Julían Díaz - Chief Executive Officer Andreas Schneiter - Chief Financial Officer

Jon Cox - Kepler Service

Good afternoon. Thank you for participating here in this Full Year Results Presentation.

This is Julían Díaz speaking for the people participating the call. Also, Andreas Schneiter, CFO, will participate in the presentation later on.

As in previous presentations, we're going to use what we disclosed this morning, as full year results presentation in our website. And we will were turn to Page 5.

That's review of, obviously, information in order to understand what we are discussing today. One important message is that we confirm that the organic growth along 2017 was until the last quarter, was very strong, but also in the last quarter, even with comparable strong quarter in 2016.

In 2017, the organic growth in fourth quarter increased by 5.7% in previous year by 5.6%. More interesting also confirmation, the synergies due to the World Duty Free acquisition and also negotiations of global deals, generated an increase of 80 basis points at a gross profit value level.

And I think this seems that due to obviously the integration process, we were commenting along 2017, but now it's totally covered. Finally, for the first time in the history of the company, we have over plus 1 million EBITDA, 1 billion, sorry, EBITDA.

Free cash flow without 105 [ph] reaches 457 million, including the 105 at the beginning of the year where three concessions that we extended. And we agreed with promise with landlords, to advance in this case's rent.

This is something that we already disclosed, including this 104 million, we reached 571 million free cash flow. As we move to Page 6, the highlight that I would like to remark is number one is obviously total sales increased by 7%, reaching 8.4 billion, organic growth already commented on, reasons for the organic growth acceleration.

I'm not going to repeat all the presentations that we have done in 2017, but one of the main reasons, number one, is, obviously, the healthy increase in passengers growth last year. In second level, I would say, the acceleration of newest basis, 30,000 square meters, that we added to the portfolio in 2017, just for comparing with a total by December 31, the total number of square meters we were operating were 457,000.

And then it's obviously the commercial states that we've refurbished. Again, the idea is how to drive more is spent per passenger.

I think this is an important issue because 10 times is difficult to communicate about global increase in the spent-per passenger. And this is also a trend that I would like to obviously confer with what is happening in other retail activities.

These activities were resilient to the online Internet. I mentioned about many disciplines, a lot we are seeing in the business that [indiscernible] business, but the most important one is what happens with the spent-per passenger.

The global spent-per passenger in the company last year increased by 2.1%. The EBITDA spent-per passenger increased by 2.5%, including all these volatilities in currencies and all these things.

Then it's also relevant. We have singed previous year a significant number of new square meters that will be opened along 2018 and 2019.

So far during the first two months, what we have signed is around 15,000 square meters of commercial space, 11,000 of this 15,000 will be opened in 2018 and the remaining 4,000 will be in 2019. Gross profit margin, again, mainly driven by the synergies, EBITDA, I want to mention obviously regarding that 1 billion EBITDA.

1 billion EBITDA for us is a significant improvement compared with previous year's plus 7.7%. And I think in the press releases, is quite detailed explanation.

But let me go through. The main driver, obviously, passengers increased organic growth 7.4%.

Then is the second main driver gross profit margin improvement 80 basis points, where were obviously the mitigations of this growth translated to the EBITDA in 2017. Number one is the increase in the concession fees.

The increase in concession fees, as you remember, in nine months or so was 27.8% compared with compared total turnover. Now it's 27.5% compared with total turnover.

It's around 50 basis points compared with last year 27.2%. What is going to happen in 2018, and this is a composition that obviously we can later on is we are expecting the same thing.

20, 30 basis points of increasing concession fees that will be mitigated again, and I am going to explain how by the gross profit margin improvement and by efficiencies [indiscernible] structure of the cost of the company. And the second one that mitigated this significant improvement in EBITDA in terms of margin not in terms of total because obviously we're talking, and I heard that everybody was talking about EBITDA margin, EBITDA margin is the increase in general expenses.

In general expenses, last year, we had 6%. This year we have 6.3.

