Earnings Call: Q3 2018

Nov 5, 2018

Ladies and gentlemen, welcome to the Dufry's Q3 2018 Results Conference Call and Live Webcast. I'm Sherry, 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 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. Juan Julian Diaz, CEO of Dufry. Please go ahead, sir. Thank Thank you very much for the introduction. Good afternoon and thank you for participating in the call. Presenting the results here today are myself, Julian Diaz and Andreas Schneider, CFO. As in previous calls, we are going to use the presentation disclosed today in our website. Let's move to Page 3 of the presentation. On Slide 3, you can see the topics for today's call. I will first review our operational performance in the period and Andreas Schneider then will present the financials. And finally, I will return for a trading update on October and my closing remarks. If we move now to Page 5 of the presentation with the highlights of these 9 months, We managed to post a good set of results despite the adverse conditions we experienced in some operations during the peak summer season. Turnover for the 9 months grew by 4.6%, with the largest share being contributed by organic growth reaching 3.1%. Most of the operations performed well except for Spain, Brazil and Argentina, who was lower down and impacted the organic growth in the 3rd quarter. Excluding the impact of these three countries, organic growth will have amount to positive 2.8% for the 3rd quarter and to positive 6% for the 9 months. We will talk about in more detail in the next slides. We continue to have a very healthy flow of new space being added to the business. Up to September, we added over 18,000 square meters of gross new commercial space across 121 subs. We expect a few additions as we already signed a contract which will throughout beginning 2019. We also continued working on the renovation of existing shops by repurposing over 27,000 square meters of retail area during the 1st 9 months of 2018. Moving to the gross profit margin, we reached 59.9% compared with 59.4% last year. The improvement of 50 basis points is mainly due to the renegotiation and better terms with global and local suppliers. Our EBITDA margin expanded by 40 basis points to 12.3% from 11.9% in 2017. And EBITDA in absolute amounts reached $806,000,000 8.5 percent higher compared with previous year. Despite the challenges we have seen in the Q3, we have confirmed our capability to generate resilience cash flow. Our free cash flow has increased by 33.1 percent reaching EUR 620,000,000 and equity free cash flow increased by 59.1 percent reaching CAD 430,000,000 Cash EPS also increased in the 9 months by 4.5% and reaching CHF 6.07 per share. The contribution of the business operating model implementation was fundamental to these results. Efficiency is totally $33,000,000 are already reflected in this 9 months financials which is already more than previously estimated. For the full year results, we have therefore increased our expectation to around $40,000,000 efficiencies to be reached in 2018, leaving the remaining $10,000,000 to benefit the P and L in 2019. Now we also confirm again the $50,000,000 to be generated in savings within the implementation of the business operating model. Last but not least, we have already complete on 31st October our share buyback program, €400,000,000 originally expected to run for 12 months. I will discuss the return to shareholders in the following slides. Let's move now to Slide 6. Regarding organic growth, looking at the organic growth development on Slide 6, you can see the top chart that after a very strong performance 2017 and an ongoing positive development in early 2018, organic growth started to slow the Q2 of 2018 and turning negative in the Q3. Looking at organic growth by division, we see that the slowdown is mostly concentrated in the division Southern Europe and Africa and division Latin America. The chart also shows that in our other divisions we have positive growth. This is also reflected in the organic growth performance if excluding the impact of Spain, Brazil and Argentina, which amounted plus 2.8% positive for Q3 and plus 6% for the 9 months. But let's move to the next slide where we will go in more detail division by division. In Slide 7, division Southern Europe and Africa. Organic growth in our division, Southern Europe and Africa fell by 2.1% in the 1st 9 months, while in the 3rd quarter, organic growth is lowered to minus 5.2%. Spain, which accounts for about 2 thirds of the division and which show record years of growth in 2017 and before, had a weak performance with single digit negative growth in the 3rd quarter. While the number of passengers and tourists were largely flat, spend per passenger was affected by an unfavorable nationality mix of passengers, which caused a decline in spend per passenger. In detail, we saw a higher number of British, German and French tourists going to Turkey and other Mediterranean destinations in the peak summer months in set to Spain. To drive growth going forward, we have launched some pilot initiatives in 4 regional airports and agreed with AENA, the Spanish airport operator, these initiatives. These initiatives are focused in improving sales and expected to provide best practice for other airports. Performance in other operations in the Q3 was as follows: Africa after a very positive first half of the year with double digit organic growth, negative environment in the Q3 with double digit decline in Morocco and Ghana. Single positive performance in EBIT and Nigeria. Very positive middle single digit growth in Turkey, low single digit growth in Italy and good positive double digit growth in France and Malta. We move to Slide 8, division 2, U. K. And Central Europe. We reached 3.6% in the 1st 9 months and 4.2% in the 3rd quarter. Those figures exclude the negative impact from the closing of our operations in Geneva last year, starting in October 2017. Therefore, this was the last quarter of disclosure to affect organic growth. Overall trading continued to be healthy in the region. In the Q3, we even showed growth acceleration, mainly due to the pickup in the United Kingdom, where several operations benefit from refurbished soft stores and intensified in store marketing efforts. Elsewhere in the division, performance continued to be solid as follows: Switzerland with positive middle digit organic growth for the Q3 and 1st 9 months. Sweden continued with this positive performance, while Finland was flat in the 1st 9 months. If we move now to Slide number 9, division Eastern Europe, Middle East and Australia. Organic growth in the 1st 9 months for this division increased to 15.2%. The Q3, organic growth decreased also reached 4.4% positive, given the high comparatives of the previous year as well as the annualization of the reopening of Melbourne operation after its complete refurbishment. And this is in our view a solid performance. Within the division, Russia kept the good performance seen in the year and grew middle single digit. Bulgaria, Serbia and Armenia all had good growth. We saw a strong performance in the Middle East with most operation growing double digit, Jordan, Kuwait and India. Saudi also performed well with single digit growth. In Asia, we saw lower organic growth due to the high comparative resulting in the following performance for the 3rd quarter. Macau and Cambodia with a strong double digit growth and South Korea with high single digit growth. China, Hong Kong and Singapore were negative following the same pattern of previous quarter due mainly to the closures of Sun operations in these countries. Indonesia was slightly negative after several quarters of double digit growth and Australia continues to grow double digit driven by the full renovation of the stores. If we move now to Page 10, Latin America Division 4. As you can see in the top of the left chart, here is where we see the most pronounced change in terms of growth. Organic growth came from positive 9% in the first quarter to minus 11% in the 3rd quarter. This means a change of 20 percentage point in a few months. As mentioned before, the main reason for this decline is the extreme currency volatility in Brazil and Argentina. In the Q3, the Brazilian real devaluated by 20% versus the U. S. Dollar, while the Argentinian