in 2018. Then going 1 page further to the cash flow, to the overview. I think that is one of the most positive aspects that we have this year. I think we have delivered a really, really solid free cash flow generation despite the fact that the second half of the year was not so easy. Again, if you look at the key metrics, you do see that the free cash flow increased by 32% and the equity free cash flow almost doubled. The conversion rate EBITDA to free cash flow was almost 60%, so that was a very good rate. And we originally guided for an equity free cash flow of €350,000,000 to €400,000,000 We're bang in the middle. And looking at what we said in the Q3, we're actually even slightly better than what we expected at the end of Q3. Then on the seasonality, 2018 had one exception. The 2nd quarter was stronger than the 3rd quarter, but that is just a timing difference. So don't read too much into that. But I think the pattern that you see here on the equity free cash flow negative first quarter, slightly negative Q4. I think that is reflective of the business that we have, so no surprises there. Then if we look at the different free cash flow components on Page 34, again, no big surprises effectively. Working capital was flat year on year. Core net working capital trended in line with expectations. So again, no surprises. Taxes were slightly higher than last year, but not a lot. And the CapEx overall was EUR 30,000,000 lower than last year. So I think we had some, if I can call it that way, savings on that cash element. But overall, I think it's pretty straightforward. Then if we move to Page 35, from free cash flow to equity free cash flow, We obviously have a substantially higher starting point. We have CHF 50,000,000 less interest, and that results in, obviously, in almost doubling the equity free cash flow. But again, pretty straightforward, no surprises. And then from equity free cash flow to the change in debt on Page 36. So we had the net proceeds from the Hudson IPO. This was about EUR 65,000,000. We paid back to shareholders one way or the other about €720,000,000 So the €522,000,000 includes, on one hand, the share buyback plus treasury shares that we bought in the value of EUR 120,000,000 and then you see the green bar, EUR 200,000,000 of dividends that we paid. And then with the currency translation, this ends up with a net debt reduction of about €400,000,000 Then next Page 37, balance sheet. Again, nothing as a surprise there. The only bigger changes that you see is, on one hand, the reduction of the concession rights with FiniteLife. That's the part that we amortized that is mostly acquisition related. And then you see the reduction of the net debt. I think just as a side comment for those that do like balance sheet analysis, Since the peak time in 2015, we have reduced the size of our balance sheet by about 20%. So when we had the last acquisition, the starting point was above SEK 10,000,000,000 Now we're about SEK 8,000,000,000. So a simplistic way to look at it is like we have started or we have reduced the risk of the balance sheet quite considerably over the last few years, as we expected. Then financing and covenants, that is Page 38. So again, not much change there. Current leverage ratio according to the calculation with the banks is 3.2 against a common threshold of 4. So we do have headroom there. We will also discuss that probably in more detail in the Capital Markets Day in May. But and as we're going to see later on, because of IFRS 16, we have already agreed with the banks to change the covenants calculation. So this is already agreed. It's a slightly different formula. I will not go through that in detail now. I think the key message is we will have similar headroom on the new covenant calculation as we have today, although the calculation itself is a little bit different. Then, last topic, that is IFRS 16. This is the introduction page. We talked about it many times. So this is for just for those that want a refresher that are not familiar with it, but I'm not going to lead through that. So you can read that yourself if in case you're interested. But I'm going to go directly to Page number 14. So again, IFRS 16 will be implemented beginning of January 1, 2019. We will present the new format for Q1 2019, but we will not do a restatement of the old numbers. What we will, however, do, and if my successor will do that, hopefully, better than I could ever do it, is to give the bridges and a reconciliation from old to new so that you can do your own math and assess yourself on how these changes work. What we can say as of today is if we're looking at the portfolio as it stands on the 31st December 2018, we have put here some impact. So we would have an additional asset and liabilities of about SEK 4,100,000,000 that we will need to activate. We will have a reduction of lease expenses of just shy of CHF 1,000,000,000. We will have an additional depreciation of just about CHF 1,000,000,000 and then EBIT will be slightly higher by about EUR 55,000,000. And then net net the impact on net earnings will be a negative EUR 80,000,000 based on the portfolio here. Now bear in mind, every single time a new contract comes or a contract expires, this picture can change over time. So