Why, mainly due to two one offs, one is one tax that we have to pay obviously with accumulated value for in the past in South America and other one is an impairment in one of the Nuance concessions that was accrued in this line of the P&L. What is going to happen in the future?

I'm going to comment on that, but I think the levels of efficiencies that we are going to implement in 2018 will impact again obviously without the one-offs. Continuing with the cash EPS, again, I think the cash EPS is one more relevant information of this presentation.

We have increased by 14%. During the last five years is the highest.

What is the meaning of that? Is that after the transactions, after the acquisitions that changed and transformed, Dufry, what we have now is a closer picture to the Dufry that we were communicating and everybody was expecting is 6.8, sorry 6.8, 14% increase with previous year.

And finally, the free cash flow. Cash flow without the one offs increased by 18%, reaching 571 million.

We move to Page 7. Here, I have a lot of information.

I would try to be systematic in this presentation. Number one, I would call - I would talk about last year's performance, compared with previous years 2016.

We increased repeated 7% total sales, 8.4 billion, with a strong increase of organic growth of 7.4% and very good last quarter even with the comparables. All the most important produce lines performed very well.

That's increased by 8%, food by 8%, spirit by 10% and luxury by 20%. Tobacco, that is probably something that I have also in mind to explain, increased by 5% globally.

We also confirm the positive sales performance of the most the relevant rationalities impacted by the devaluation during the last three year. Simple information, sales to Brazilians last year increased by 29.3%.

Sales to Russia by 36.6%, and sales to Chinese by 20%, 19.7%. And the performance by division, was as follows.

Turnover individual one, Southern Europe and African reached 1.8 billion, 9.1% increase compared with last year. And organic growth in this division increased by 6.8%.

Turkey, recovered a strongly with a return of Russian customers with double-digit growth. But not reaching the level that we achieved in 2015.

But we expect this year 2018, the Russian operation will reach the same level of sales profitability we had in 2015 with a return of that Russian passengers. In this region, Morocco, Ivory Coast, Ghana, Nigeria and Portugal double-digit growth.

Good performance in Greece, Malta, Italy, France, Spain, with healthy single-digit growth. In division 2, U.K., Central and Eastern Europe.

Turnover, was 2.1 billion, 3% increase compared with previous years in CHF and 5.3% in local currency. The division achieved 6.3% in organic growth.

Double-digit growth in Serbia, Russia, Kazakhstan and Armenia, again, this part of the business was impacted due to the double [ph] devaluation during the last 3 years and now the business is returning to the same level of profitability than before. Single-digit growth in U.K., despite the high comparison due to the realization of the devaluation of British pound during the second half of 2016.

Mainly this obviously even with the comparable in terms of valuation because in 2016 the devaluation happened. During six months and compared with the six month, the situation remains very healthy and spent-per passenger is growing significantly.

After that, what I would say is Basil, Sarah, Sweden, Finland and Bulgaria also single-digit growth. In division three, Asia, Middle East and Australia turnover reached 800 million, and organic growth plus 5.4%.

Indonesia, Cambodia, Macao double-digit growth. South Korea, Emirates, Jordan and Kuwait single-digit growth.

And finally, Maroon recovered with single-digit growth in the year after the opening of the new generate unit start during the last quarter of 2017. I want to remind that because this specific concession was impacted in the concession free line until the nine-month results presentation.

Why? Because we started to pay the new rent in January, but the new locations and the new spaces were only opened during the last quarter.

Division four, Latin America. Excellent performance in most of the countries, was the record year in South America in many regards, reaching 1.7 billion, with an increase of 10.6% compared with previous year.

Organic growth 10.8%. Uruguay, Chile, Peru, Brazil, Dominican Republic, double-digit growth.

Argentina, Ecuador, Mexico, Puerto Rico single-digit growth. And finally Division five, North America turnover reached 1.7 billion, 6.7% above last year and organic growth by 6.5% increase.

Double-digit growth in U.S. and Canada duty-free and single-digit growth in duty paid.