peso lost 45%. These types of movements typically reduce the purchasing power of customers given we do sell our products in hard currencies and considering the fact that in Brazil and Argentina our main customers are Brazilian and Argentinas. Thus they are directly impacted by the currency devaluation. Indeed, looking at the performance, we see organic growth mirroring the movement of currencies. This development also started to show some effects in other South American countries. On the other hand, performance in Central America continued to be very strong. Our quiz division continues to grow high double digit growth benefiting from the several new contract wins and openings realized in the last few quarters. We also saw good performance in Dominican Republic, Puerto Rico, Yamaca and among others. Mexico was the exception then flat in the 3rd quarter after the strong half year twenty 18 and single digit positive performance in 9 months. We move to slide 11, division 5 North America. Organic growth in North America remaining very strong at 7.5% in the 1st 9 months and 7.1% in the 3rd quarter. The duty paid part of the business, which is mainly convenience, continues to grow strongly at the back of a steady growth in the number of passengers, increasing spend per passenger as well as positive impact of the new concessions. Our duty free shops also performed well with mid single digit growth. If we move to Page 12 of the presentation, regarding passenger growth, I will now explain both charts and a table so that's shown a very strong picture. The global increase in passenger number has continued to be very strong and the expectations of industry experts remain very solid. This is a good sign that the industry keeps its goods and resilience fundamentals. Looking at our own footprint, passenger growth expectation is different. 1st, as we are still underrepresented in Asia and we are currently unable to capture the full scope of this growth. And second, in the Q3 particularly we have been impacted by the 3 markets disclosed before Spain, Brazil and Argentina. If we move to slide 13, with respect to driving organic growth, 2 main pillars are the opening of new retail space and the refurbishment of existing stores. In the 9 months 2018, we have opened a total of 18,000 square meters of gross new retail space and we are targeting 26,000 for the full year 2018. The main highlights of the new openings so far are as follows. In Madrid, new Hudson Shops. In Malaysia, the 1st downtown shop in this specific country. For cruise lines, I would like to name the 2 wells new ships that we have opened in early summer with cruise lines such as Holland America, Carnival and P and O and finally 23 new stores in several North American locations. Looking at the refurbishments, we have been very active on the renovation of our operations and up to September we have renovated 50 stores equal to 27,000 square meters of retail space. Among the main projects are as follows: Malaga 3 stores, Hydro Terminal 3 new generation store, Glasgow main store, Valley 2 stores and Cancun Terminal 3 new generation store. When we do these refurbishments, we consistently also implement our digital strategy elements aiming at improving the shopping experience for our customers and driving sales. Good examples are the 2 new generation stores we launched in Hill Road Terminal 3 and Cancun Terminal 3 with an extensive use of digital technology. Here we have also already considered first learnings of the other new generation stores opened last year. In this context, we have also equipped ourselves associated with the tables with a lower considerable improvement in customer service through better product information. In slide 14, new contracts and pipeline. Among the new space signage so far during the year and totaling 16,000 square meters, the main contracts already disclosed are the new airport operation in Perth, Australia, the 10 new stores in Philadelphia, 1 new store in San Petersburg and 2 new stores in Chile, as well as several shops at Chicago, Midway and Boston Logan in the U. S. Moreover, we have an important project pipeline of close to 40,000 square meters we are currently working on. These potential opportunities are currently mostly located in Southern Europe and Africa, Division 1 as well in the Division 2 U. K. And Central Europe. If we move to Page 15 for commenting on the business operating model. I would like to update you on the current status of the implementation of the business operating model implementation. One of the most important internal projects as it's allowed us to generate a total of $50,000,000 of operating efficiencies, which will be reflected in our P and L in 2018 2019. The business operating model is currently being implemented in several countries in Europe, Middle East and Asia. So far implementation has been started in 47 countries of which 23 have been already received the 1st certification and 11 of those have passed the 2nd certification. The benefits are already visible in the P and L and we expect to already see an impact in the first $40,000,000 in full year 2018, which is considerably higher than the $26,000,000 originally planned. The remaining $10,000,000 will be build up and be reflected in 2018 results. If we move to Page 16, as already mentioned at the beginning of the presentation, in this page, I would like to give you an update on the cash returned to shareholders during 2018. 1st, on May 17, 2018, we paid a dividend of CHF3.75 per share for a total of CHF200 1,000,000 With respect to the dividend payment to shareholders, we have committed to pay at least the same amount as previous year equal to a minimum of €200,000,000 and up to a sustainable return level of 40% of cash net earnings as a target. Additionally, on October 31, we have just complete ahead of time the share buyback program of $400,000,000 which was scheduled to last 12 months until May 2019. In total, we spent $402,000,000 and purchased over 3,300,000 shares which we intend to cancel as already announced. In 2018, we have opened 2 additional new generation stores, 1 at Hydro Terminal 3 and 1 at the Cancun Airport Terminal 3 in Mexico. In both the stores, we have also been able to implement the first learning from the previous installations in Madrid, Melbourne, Cancun, Terminal 4 and Zurich. The next new generation stores to be opened will be Buenos Aires and Amman in 2019. Our online reserve and collect platform has been extended to 21 countries covering 81 airports by the end of September. And we will further increase coverage by the end of the year. On the platform, we have also further improved the assortment and the value proposition. The footprint of Red by Dufry, our customer loyalty program, has also been extended and covers now 36 countries and 160 airports. And last but not least, we have equipped our sales associates of 40 stores in 14 countries with the sales tablet, which allowed to considerably improve the service provided to the passengers. And now I am passing through Andreas Schneider for continuing with the financials. Thank you, Julian, and good afternoon and good morning, everyone. Let's move to Page 19, where we have the growth components. Reported growth was positive in the 3rd quarter due to positive FX translation effect. As Julian already explained in detail, there was a slowdown in organic growth in the 3rd quarter due to challenging external factors in certain markets. This effect clearly shows in the like for like growth that turned negative to minus 0.9 percent in the Q3. As to net new concessions growth, Q3 was below previous quarters, mainly because some of the projects analyzed in the 2nd quarter such as Melbourne, where the expansion went live at the beginning of Q3 last year. Generally, net new space contribution tends to fluctuate because of the timing and the size of such projects. Based on our current project portfolio, we expect that net new concessions growth will accelerate again in the 4th quarter. Overall, Q3 top line performance has been lower than what we originally expected. Having said this and considering the pressure on the top line, we have delivered good results overall and our other KPIs, as we will see shortly. There has been a good gross margin progression. We could improve EBITDA margin and we have