it's something which is going to flow over time. So that was basically it from my side. Now I give back to Julian for the conclusion. Thank you, Andreas. Let's move to Page 42. As I comment on at the beginning of the presentation, during the 1st 2 months of 2019, the performance total performance increase in sales compared with previous year was 3%. Main changes, the improvement of the performance in Spain and the contribution of the new openings, especially the big ones in Hong Kong and in Australia. Also it's important to remark that the situation in Latin America is similar than in the previous quarter. In terms of the cash flow, no material changes expected during this quarter. If we move to Page 43. Obviously, trying to summarize the year, it was a tough year, very difficult during the 2nd part of the year. But finally, I think in terms of the set of financials reported, they are resilient. And I hope that the generation of cash and the improvement in many lines of the P and L is also a significant sign. In terms of the gross profit margin, again, for many years in a row, the gross profit margin increased by 40 basis points. EBITDA was flat and the strong cash generation obviously will put all the in perspective. In terms of the efficiencies, we have confirmed through obviously the certification that EUR 40,000,000 are registered above EBITDA in the P and L due to the business operating model implementation. And the 2 messages from the Board of Directors that will propose to the general assembly, the cancellation of the shares acquired through the share buyback program and the dividend distribution of CHF 4 percent plus 6.7%. That's all from my side. I think we can move now to the Q and A session. I suggest first we cover here in the room and then we pass through the conference. Roni Sarno from Octavian. Question on the guidance, the 3% to 4% top line, seems to me not very ambitious given the passenger growth and net new concessions you traditionally added 1% to 2% conversion you're working on. So what is driving that number, which is now lower? I mean, saw that obviously growth has come down. And secondly, the that equity free cash flow is growing in line with revenues. Is that basically the message that the margin progression is sort of capped at this point? Okay. Regarding the obviously, the guidance, middle 10%, 3%, 4%, what we have finalized is the possibility that events like the event that or the events that happened over the past year also are repeated and we have finalized globally what could be a rational approach in terms of events that may happen in the future. And as I said, this is a middle term guidance. And basically due to that possible events worldwide, what we have calculated is 3%, 4% is more in line in order to really put a clear picture to the analysts and investors regarding what could happen. Mainly, if nothing happens, the situation will be better. But the reality is that during the last few years, we have seen a couple of times that something happened and we are in this case suggesting that is the best way to go. The second one is as a consequence what we cannot say is the free cash flow and equity free cash flow will accelerate in a different speed. In this case, what we are trying to explain is that if the company grows 3%, 4%, what we should expect in the liquidity free cash flow and the free cash flow is between 3% 4% increase per year with a base of EUR 371,000,000 EUR620,000,000. This is the explanation. Can you explain or elaborate a bit about your collaboration with Richemont, who is still holding some shares, I think? And then as you mentioned, you bought quite a lot of treasury shares. What's the meaning behind this? Regarding Richmond, we are still developing the collaboration plan. I think I mentioned during one of the conference calls that we have prepared together a plan for expanding the different Richmond brands in the companies around 100 new point of sales in worldwide, and we are progressing significantly. We have opened a new Cartier shop. We are open now a new Mont Blanc point of sales. I think for us it's a great opportunity because finally, we are able to really display and expand the Richmond brands in the group in a level that we never were possible in the past. In the past, it's not a secret to open a Cartier shop in Southern Retail is very difficult. And sometimes we have our arguments. Now we are opening Cartier shops with obviously very proud of this, but if one if he's not the leader in this type of business worldwide, for it's a very impressive brand. Regarding the treasury shares, the treasury shares happened last year because we had an opportunity to buy the shares in a very good price compared with the market price at that time in a transaction that was in one package and the shares are still there. If in the future are needed, we can use it in transactions. I think that the best at the share price now is to keep it there, how the evolution of share price is. Yes. John Cox, Kepler Cheuvreux. A couple of operational questions and then maybe some more on the financials. Just on the whole Spain contract, we know it expires 2020. Just wondering where you are in terms of conversation. You've said before you won't re sign anything similar to what you have today, but it seems as you're having better sort of doing better things at the moment in Spain. At the same time, AENA is saying it wants a very competitive tender. It wants the highest possible rents, etcetera, etcetera. What are your thoughts on Spain? 