This is what happened in terms of performance compared with 2016. Compared with 2017, I'm going to talk now about our trading update for January and February 2018.

The trend is very similar, in all the regions. The EBITDA growth has been around 7%.

And the most relevant are as follows: Division one are of the Europe and Africa. Most of the operation performing well, including Turkey, Spain, Greece, Portugal and Italy.

Division two, U.K., Central and Eastern Europe, similar performance in division 2017 despite the closing in Geneva April as you may know because we announced the last conference call, we are not operating Geneva any longer in the termination of the contract happened during the happened during the last quarter of 2017, but even with this termination, the performance is very similar in total for the division. Division three.

Asia, Middle East, Eastern Europe and Australia, significant acceleration of growth driven by Macao, India, Emirates, Jordan, Kuwait, Russia, Kazakhstan, Bulgaria, Armenia and Australia. Division four, Latin America, similar growth in local currency in South America.

Countries like Brazil with double-digit growth and obviously, Chile, Peru are performing very similar than the previous one. I want to remark three countries of three activities that really accelerated growth, one is Mexico and the other one is Dominican Republic and the other one is flagship the, this [indiscernible] This is division four.

Division five. North America.

Similar growth in duty-free compared with 2017, but acceleration of growth in duty-paid activities. This is what happened in terms of the trading update.

We move now to Page number eight. As we try in previous calls, we will explain the main drivers of organic growth.

Number one is the passengers increase. The acceleration of the passenger increases in 2017 is clear international passengers globally increased by 8.4%, in locations where Dufry operating the number was 5.1%.

This also healthy was different because the mix of passengers and the mix of the countries where we are generating sales, is obvious that we have more presence in South America, in Central America, in North America, Europe and Africa, et cetera. The second one is the future of this passenger growth.

The projections by international - for international passengers is 7.3% in 2018, 6.6% in 2018, and 5.7% in 2020. Where these passengers we grow?

Mainly in Paris and mainly in South America. We are well represented and very good represented I would say in South America when we are in this part of the strategy trying to develop this company is in Asia.

We move to Page nine. Information that has been already disclosed but I want to determine in one single shot.

Page nine considers the 30,000 square meters gross space that we have opened in 2017. Most of this space, 41%, was opened in Latin America.

In Latin America, operations like Cancun, Rio de Janeiro, Mexico City, Bogota and Barbados contributed with a much important part of this 41%. The second one was North America, with 23%.

In North America, Minneapolis, Ft. Lauderdale, Tucson, Las Vegas and Calgary.

Division 3, Southern Europe and Africa, 18%. With Cairo terminal 3, Barcelona, Athens as the most representatives.

In division 3, Asia, Middle East and Australia, 15%. The one [indiscernible] more representatives is the - in Macau, in Chengdu and Fuzhou in China.

This more or less obviously what we have done in terms of the 30,000 square meters of commercial space added and the 32,000 square meters of commercial space renovated are just obviously in the bottom of this page. From Madrid, Athens, Guadeloupe loop in division to Vancouver, Toronto, Las Vegas and Los Angeles in division 5.

This is intention for 2018, again, we have a significant and similar plan for renovating shops worldwide in order to maintain the acceleration of organic growth. Of this picture in the following pages it says one [indiscernible] the second one is Gatwick in the U.K.

The third one is obviously Russia. It's [indiscernible] Its okay, but is one of obviously the conscious we used Mexico, stopped to see in Cancan.

And the final one is a - and Dufry shopping. Dufry shopping is the concept that we are operating in duty-pain in Brazil and one of the concepts that we are going to use for stand in the duty-paid business worldwide.

Then we move to Page 14. Those are the square meters we signed so far in 2018, 15,000 square meters, yes a few obviously remarks we have expanded the portfolio in Greece with 2,100 square meters.