generated a very good free cash flow and equity free cash flow. The performance of the Q3 illustrates that we do have a very robust business model that can be managed tightly. And although we're not entirely happy with the performance, we do feel that we have managed the business well and delivered good results given circumstances. If we move then to Page 20, I would like to talk about the FX impact. In the case of Dufry, the FX impact that you see is the translation effect converting into Swiss francs all the different currencies where we sell our products. You see our main currencies in terms of sales are at the bottom of the bottom right chart. These are the U. S. Dollars, the euros and the British pounds. In this context, let me make one additional comment. Because we do price in those currencies, our organic growth is also measured in these currencies, e. G, this means our organic growth in Latin America is based on U. S. Dollar sales and not based on local currency sales. Then on the top left chart, we see the evolution of the FX impact on turnover. In the 9 months, we had a positive FX translation effect of 1.5 percent and we had a similar positive impact in the Q3 of 1.3%. At the bottom left chart, we see the evolution of our main currencies versus the Swiss francs, which point to a negative translation impact in Q4 due to the strengthening of the Swiss francs against the euro and the British pound. Then if we move to Page 21, to the income statement, and let's move directly to gross margin as we already talked about turnover. Gross margin improved by 50 basis points, driven by negotiations with suppliers and also initiatives that we did develop together with the brands, mainly related to promotions and the so called brands plan. There was also a slight benefit from a mix effect. Concession fees increased by 30 basis points to 28.1% in the 9 months. Of this increase, about 2 third is attributable to the Spain contract, where the lack of growth in combination with the increase in minimum guarantees led to a relative increase in concession fee charge. For all the rest of the business, the net increase was about 10 basis points. Personal expenses and other expenses together improved by 30 basis points in the period. This is mainly due to the efficiencies from the business operating model as explained by Julian, and you can see well the improvement in the general expenses. The positive impact of the business operating model on the personal expenses is not fully visible as there were some underperformance in some operations and some increases in personal expenses in North America offset this improvement of the business operating model. As a result, EBITDA grew to CHF807 1,000,000 and EBITDA margin improved 40 basis points to 12.3%. Then moving on, depreciation and amortization was slightly higher than in previous quarters at 6.4% of turnover. This is due to an increase in depreciation, which is related to our continued investments in new space and refurbishments. Amortization was almost stable Swiss franc terms and slightly decreased as a percentage of turnover. Just as a reminder, more than 80% of the amortizations related to acquisitions. Linearization was a CHF 27,000,000 charge for the 9 months. As a reminder, linearization comprises the non cash elements of the Spanish contract. This means the straight lining of the minimum guarantee increases over the period of the contract terms as well as the prepaid concession fees. Due to the seasonality of the Spanish business, the linearization is positive for Q3. For Q4, there will be a charge again. For the full year, the linearization charge will be around CHF 50,000,000. Other operational results for the 9 months was CHF 32,000,000. Of this amount, about half is related to new projects and start up, as well as restructurings and closings. Financial results improved by 25% to CHF 99,000,000. This is mainly due to the refinancing that we executed in 2017 as well as the lower net debt that we had along 2018. Income tax was CHF 92,000,000 in the 9 months and there was a big increase year on year of about CHF 55,000,000. Of this amount, CHF 47,000,000 were incurred in the first half of the year. And as we mentioned at the time, the first half year increase related to deferred taxes that are non cash in nature, about $35,000,000 and of those $35,000,000 about $20,000,000 are one off charges, which are in majority related to the restructuring in the U. S. That we did due to the Hudson IPO. Then the Q3 specifically, the increase in taxes was $8,500,000 and the tax rate moved to about 27% from 23%. So the Q3 is more representative as there were no material one off items, although the devaluation in Brazil and Argentina resulted in an increase in deferred tax charges. In addition, there is a mix effect whereby we accrue more profits and taxes in those operations where we grow faster. Now taxes are quite difficult to forecast. Our best estimation at this stage is that for full year 2018, we will have a tax charge of about €100,000,000 in the income statement. Moving on, non controlling interest were €49,000,000 of which the largest part is due to our business in North America. The $49,000,000 already includes the Hudson minorities from the IPO that we did in February this year. The result then basically is cash earnings, which improved by CHF 7,000,000 to CHF 319 1,000,000. Let's then please move to Page 22, where we have the cash EPS. If you look at the top chart, we show a bridge from last year's to this year's cash net earnings. As you can see, the tax charge negatively impacted the cash EPS for 2018. As I mentioned beforehand, because the largest part of the increase in taxes is non cash and includes also one offs, the actual result does not fully reflect the real performance. The effect alone from stand from one offs is about $0.40 per share. Then if we move to Page 23, we can talk about the cash flows, and we have shown here our KPIs in that context. For the 9 months, we had a record cash generation with free cash flow at CHF 619,000,000 and an equity free cash flow at CHF 430,000,000. We will see all the details in the coming slides, but before we go there, let me make one comment. 2018 is the 1st year for some time where the cash flow has not been impacted by any exceptional items and that reflects the cash generation of our business. In our view, 2018 is actually a good proxy for future performance. Moving to the numbers. I would like first to refer on the seasonality charts at the bottom of the page. As we had mentioned 3 months ago in our last results conference call, some of the positive impact which normally makes Q3 the strongest quarter in terms of cash generation were anticipated in Q2, specifically the positive impact of net working capital during busy season. The key point here is that we have a very strong cash generation for the 9 months and we shouldn't necessarily look just a quarter. Despite the lower top line growth, our expectations for the full year remains largely unchanged compared to previous calls. For the free cash flow, we expect to reach an EBITDA conversion at the higher end of our range of 50% to 55%. And for the equity free cash flow, we expect to end up at the lower end of the previously indicated range of $350,000,000 to $400,000,000 for the full year 2018. Now if we move to Page 24, we will look at the free cash flow component in more detail. In the 1st 9 months of 2018, we saw a positive net working capital inflow of CHF94 1,000,000, of which about half is due to changes in core networking capital, as you can see at the bottom of the right chart. You also can see there that we already have core networking capital below 5% in the Q2 this year. The other half of net working capital improvement was due to a better non core net working capital. Cash taxes were $81,000,000 compared to $69,000,000 last year. Compared to the taxes in the income statement, cash taxes are much more stable and growing more in line. For capital expenditure, we reached CHF 181 1,000,000 in the 1st 9 months. You can see the evolution in the bottom left chart. As a percentage of turnover, CapEx is slightly below 3% versus a normal level of 3% to 3.5%. Then moving to Slide 25, here we have mainly 2 items to be discussed, interest and minority. Interest paid was CHF127 1,000,000 for