2nd question, just on Argentina. Can you just remind us on the revenues in Argentina? I guess it's just a couple of percent, but if you could give us that, that would be useful. Then maybe a question for Andreas on the IFRS 16. You seem to be saying that your net profit will be down in 2019 after IFRS 16. But obviously, in terms of the cash side of the equation, you're saying that there's no impact on us. So will you give us sort of an adjusted cash net profit so we can go back to the cash EPS and that will be equivalent to what we saw in 2018? Or are you actually saying, well, no, you can knock equivalent of EUR 80,000,000 off that? So if we're valuing you on an adjusted PE basis, for example, we should just turn around and cut our assumptions? Thank you. Regarding Spain, I think the situation for us is clear. We have to disclosure this many times. We are there are 3 lots in 2 of the lots, the most important ones in terms of volume. We are paying the Mac. No, we are paying the Mac. The company has been paying the Mac forever since day 1, okay? The reality is that to continue with the same conditions is not for us an option. I think what we need to do and this is the discussion that we have maintained with AENA is really implement initiatives that will drive more sales and will drive more income for AENA and for us. Because AENA in these two contracts is only reaching the level of the minimum guarantee. It has been historically. The problem here remains in the same place is if there is not a change, a fundamental change in the conditions of the concession, there is a very short possibility, low possibility that the profitability will happen. What are the changes that are required? Are changes required in square meters? Yes. Location of the square meters? Yes. Location of new products and allocation of new products to the assortment of the company, yes. Collaboration in promotions, yes. I think there are many examples that have been used in these 5 tests that we are implementing. In fact, we are right now doing it with AENA that explains, not justify, explains that the change is possible and can be done. Then I don't know what AENA's strategy is. I got the impression that they want is to maximize the income from the concession. And sometimes to maximize the income of the concession is not to do an auction process where you have a minimum guarantee every year, somebody pays the guarantee with a guarantee, but you are leaving on the table a significant amount of profitability because you need to generate more sales. And this means that if needed a collaboration between the landlord and the retailer in order to really implement this strategy. And what I can say is today is happening. I think there is a great collaboration between both parts And I hope that very soon we will confirm what we have seen over the past 30 or 40 days. It's a significant opportunity and change. Regarding Argentina, depending how you look at it, because now with the devaluation is different, it's between 2.5% 3%. So on your question on the cash EPS, like that's a complicated one. In principle, the starting point is that we will not go back to a cash EPS as it was calculated pre IFRS 16, okay? You can do it, but it's a pretty complicated way of getting there, and I'm not sure that this is really the way forward. But what we plan to do as part of the session is basically show you on how it can be done if anyone has strong feelings, but we will go for a number that will reflect post IFRS 16. What we will do, however, is we will give you a bridge from old to new. So how can you compare the old cash EPS number with a new cash EPS number? That will be our main focus, if you want. Yes. Hi, Fik Rammers from Zett Capital. Three questions, if I may. I mean, you said that in January, February, you had 3% total growth. Can you provide a bit more granularity on the composition of that, especially on like for like? Is that still negative? And also on margin, if don't know if you can comment on that. Then on gross margin, you had seen some good expansion in the beginning of the year and now in Q4, a little expansion. So do you feel that your gross margin has still some room to improve going forward? And maybe last question, a technical one, is on the EBITDA of the distribution center. For the first time since I look here, it is negative. So I was asking myself what's going on there. Okay. Regarding January and February, I don't have more information. I cannot confirm because every information that we provide to the market has to be audited and we don't have this information available yet. I don't want to guess. Regarding the gross profit margin, during the year, we increased by 40 basis points and I think this is a good proxy for the future. What happened during the last quarter is a very specific thing. As you know, by September, we were growing 50 basis points. We have grown only 10 points in Q4 2018. And the difference is, one is a mix thing because we accelerated