the 1st 9 months, CHF 30,000,000 lower than 1 year ago. As already mentioned, the improvement is due to the refinancing executed last year as well as lower debt levels. Cash flow related to minorities was $56,000,000 and this is $22,000,000 higher than last year. About half of this increase is just the timing difference, whereby we pay dividends to minorities in Q3 this year, whereas last year we paid the same dividends in Q4. On Page 26, then we have the bridge from equity free cash flow to net debt. On one hand, we have the proceeds from the IPO, which is CHF665 1,000,000 and on the other hand, we have the cash that we return to the shareholders, I. E. The share buyback, the purchase of treasury shares and the dividend payment that we made in May. As per September 30, 2018, we returned about CHF 600,000,000 to our shareholders since the beginning of the year. After the completion of the share buyback last week, the total amount for 2018 will be CHF 720,000,000. Then on Page 27, we have the balance sheet. There is no major comment. The asset side hasn't really changed. Concession right continued to decrease as we amortize them. On the liabilities and equity side, we have an increase in equity, which is due to the Hudson IPO and the decrease in net debt, which is due to a combination of IPO proceeds and the cash generation as explained beforehand. Then on Page 28, we have net debt evolution, which reached $3,010,000,000 as per September 2018. Our covenant was 2.92x net debt to EBITDA. With this, we are within our target range of 2 to 3x net debt to EBITDA and well below the maximum threshold of 4x leverage that we have agreed with banks. As mentioned in our earlier calls, we have a long term financing in place and there are no maturities before 2022. In October 2018, we extended our RCF facility by 1 year to 2023, so we further improved our maturity profile. To conclude, a few comments on IFRS 16. If we move to Slide 29, we have a refresher on the different aspects of IFRS 16, but I don't want to go into details there. This is just for those people that may not have all the effects at the top of their mind. On Page 2017, you may know that we have IFRS 16 being implemented for 2019. So the first time reporting will be Q1 2019. The current status is that we have now that we are now in the final stretch of our review. Compared to our previous indications, we have a lower impact on the balance sheet and to a lesser extent also on the lines in the income statement. Our current estimate for the balance sheet effect currently trends towards the CHF 4,000,000,000 mark, and amortization impact is expected to be below CHF1 1,000,000,000. As you may remember, from 2019 onwards, EBITDA will not be a meaningful KPI anymore. We will focus more on cash flow metrics as those remain largely unchanged, and we also will attempt to provide some additional metrics that will allow to track the performance of our business before and after exchange to IFRS 16. This concludes my part of the presentation, and I'd like to hand back to Pelikan again. Thank you, Andreas. I will now move to Slide 31 sorry 32. In the 1st 4 weeks of October regarding the trading update, net sales were gradually improving with organic growth close to +1%. The improvement in organic growth is due to a number of factors including seasonal lower exposure in Spain and better performance in this market too. The annualization of Geneva closing last year in October. Further improvement in performance in Asia, UK and U. S. And the contribution of the new openings mainly in Asia such as the Hong Kong MTR train terminal operation and the new subsea berth. For the full year, we therefore expect an ongoing year on year performance improvement for the group overall with the information as follows. An organic growth for the full year between 2% 3% and EBITDA margin between 12% and 12.3% and confirmed level of equity free cash flow as Andrea mentioned, €350,000,000 €400,000,000 In Slide 33, what we have as a conclusion is to summarize the performance in the 4 9 months. I would like to really remark the resilience set of results realized despite the adverse condition in some of our key markets. Despite the slowdown in sales, we have further expanded our margins at gross profit and EBITDA levels, and we have confirmed our cash generation capability. We have reached an advanced implementation stage of the business operating model, and we have completed the share buyback program. And we are executing as planned or other goals set for the year 2018, which are further expansion of digital initiatives in the context of emotion as well as to continue focusing in cash generation. I think so far the situation in 2018 has been challenging especially in the 3rd quarter, but we are especially in this set of financials showing again the resilience of the business model. That's all from our side. And if possible, we can now move on the Q and A session. Thank you very much. The first question is from Johan Isford, UBS. Please go ahead. Yes. Hello, Julia, and hello, Andreas. Thanks for taking my questions. And there would be 4 quick ones, please. The first one is looking into first half twenty nineteen on organic growth. I mean, can you roughly share with us what is your expectations on net new shop expansion going into the first half twenty nineteen and any other initiatives to share these things that you can return to around mid single digit organic growth in the first half twenty nineteen? Or will it remain at the low single digit given your current best guess? 2nd question would be on the EBITDA margin. If I read it correctly, you are guiding that the Q4 EBITDA margin is down around midpoint of your guidance, 50 basis points. Is there something special you should consider on the concession fees across profit margin? And then here's also the question, how should we think about margin progress in the first half twenty nineteen? And third question on the cash flows. I mean, you said 2018 should be a good proxy for 2019. Don't you see the risk that you have to do prepayments for concession renewals in 2019? And then the last question, very quickly on your strategy, that you have used the Hudson proceeds through the share buyback. Does it mean that there is limited M and A prospects in Asia? Or how should we read it? Thank you very much. Okay. Thank you for the questions. Let me start with the like for like in Q1. It still is very early. It's obvious because even we don't have the budget finalized. But I see 20 18 in a sorry, 2019 Q1 in a different mood. Last year, we grew 7.5%. I think this year, obviously, in terms of comparable, it's going to be more difficult to compare in order to reach the level of 7.5%. A lot of things have changed, for example. What is going to happen in Brazil? What we have seen during the last 10 days, 15 days is a significant turnaround. After the elections, the exchange rate normalized. And as a consequence, the situation in terms of performance, sales performance is improving. Argentina doesn't move a lot. Spain is improving. And I think obviously all depends on the circumstances, but I think the toughest comparable in the year will be Q1. For the year, I cannot tell you anything, but I can obviously suggest that as soon as we know the information, we will provide the market information with more accurate facts because now it's just a perception. Regarding the EBITDA margin for the Q4, I think you need to obviously, there are some elements that may limit the EBITDA margin development. Number 1 is the new businesses that we are open that we are opening and we open. As you know, I may comment on that. The cruise lines and some other businesses in Asia are lower margin, even that obviously they have an IRR perspective at the same level and sometimes higher than the business that we are operating today. This will have, let's say, an impact in the margin. And the second one is Spain, Brazil and Argentina. If Spain, Brazil and Argentina are not turning around as we are expecting, especially Spain and Argentina, the fixed costs will be over proportional to the situation and also may impact the percentage. But within this range of EBITDA that I mentioned, all these things are considered. Regarding the cash flow. So on the cash flow, I think you were mentioning that there should be any