the sales in wholesale. As you know, probably because I comment on that in the past, we are doing 3 wholesale activities with intention to step in the retail. That's all. And this time or this quarter, we had a higher percentage of wholesale compared with the rest and the margin in the wholesale is a lot lower. And the second one is mix effect and accounting effect. What is that? Basically, is the way that we have calculated the mix based in the sales of the companies. There are companies with high gross profit margin that during the last quarter were impacted because the sales were lower and this is impacting the combination, the mix. But for the future, the profit is what we say 30, 40 basis points for 2019 is a possible target. And then on the distribution center. So we have done a few reorganizations, and I think this was also part of the 2018 business operating model. And as a consequence, a few of the functions or parts of the functions have been shifted to the warehouses, to the distribution centers, and they accordingly have picked up the cost. So what you will see is, for example, that Division 1 Southern Europe has had a benefit from that and that has shifted to the distribution center. It's a pure reallocation of costs because we have organized ourselves differently. There are no more questions in the room. We move to the call. The first question from the phone comes from Edward Obin with Morgan Stanley. Please go ahead. Yes, good afternoon. So first of all, Andreas, I just wanted to thank you for your time. It has been a real pleasure interacting with you and just wanted to wish you the best for the future and hope we stay in touch. The 2 or 3 quick questions for me. Just to follow-up, sorry, on the previous question on gross margin, Julien, if you don't mind. On the gross margin expansion, I understand you're guiding for roughly 40 basis points going forward. But could you just come back on the if you wouldn't mind on the drivers of this gross margin expansion because that's not entirely clear to me of what's going to drive the gross margin expansion? That's question number 1. Question number 2 is that on the cash flow leakage. Historically, Dufry's cash flow leakage has been relatively significant in terms of the last year in 2018. Andreas, is there anything you're seeing on the horizon in terms of potential leakage in 2019 2020? If you could share with us, that would be great. And finally, my last question is on the channels, the diversification. So over the past few years, you've indicated that you intended to grow outside the airport channel further. But if I look at the share of the non airport channel, it has been roughly 10% over the past 3, 4 years. So it has been basically stable. Has it been more difficult than initially expected to grow outside the airport channel or at least to grow profitably outside the airport channel? Okay. Can you start? Yes, start. Regarding the gross profit margin, the drivers the main drivers that we are using here is still the global negotiation with local and global supplier, especially now in marketing and income, advertising income. Those are obviously still opportunities for us and for the suppliers for expanding the sales, adding more promotions, contributing with more promo girls or promo sellers. The reality is still we believe that in 2019, there is a possible room including the negotiations with local suppliers. As you all know, we have around 20% of the total products that are considered local. The second is regarding the channels. But if you remember, I comment that they were strategically important for us. But when I comment that we were expanding this business was in the half year results. I think it's a business that if we have and the question is, do you have an alternative to grow up the business in travel retail? Yes, we have many and we have had many where in airport retail. We prefer to expand in airport retail, the answer is yes. But the reality is that having the same returns on the investment, especially in the big cruise lines. We believe due to the potential growth this channel has, as you know, there are more than 200 new creases coming to the market during the next 2 years is a great opportunity. Finally, we understand the business. We have had the experience over the past years, and now is the time to accelerate. So hi, Eduardo, and obviously looking forward to stay in touch with you. Now to your question, look and if I can just do open that discussion a bit on a wider scale. When you think about upfront payment, that is typically a way of financing for airports. Now in general, airports, especially in developed markets, they do have access to funding. So there is not really a benefit for the airports to have that. So where we would see typically upfront payments will be more in either emerging market situations or sometimes there are special circumstances. But to answer your question, in 2019, as far as we can tell, on the based on the pipeline that we have today, there shouldn't be any significant upfront payments in the cash flow. So that should be again like 2018, if I can call it that way, a clean year. Okay, very clear. Thank you. Thank you. Thank you for the questions. The next question from the phone