prepayments. Look, I think we highlighted many times that prepayments are actually not normal course of business in our industry. And as far as we know from today's perspective, there's no such things there. So I would reiterate or confirm that based on what we know today, there shouldn't be anything one off in 2019. And regarding the M and A, I don't want to obviously repeat myself many times, but I have seen and I am still repeating that the business travel retail is very fragmented, that the best way of allocating capital in this company is to continue with this type of growth, especially in Asia. And if the question is, are you going to consider a delay in the strategy, the answer is no. I think the opportunities will happen when they happen. And obviously, the conditions are related to the vendors. If they decide to sell, I think we should consider the opportunities. And one of the, let's say, basic principles for business operating model is to continue with the growth of consolidating the business. Okay. Many thanks for this. And on your last point, Julian, would you really is it 1% sure that you are canceling the shares? Or could you use the shares you bought back also for M and A prospects in 2019? The idea of these shares was not originally that. The region is still is not originally that. We acquired these shares in a situation where we saw the price, we saw that it was a package of good value because we saw that the value of the share price at this time was really low, and we thought that was a good deal for the company investing in their own sales. That's all. And still they are there. If they're in the future they are using M and A transaction, why not? But today is not the intention. All right. Many thanks. Thank you. Next question comes from the line of Edouard Aubin, Morgan Stanley. Please go ahead. Yes. Good afternoon, guys. Just three quick ones for me. Just to follow-up on the space growth. So sorry if I missed the answer, but it came in below expectation in Q3. Could you be reaccelerating the space growth in 2019 towards the 2% historical average? That's number 1. Number 2, on the gross margin, I guess that was the positive one of the positive surprise of Q3, which is a 90 basis point expansion year over year. And you've mentioned some of the drivers of that. So that came ahead of your annual guidance, I guess, of 30 to 40 basis points. Based on what you said regarding EBITDA in the Q4, should we expect a much less significant expansion of the gross margin in the Q4? And what should we be expecting towards 2019? Again, should we come back to the 30 to 40 basis points? And lastly, I know it's a bit premature to talk about EBITDA for 2019, but given that you've put forward some of the benefits of the BOM program, should we be looking at an EBITDA margin in 2019 more or less in line with what you in Okay. Thank Okay. Thank you for the questions. Regarding the new space, I think it's very similar to previous year. It's 4.2%. The difference is closed operations along the year. I don't see any difference with previous year that we have been always between 3% 6%. Then probably what happened in this quarter is that there are annualized effects, especially in Cancun and in our cruise division in Asia. But this is something that happened because we were opening at the at comparable level impacting less in the positive side. But I still believe that between 4% 6% of new gross space is possible every year. Regarding the gross profit margin, in my view is a sustainable situation because the gross profit margin has been for a while one of our main drivers. We have been negotiating with suppliers locally and globally, especially locally for improving the gross profit margin. And I think during the Q4, we are going to see a similar increase. Regarding EBITDA for 2019, it's difficult. As I said, we have not even finalized the budget. I cannot comment on the specifics until I have more clear and obviously, transparent information. I prefer to avoid the discussion about the full year 2019 until we know what is going to happen. Okay. Sorry, Julian, on the gross margin thing, so I mean, if your guidance implies a contraction of EBITDA of around 40 to 50 basis points in Q4, What you're saying is that you can still you should be in a position to post a 90 basis point or something gross margin improvement in the 4th quarter? I think this is a realistic information in terms of gross profit margin. In terms of the Q4 that I mean obviously a consequence of what I said regarding the full year is a consequence. I am going to I want to clarify that because I repeat it. There are new businesses that we are consolidating with lower EBITDA margin, especially the cruise lines. And I said that at the beginning of the year and we have added we are going to add this year close to 30 new cruise lines. It's a different business, but in terms of IRR, as I said, it's similar or higher. And I am not going to avoid new concessions from new businesses because the EBITDA margin is lower and higher. It's a different business that is consolidated. There are also other businesses in Asia with lower EBITDA margin that started to be consolidated in the 1st October. And this is happening and also is happening what I said, there are operations like Spain, Brazil and Argentina that due to the lower in this case sales have a fixed component of the cost that are impacting also the possibility of continuing with obviously the same level of EBITDA margin. Those are the reasons. Okay. Thank you. Next question comes from the line of John Cox, Kepler Cheuvreux. Please go ahead. Yes. Good afternoon, guys. A couple of questions on my side. Just looking at your comments again about reiterating at least CHF 200,000,000 on dividend on the next dividend. The way I look at it, it has to be over CHF4 per share just to get to CHF200 1,000,000 because obviously you've reduced your share count. When I look at consensus, it looks like it's around $3,800,000 Would you think that consensus dividend expectations for next year are too low? That's the first question. 2nd question, I wonder if you could just give us a bit of an idea on the size of those new businesses, which will obviously have a negative impact on mix? Just roughly, is it like a couple of percent or whatever it may be, those new businesses coming through? So we can try and think about what the margin of those businesses might be coming on? 2nd question. 3rd question, just the nuts and bolts on the working capital and CapEx evolution. Core net working capital continues to remain well under control. Any thoughts on where it could go next, Andreas? Or do you think it probably will remain now roughly where it is? Same on CapEx, you mentioned below 3% in Q3. What is your And then just the last question, if I can, on Spain. And then just a last question, if I can, on Spain and AENA and that contract coming up in 2020. You said you wouldn't sign a similar contract in the future. I'm sure the negotiations are pretty intense. Just wondering where we are there, particularly as you are launching new projects with AENA, which would seem to be that you are in the driving seat at least to try and maintain those contracts. Yes, any update there that would be much appreciated. Thank you. You want to start with the Edouard? Yes, I'll start with the working capital and CapEx. Look, I think we are currently at a good level in the sense, look, we will to improve the working capital as we can. But as we always say, look, the 5% that we have now seems like a realistic target. It's hard to materially improve mid. So that's why I would think that the levels that we have today for working capital and CapEx are actually sustainable. If we can improve it marginally, obviously, we'll try to do that, but I wouldn't expect any big change. And as such, then also if you want the cash flow generation, equity free cash flow and free cash flow shouldn't materially change from a structural point of view. That's why we feel that the 2018 numbers actually are a good proxy, as I have tried to explain beforehand. I'm sorry, on the dividend, yes, look, that's probably our mistake. So when we think about it, it's like the same amount. So I would argue the SEK 3.75 billion are probably the base case. The Board hasn't decided anything yet. So I think what the proper