comes from the line of Paul Bonnet with Bank of America Merrill Lynch. Please go ahead. Hi, William. Hi, Andreas. I have two quick questions for you. So the first one is, I know you can't really give a split like for like and net new concessions for the 1st 2 months. But when you say total growth, this includes a positive FX impact, right? And then the second question is also you said we cannot really extrapolate the concession season rents in Q4 of 160 bps year on year. But some of that will obviously spill into the 1st 3 quarters of 2019. And also, you will have a continued minimum annual guarantee increase at AENA, which I think is slightly more pronounced next year than this year. My question is although EBITDA margin is probably not the criteria going forward, How really can you compensate for this likely steep increase in concession fees and rents going into next year? I will talk about the like for like. Okay. We don't have the like for like calculation yet, but in this 3% is not enclosed any type of FX, okay? And to your question on the concession fees, look, what I wanted to say, and maybe I wasn't really clear, is like I think that there will be increases in concession fees. We agree with that. And what we always said in the past, I say, hey, look, you may have kind of whatever 20, 30 basis points increases in the normal business. I would assume that would also hold true for 2019. There is no reason to see it differently. I also would tend to agree that we may have some additional pressure, if I can call it that way, from the businesses that are non airport. So the Cruise Lines business, obviously, will also drive, to a certain extent, the concession fee increases. But the part that is important to me that the largest part that were there in Q4 2017 will not be there. Now for Spain, that is a complicated one. You are right that the concession fee, the minimum guarantee will increase again. It's not more than in 2018. It's similar. But the key question here is actually not that. The key question, and that will be a big driver on how the concession fees will evolve is like how much will we grow or not in Spain. And if we're looking to the first data points that we have in 2019, things look a bit better than in 2018. So if we were able to extrapolate that, which I couldn't tell you at this time because it's too early, but if we just do that, the pressure on the concession fee obviously from Spain is a lot lower than it was in 2018. So I think to summarize that, yes, concession fees will increase. We agree with that. The only thing I wanted to say, they will not increase 160 basis points in 2019. This is not going to happen, okay? And then sorry, to the second point that you made is to say, hey, look, can we how can we compensate the concession fees? Julian mentioned the gross margin improvement. I think that is one of the components that we have had available in the past and we also expect to have available in the future. And the second point is obviously, and we will talk about more about that one in the Capital Markets Day in May, is like what kind of efficiencies we can drive going forward by adapting the business model. So I think there are self help measures available to compensate for these concession fee increases. Okay. 2 very, very quick clarifications. So you were aware of the one off in Q4 when you gave the 20 to 30 bps increase guidance in concession fees in 2018, right, for the Q4? And the last one is, so total growth for 3% means organic growth 3 percent in the 1st 2 months of the year, right? So we were aware of it. And you may remember that on the Q3 call, we actually guided for a lower EBITDA margin. So you may remember that we said, hey, look, EBITDA margin for the full year guidance will be between 12% to 12.2%. Percent. We're now at 12%. So that was the reason why we guided for it. Okay. And total growth for the first 2 months means organic? And just a clarification from Julian? No, it's total growth. So total includes FX? Yes, total growth. Okay. So it includes a positive FX impact? Sorry? So it includes an FX impact. So you just said that it didn't It's excluding FX. It's total growth excluding FX. So it's organic? I don't I cannot confirm it because I don't remember all the details. But in general, it's what I said is total growth. Okay, fine. Thank you so much. The next question from the phone comes from the line of Jorn Iffert with UBS. Please go ahead, sir. Yes, hello, and thanks for taking my questions. The first one would be, please, on the advertising income. I think it was very nicely contributing to your EBITDA growth, and I think it's definitely high, high quality growth. May I ask, is this part of the concession fee? Is this charged per the local shop? Or is it just something you are booking on the corporate and functional is not part of the concession fee? And how do you expect this advertising income to grow in 2019? Should it be another €20,000,000 €30,000,000 And the second question would be please on the equity free cash flow. I mean, we are aware that Spain is a lower margin contract or contracts net net. And if you now you would lose 50%, 60% of the contract and revenues, would your cash flow guidance still be valid for 2020 then? So let me start with the first one. So look, the advertising income, it really depends on how the thing is structured. So in some cases, for example, if you have promotions, you actually have because you pay a percentage over sales, you get the kickback on the cost side. So in principle, you don't account for it, but there may be other marketing monies where you pay for it. As a basic concept for us, in most of the cases, we don't pay, but it's not for 100% of the advertising income, okay? And then I think on the second question on the equity free cash flow, that's kind of a tough one. Look, if we were able to retain, for example, half of the business in Spain, but we would be able to retain that at better terms, then clearly, the equity free cash flow should be at least as good, if not better, because I think where we are currently getting hurt in Spain is obviously because of the low profitability. So if you have a normal profitability there, the equity free cash flow should be supported by that. And from that perspective, even if the business is smaller, it still should hold through on that one. But we will need to say first on how the contracts will be done, though. All right. And just a final question, if I may, coming back to the margin topic for 2019. I mean, given the concession fee increases, given some cost inflation, there's a negative on to offset this, you have the gross profit margin expansion. But you're not speaking about your medium term profitability increases anymore. Does it mean that now the business model is more focusing on keeping margins or profitability flattish for the next couple of years? The answer is yes. We are going to focus in being more efficient and in the next obviously time that we will discuss the subject, we will try to put the perspective of savings because there is a leverage in the cost structure that can be used as increasing the profitability in line obviously with the rest and the increase of sales. So your answer is yes to that you still target profitability increases going forward? Yes, there is still possible improvement in the profitability level, yes. All right. Thank you very much. The next question comes from Volker Bosse with Baader Bank. Please go ahead, sir. Volker Bosse, Baader Bank. First of all, Andreas, thank you very much for all your support over the last years and all the best to you for the future. Starting with 3 questions. First of all, regarding your midterm sales growth of 3% to 4% going forward, could you split it into the components like for like? And how much is from new concessions as you did it for the 5% to 7%, which was the guidance before? And the second question would be on M and A opportunities for 2019, be it in Asia, be it in the U. S, especially perhaps in the food segment as you made the Hudson IPO also in order to reshape the business there and perhaps teaming up with the one or other food guy over there, perhaps a word on that, how you look at M and A in 2019? And the final one, just for clarification, the income tax rate, Andreas, will it be around 40% after 42% in 2018? Or you made some statements, but I had a bad line, so for clarification. Thank you. In terms of the middle trend growth, I think it's better that we talk about like in the high street. Obviously, they say sometimes life for life, they say sometimes growth. We are going to talk about organic growth and we are going to disclosure every time that the information is provided is ready. We are going to provide the final results. We are not going to provide any guidance regarding like for like or new concessions. Regarding M and A, I think I repeated many times the way of allocating capital here is basically that we want to go and increase the presence of the company in Asia. And these small and middle sized acquisitions are available in Asia. We have obviously, today the opportunity to explore some of these opportunities. And the way we do it is a very traditional way. The first thing that we try to really be sure that is the right thing is the concession portfolio. After the concession portfolio, what we create is a business model, especially discounted cash flow. And after that, what we have is a very specific limitation in terms of internal rate of return and payback. The situation in each of the contracts can be obviously modified because the synergies we can create. And depending on the synergies, the opportunities will be in the first line priority or in the second line priority. All the opportunities that we will look for will have 2 characteristics, good concession portfolio, understanding good rent, good duration of the contract and diversification of risk and also the opportunity to implement synergies in the gross profit margin and in the cost level. Those are the parameters that we use in any type of acquisition in Asia or in any part of the world. Hi, Volker. And obviously, it has been great working with you. So thank you for that. Now to your question, look, if you wanted to calculate the taxes or the tax rates, the easiest way to do it, put it that way, is like if you take the net earnings that you have, but you add back the acquisition related amortization and that will be your real basis for earnings before taxes. And the reason for that is that