way of forecasting that is to take the 3.75 times a share that is outstanding. So it's just below the €200,000,000 that Julian mentioned. But this is our mistake because we still think on the full number of shares. Okay. From my side, Jan, regarding the size of the new business, obviously, depends on the performance, but it's between 3% 5% of the total sales. If we are able to open everything on time, this is the full year impact. And then it's gradually, obviously, depending on the months, depending on the number of days you open the business. Regarding the Spanish contract, I think I have been very transparent with that. The conditions are not the very tough contract, especially due to the minimum annual guarantee in 2 of the lots, lot number 1 and lot number 2. This is public information. What we have done is we have agreed with AENA the implementation in 6 in 5 papers in Spain of a project that will consider the traffic flow, the configuration of the socks, the brands, the assortment, the pricing policy, the digital approach and also new opportunities of businesses that may arise during the discussion in order to show up that after 6 year or 5 years of operating this contract, the company, As you know, the contract was awarded to the former World Duty Free operation that now is operated by us. And we believe that with these changes in the operation, there is a possibility to really overpass the problem with the minimum annual guarantee. We just started the renovation of Sanofi Sepers and we expect that during the next 3, 6 months, we will be able to show Avaina that this is a different obviously way of doing things. As you know, when you agree and I am not talking about specifics of the contract because as you know was a very difficult moment in time when World Duty Free agreed about this situation due to the economy in Spain and due to the situation of the Spanish airports at that time. The original business plan was based in assumptions and was based in the current market conditions at this time. Today, we believe that with all the changes that happen not only in the airport environment, but also in the domestic market in Spain and in the countries where the passengers are coming from, the commercial offer in the Spanish airports in the retail part, in the duty free I'm talking about, requires a different approach. As a consequence, the test is probably the best example because it's not the electrical discussion. It's a practical and specific discussion comparable with previous performances in 2018 2017. If the results of this test as we expect, I think it's obvious that we will be very interested to continue. And I think this is the assumption that we only work with at this stage of the process. Depending on this performance, everything else is possible. But I think first of all, we need to wait until the performance and see what the reality is. So just to confirm, the you think that what you've done there on these pilot programs should deliver better revenues? And if that's the case, then you're happy to sort of maintain the form of the current contract, including a new minimum annual guarantee? Yes, yes. Thank you. Thank you. Next question comes from the line of Paul Bonnet, Bank of America Merrill Lynch. Please go ahead. Hi, Julian. Hi, Andreas. Yes, just three quick questions from me. The first one is actually Now you say €40,000,000 in 20 18. But I guess the business operating model, the whole idea behind it was to save on the operating expenses, right? And when I look at the operating expenses on the 1st 9 months of this year, actually, I only see a little bit of leverage on the operating cost, but otherwise pretty much everything is unchanged. And so the 40 bps increase in the EBITDA margin actually comes fully from the gross margin increase. Should we actually expect any savings cost savings on the operating expenses? So that is my first question. Then my second question is actually I thought one of the disappointing thing about the results actually came from Asia and you pointed toward the tougher comparison base. So effectively, the comparison base is approximately 6 percentage points tougher, so between Q2 and Q3 last year, but actually the performance of the business deteriorated from 23% to 4% between Q2 and Q3 this year. So where does the twelve percentage point underlying deceleration comes from is the second question. And then the third question is on the net new concessions. I just have a little bit of hard time to reconcile exactly how this works because in the last two quarters, we've seen approximately 2% that was coming from that. But the reality is, if my understanding is correct, when you open a new concession, this should last approximately, well, 4 quarters, right, before this is in the base. So I don't really understand how come we had only 2 quarters of around 2% and before that we had below 1% and now we had below 1% again. So if you can enlighten me a little bit on that, that would be much appreciated. Thank you so much. Okay. Regarding the business operating model, I think I have repeated this many, many times. We target EUR 50,000,000 total impact in the P and L in 2018 2019. Initially, we forecast an impact in the P and L in 2019 of 26,000,000 euros Due to the acceleration of the implementation of most of the initiatives of the business operating model, we have explained during the presentation that is that to instead expecting EUR 26,000,000 in 2018 will be EUR 40,000,000. And the reason is the acceleration of obviously the implementation of this business model. So far in the P and L 9 months what you have seen is $33,000,000 Sorry, can you just point me where those EUR 33,000,000 are? Because the only thing I can see is the general expenses went from 4.9% of sales 4.6 percent, which for me is €80,000,000 not €36,000,000 Yes. So this is Andreas, Seppo. Look, I think you have on one hand the general expenses, that is one thing. The other hand, that's what I tried to explain in my speech is like you have personal expenses. And I know that you don't see an improvement there, but I think you have 2 elements that go against each other. On one hand, you have the business operating model improvements, but on the other hand, you have 2 things. On one hand, you have a negative impact, for example, in Spain because of the lower performance of the business. And then you also have a negative impact in North America from increases in personal expenses. So although you don't see it there, reality is that the business operating model has delivered there as well. But it's not something where you just can't say, look, this goes straight there, because there are these two elements that, if you want, offset the improvements. Okay, fine. So in the underlying business, in the normal course of business, we should have seen around €33,000,000 to $36,000,000 but now we're only seeing like $20,000,000 because there was the leverage due to the lower organic growth is what you mean? The lower organic growth and the cost increases in the North America. Correct. Okay. Fine. Amazing. Okay. And what about the 2 others, please? Yes. I've seen in Asia, I think I commented during the presentation. You have number 1 is the annualization of Australia. Number 2 is the annualization of the Asian Swiss Lime business. And number 3 is the slowdown in China operations in Asia, especially in Indonesia that during the Q1 was double digit growth and in the Q3 was almost flat. Net of new concessions, I think the net of new concessions is and I think I commented on that before. If new concessions contributed 4.2% of gross of the sales. Closed concessions, 2.9% during the first 9 months of 2018. And this 1.3% net added to the FX impact sorry, added to the like for like, 1.8% result and organic growth of 3.1%. In previous quarters, what we had is a participation of 1.9%. The reality here is, again, the comparable with previous quarters because now what we have is and this especially the Grisline business in Asia. Australia that last year was the first time that we opened with the full renovation of shops. It's a comparable issue. And now it's moving to obviously like for like impact when you have 12. Okay. So considering that the comparison base actually gets another around 15 percentage point offer into Q4, are we going to see negative organic growth in Asia into Q4? Is it a possibility? [SPEAKER JOSE RAFAEL FERNANDEZ:] No way. I think in Asia, we have very good new operations and we start in the 1st October along October November that will mitigate any possible negative impact will be positive. Okay, fine. And so what about the phasing of the net new concessions, which is my last question? Net new concessions. So look, I think the as you pointed out correctly, I think your concept is absolutely right. So whenever we open or close a new business, obviously, that will go into the net new concessions lines for 4 quarters. Now obviously, depending on how big the project is and when it starts, you may have every quarter openings and closings. So to give you an example, in Q4 2017, we closed Geneva. That's why you would see actually quite a strong drop in the quarterly net new concessions growth in Q4 last year, okay? Now for example, Melbourne, that was a big one that we opened beginning of Q3 2017 that will roll now or that has rolled off actually in Q3. I think because it's project by project, there is no, if I can call it that way, systematic there on what the growth can be depending on what comes off and what goes on. Even the numbers may fluctuate. And I think again that is something that I wanted to explain in my speech. So you cannot just take any given quarter and take that as a run rate. There is some volatility there. The key point for us here is like Q4 again, it should accelerate because there's a number of new projects which are quite sizable. And Julian commented about it, they go online or they have gone online in Q4. Okay, perfect. Thank you so much for your explanation. Thank you for your questions. Next question comes from the line of Micha Ruili, Credit Suisse. Please go ahead. Yes. Just a couple from my side. First one, just as a clarification. With your Q4 guide implying around 40 bps to 50 bps of EBITDA margin decrease, I wondered, I mean, does this also does this guide also imply a mid single digit decline in organic growth in Division 1 in Q4? I'm asking because obviously the IANA winter guide capacity guide and also some sea capacity data is suggesting quite remarkable recovery in Q4, but also Q1 2019. So is this already does it still imply around mid single digit decline? So can you so the line cut off several times during the time that you were asking the question. Can you please repeat that? Sure. Sure. So with the Q4 guide, implying 40 to 50 bps of EBITDA margin decrease, I wonder does this guide also imply a mid single digit decline in organic growth in Division 1 in Q4? So because obviously we have seen there's some sea capacity dates and also the Yaena guidance for winter capacity suggesting quite a remarkable improvement in traffic growth. So that would be my first question. And then my second question is, I think in the press release, you speak about structural issues in Spain. Are those comments simply basically related to the minimum annual guarantee? Or what else do you mean with structural issues? Has there been any change to the different environment there? And the third question would be, I mean, I guess you guys have quite a good view of how the Chinese consumer is feeling in general. So in addition to what you already commented on the APAC growth, is there any sort of slowdown for Chinese in any sense? Thanks. Okay. Regarding the Division 1 organic growth in Q4, we don't expect a double digit organic growth in Q4 for Division 1. In fact, Spain, that is the main has been the main reason of the negative organic growth is improving significantly, number 1. Number 2, the structural changes in Spain means and I think during the presentation, it was an specific comment about one issue that is very relevant. The traffic in Spain, international traffic in Spain increased by, I think, 1%. The difference is the profile of the passenger in this increase. British passengers and other nationalities decreased by around 4%, 5% during the period that we are talking about. As a consequence, because these passengers were substitute by Spanish passengers, the spend per passenger has been significantly impacted. What the problem is? The problem is that one, let's say, British has around €10, €11 per head and 1 Spanish passenger is €2 per head. This is the main structural problem that I tried to explain and probably is not well explained. Regarding the Chinese customers, what we have seen in general is not a slowdown, it's a drop in the spend per passenger. And what the reason is depending obviously the destination, but the main reason that we have seen is that the type of Chinese passenger traveling today is a bit different than 2 or 3 years ago. We are welcoming in several of the locations where we have Chinese passengers, different passengers profile, lower profile than before. And I think this is something that has been repeated in most of the locations that we have been operating. It's not the impact in number of Chinese passengers, it's more the change of profile of the Chinese passengers. Okay, thanks. Next question comes from the line of Peter Testa, One Investment. Please go ahead. Hi, thank you. Just three things. One maybe just following up your on your comments on the Chinese passengers. Is that something you saw happen, say, during the second half of the year? Or is that a longer term comment that you're making? And then just two things on mix to make sure you understand. On the Spain, Brazil and Argentina factor, I guess, because of the season, Brazil and Argentina have a higher weight in Q4. So even though the difficult trading happened in Q3 and it's a bit recovering in Q4, that higher weight is what gives you the point on the operating leverage that you were making? And then the third question is just on the cruise side. It's about 3% of sales. I was wondering if you could give us some sense based upon the Business One, what sort of base of sales that would represent just to give us some context for that opportunity to be able to understand your comment better? Thank you. Yes. Regarding the Chinese passengers, I think this is a gradual change that we have seen over the past years, but essentially in 2018. There are more Chinese passengers traveling with obviously the average profile lower than before, where obviously most of the passengers were high level. Now we have also mass market Chinese. The second one is the seasonality. Spain, as you know, is very seasonal, especially in Q3. And the recovery of Spain that is in fact happening now may no impact at the level obviously needed in order to accelerate organic growth, but it's not going to damage the performance. Brazil and Argentina are different cases. Brazil, depending on what we have seen is an improvement compared with Q3. And Brazil has a very, let's say, a good performance during Q4. It's not like in the North and Hemisphere, it's like more in the Southern Hemisphere. Argentina is not an improvement. Argentina remains the same and is going to be tough. As a consequence, Spain, even in the case of recovers, is not having the important impacts that we have lost during the Q3. Brazil, if Brazil recovers, we will have a significant good impact in Q4 because it's an important quarter and Argentina is not moving a lot. I don't think that we should consider Argentina recovering. Okay. And then on the cruise point, just so they understand the context for what you're talking about? Obviously, what we disclosure in our information is around 3% generated by the Chris business in the top line in the P and L. What I have this comment on before was that we have opened during this year and most of these cruises have been opened at the beginning at the last part of September, beginning of October and alone in the last quarter, new 30 cruise lines. The contribution of this in a full year basis will be between 3% 5%. And I think depending obviously gradually the implementation and the starting of this business will increase even obviously the percentage of participating in the total sales. This is the size of the magnitude. Okay. So 3% to 5% is cruise alone on top of the normal gross openings? Yes. Fine. Thank you very much. Next question comes from the line of Rebecca McClellan, Santander. Please go ahead. Yes. Hi. Good afternoon. Can you hear me? Yes. Yes. Perfectly. Good afternoon. And