nowadays, amortizations are not tax deductible anymore. And if you do the math there, you get to a tax rate of about 25% on that, if I can call it, adjusted EBT. So I think that's the almost simplest way to approach it. Okay. Thank you. The next question from the phone comes from Daria Fomina with Goldman Sachs. Please go ahead. Thank you. I would have 3 questions, if I may. The first one is on CapEx. So your organic growth split is getting more skewed towards the new concessions in the Q4, obviously, like for like was negative 1.4. Percent. Can you talk a little bit about the CapEx implications and how should we think about it in 2019? Your CapEx is 2.9 percent and you achieved further savings there. Can you guide us a little bit through the thinking for the next couple of years? The second question is, in your P and L, you have about €60,000,000 release of provisions. Can you talk a little bit about what's driving that? And what's the outlook on that in the future? And the last question is on your medium term growth guidance. You have this super helpful slide in your Capital Markets Day where you bridge the give us the breakdown of organic growth of 5.7% into passenger growth, spend per packs and new concessions. Can you give some color on what stays behind now the 3% to 4 percent growth that you have? And also, what how your thinking evolved over the past 9 months to drive this revision down? That would be very helpful. Thank you. Should I start with the first two and then Greg So hi. So look, on the CapEx, at this stage, we feel continue to feel comfortable with the 3% to 3 point percent of turnover, as we always have said. I think what you do see now in 2018, we were, if you want, at the low end of that range. And it will depend a little bit on which projects we're taking on. So as I said, if you go outside the airport channel, typically, the CapEx is lower. So I think there is a certain chance that we may end up with a lower end of the range. But still, I think for discussion here, I would stick with the 3% to 3.5%. But the key point for me is with that, we have been able in the past, and we will be able to continue also in the future to reflect the organic growth that we have had. And the one that you think that you need to bear in mind is it's not only about new contracts. These are now the growth contributor this year, but we also had other situations where, for example, refurbishments and expansions were as important. So I wouldn't take too much, let's say, analysis into, well, what is really where we grow. But I think that the important thing is that we continue to refurbish, to build new spaces. And this, let's say, euros 250,000,000 to euros 300,000,000 will be there in a normal year also in the future. The second question was the release of provision. Sorry, yes. Thank you very much. So look, the release of provision happened in 2017. So 2018 in that context is clean. The release of the provision in 2017, there were 2 one offs in 2017 that were relevant. 1 was the release of provisions, which was about EUR 80,000,000 and there was an additional impairment charge of about EUR 65,000,000. Both were related to the Nuance acquisition. So what happened that when we did the Nuance acquisition originally, we did a so called purchase price allocation where we allocated values to different operations. What then happened now is like one operation performed better than we expected, so that's why we released the provision. And the other one performed worse than we expected, That's why we had an impairment. This is just on how accounting works. But net net, the impact in 2017 was EUR 15,000,000. These were real true one offs. In 2018, we don't have any of that. And in the future, we will see. But at this stage, I don't see any further of these one offs for the time being. Okay. Regarding the middle term guidance. In terms of middle term guidance, we are not going to provide any allocation to the different components of the organic growth. The organic growth is just a guidance for the middle term, and it has been decided to communicate 3%, 4% because what we have done this time is we analyze the different operations and countries during the next years. And we have came to the conclusion that in this guidance, we need to consider events that may happen, as I commented on before. And in our case, with obviously the countries participating in the projection, we have came to the conclusion that 3%, 4% is the more realistic just in case specific events will happen in these countries. That's the way that we did it. For this reason, it's the 2b5.7% is now 3.4%. Billion. That's very helpful. Thank you so much. Just to clarify on the provisions because I see in your financial statements in Note 12 on the other operating income, there's also about €16,000,000 provision release of long term provisions. But I can ask that question offline as well. Yes. Well, let's take it offline. Thank you. Okay. Ladies and gentlemen, there are no more questions from the phone at this time. Okay. I would like to thank to all the participants in the room and also via conference call and we remain available for everything that will be needed. Thank you very much. Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call.