I've got four questions for you, please. Firstly, the organic growth of 1% that you saw in October, was that a combination of improvement in the like for like and the new space? Or is it sort of more a reflection of the new space from the cruises as well as a reduced sort of dilution from Geneva? My second question is, can you remind us just what the mag inflation in 2018 2019 is? And are you hoping to sort of get an inflationary neutral or less inflationary mag situation under such a new contract terms? My third question is what do you think has driven the improvement in Spain in the last weeks? And finally, you talked about cruise in Asia or new businesses being slightly dilutive or the mix effect at the margin being lower. Is that at the growth or is that predominantly at EBITDA? Okay. Thank you. The organic growth increase, we are talking about days in the 1st weeks of October, the 1% is mainly due to the new space and the comparable with Geneva last year. We haven't seen all the detail, but it still is very premature to see something else. In my view, there are also 2 aspects that could be positive. One is the sales in Spain that are not negative so far or were not negative during this day so far. And the improvement of the operation in Brazil that is still negative, but it's better than during the Q3. Those are the main changes in the organic growth during the 1st days of October. Regarding the inflection in the market in Spain, it's public information. This year has increased 6 the minimum annual guarantee increased by 6%. And next year, I am not sure now, but I think it's another 6% in 2019. Regarding the if we were if we are going to be able to overpass this inflection in terms of sales, obviously in 2018 is not going to happen. But I think with the initiatives have started and the trend that we are seeing now in 2019 may happen. Why? Because obviously, they spend per passenger. During the time that we have initiated this project that I comment on, the first results are positive, but nothing concrete because it still is very short thing. The Chris business have 2 different levels. 1 is obviously impacting the top line, but also the EBITDA margin as a business is a lot lower than the EBITDA margin in a standard duty free airport operation. For this reason, and if you remember, I comment on that at the beginning of the year, we won, I think, 40 cruise lines and these cruise are going to be consolidated during 2019 and beginning of 2019. And this is may impact the margin. But this is reflected in the guidance that we have commented on in the press release. Okay. So sorry, Julian, just two things. Firstly, for the crews, is it a lower gross margin as well as EBITDA margin? It's not the gross profit. It's not the gross margin. It's the concession fee. Okay, excellent. And secondly, just about the Spanish MAG inflation. I mean, it's difficult to tell obviously with AENA, etcetera, but I'm assuming that one of the things that you probably want to erase from any future contract is significant inflation in the mag, right? Because that's been fairly penalizing. Yes. It's a very important factor because in this contract, as you know, gradually the mag increases significantly. The 1st year that we took over the contract, the increase in the minimum guarantee was around 15% or 16% and gradually 6% per year. We have seen this in 2017, 2018 and I've seen in 2018. Obviously, the key point here, Rebecca, is if we can really drive more sales per passenger. And personally, I am convinced that we can do it. The difference is that in this case, we need to really show up and test it with AENA. We are doing this project together. They are very obviously interested that the top line is increasing significantly, I would say. And we expect during the next 3 or 6 months good results on this initiative. It's the first results and I don't want to really identify these good results because the new initiatives, because we have been doing a lot of things during 2018 and probably some of these projects already impacted the sales. The Fed results are very are positive. We turn around the situation of going negative. Now the situation is flat or positive week by week. Okay. But the improvement in Spain recently isn't I mean, that's too small, right? It's just pilot. So the improvement in Spain is what, because there's been a pickup in international passengers or? No, the international passengers is more or less the same. As you know, the British passengers that is probably the most not probably, is the most important customer we have in Spain, have switched from Spain to other destinations. And to substitute these passengers with lower spend per passenger like is happening with the Spaniards is a big challenge because you have obviously, this is the proportion that when I said 10% to 2% is the real proportion, it's not I am not guessing here, it's a real proportion. Okay, thank you. Thank you. Next question comes from the line of Gianmarco Vero, MainFirst. Please go ahead. Good morning, everybody. Just one or two questions for me. The first one regarding Latin America. Do you expect a spillover effect in Latin America also influencing the grow and organic growth in Mexico? And do you think this growth could also shift into negative territory maybe in Q4 and also in H1 2019? And then the second question may be more hypothetical, but assuming that you intend to further increase your cash EPS also in the future, what would be an Okay Okay. Regarding Mexico, being fair, I don't think that Mexico has the risk to go through a process of negative EBITDA. What happened during the Q3 sorry, negative organic growth. What happened during the Q3 a very more straight point is we have opened many shops, the traffic in different terminals. The type of traffic in Cancun has changed from terminal to terminal. We have been under renovation for a long time. We have opened 2 new big shops. One of them was in an current terminal, the other one in a new terminal and this impacted the organic growth. This is my what I have seen over the past 2 or 3 weeks is, again, they are initiating the same growth than before. Then is the cash interest and net debt. Yes. So look, I think as I said, we are currently at around 2.9 times, so that is at the higher end of the range. So if you do the very simple math, so if we were not to do any acquisition for the next couple of years and assuming that we will keep the dividend as we have indicated now, we probably will be at around 2.5 times in a couple of years or just below 2.5 times. So ultimately, this is a decision by the Board of Directors. This is not our decision. But I think from a management point of view, I would feel comfortable that we say, look, we kind of give ourselves a year or a couple of years before we need to decide or before we really have few on pressure to do another share buyback. So I think we're in a sweet spot in the sense that if we can do M and A, we have the financial flexibility to do so, but we also still have enough leverage that it will make sense to delever if there's nothing in the short term. Okay. Thank you. We have a follow-up question from Jorn Iffert. Please go ahead. Yes. Thanks again for taking my quick follow-up questions. Julian, as you were speaking about the mix is changing with the rising share of cruise lines having lower margins, Is this also resulting that you put under review your medium term EBITDA margin target of 13%? Well, as I said, Jon, it's very difficult to say today what is going to happen in the middle trend EBITDA margin. I don't have the answer. I don't know. I think what we have today is as a consequence of what we have done over the past years. And I think the 2 acquisitions at that time justify the EBITDA that you mentioned. The reality in terms of margin for the future, I prefer to have a clear understanding about 2019 and the impact of the new businesses in order to answer properly the question. I don't know. Fair. Thanks very much. That was the last question. Okay. That's all. Thank you very much for participating in the presentation and in the call. All the questions were very interesting. Thank you very much. Bye bye. Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call and thank you for participating in the conference. You may now disconnect your lines. Goodbye.