I think is important to remind - to remind all of you that we have signed a significant agreement with - Greece in order to extend the contract in terms of duration of the contract and also to expand significantly the number of square meters and the most important to reallocate the square meters in the right locations, because in most of the April's that we have been repeating that since the beginning of the acquisition, we need to really need to move the location of the square meters to the places where the passengers go through. Already in April's like in Spain we have one attended for Hudson, 600 square meters, Brazil, new 2,800 square meters and in the U.S., 3,000 square meters.

Let's move Dufry's segmentation now. I've commented the sales on the left side by division on the bottom left side is by category as in the start of the company has announced many times is personal care and [indiscernible] 32% of the business.

Food and confectionary is 17% of the business, it's also obviously growing. And luxury goods 14% of the total sales, plus 20% as I said before, is obviously confirming the strategy of the company.

Then Dufry by channel. This is all obviously, later on I am going to comment a bit later on.

But Dufry a company multichannel in retail. So far the most important sales are generated 91% and profitable in April, but we have said, approved by the Board of Directors, the intention on top couple of obviously developing do duty-free and duty-paid in April to expand alternative channel as follows.

Number one is obviously sales force. I read this very time.

Number two is more soft. Number three is downtown shops, especially in Asia.

And I'm going to comment on that later on. Then regarding the tax structure in terms of sales.

52% of the sales are generated in duty-free and 38% in duty-paid. One important remark we already did that.

We had several pre-release's in Page 16, what we obviously trying to show is the IPO results in all our operation in the U.S. and Canada.

Dufry acts as US$19 per share, the total proceeds of this transaction this 43% was US$740 million and the implications for Dufry are obviously clear and responding. This is a division, we will be consolidated into the division and Dufry and we will obviously benefit and obviously be part of any strategy of the company locally and worldwide if needed.

North American business will remain total integrated in the fall structure of this disclosure. And the impact in the P&L will be in obviously the line of minorities.

Continuing with priorities for 2018. First just to comment on the new organization.

The new organization has already disclosed. I want to just mention three things.

This organization has a significant important reason, is to be more agile, to be vertically integrated and to allocate the better responsibilities. And this is going to generate an extra value of the company and I don't comment on that, because obviously it's a different way of working.

Along 2018, this will have an input not only in the business, but also in the efficiency of P&L structure. The business operating model.

The business operating model is one if is not the number one. It is the number one minus 0.5 priority in the company.

It's the most important pleasure with that we are doing here, is standardizing. Standardizing what?

Process and proceedings. Organization, IT systems, supply chain, including the global obviously assortment, promotional applications, every single letter with supply chain and the digitalization.

The digital part that is based and focused on the customer. And this is impacting obviously the company in different levels.

I mentioned that the total impact in the company above EBITDA, when it's fully implemented, will be CHF50 million. The impact along 2018 due to the relevant implementation will be 23 million.

This project, with obviously reorganization of the company, will impact the company above EBITDA in several obviously millions, what we are expecting in 2018 that this will generate almost 0.5, 0.6 of extra EBITDA due to these efficiencies. The other driver of this growth and I assume this is also a good information for 2018 is the increase of gross profit margin, but we are expecting is 50 basis points of increase of gross profit margin, where it's going to and how it's going to be impacted, the cost structure.

On one side, you have the concession fees. The concession fees as we always said, will increase by 20, 30 basis points that will be mitigated, obviously by the gross profit margin improvement.

And then we have the leverage in two levels: The leverage of the new business operating model in the Personal Expenses line and the General Expenses line. And this is the way that we try and this is something that really repeated to reach this close to 13% EBITDA margin.

Above or below gradually, you will see and we will confirm what is going on. But it still remains unchanged.

We want to be close as a company to 13% EBITDA. And those are the tools that we are using for achieving that.

And this is something that gradually, will be implemented in 2017 - sorry, 2018. Finally, this is on time, we will see everything in one shop.

It's not will be gradual but this is the target for the company. But I cannot - and I think this is very strange, we talked about EBITDA margin permanently in this company now because the market is expecting 13% EBITDA margin and probably, today, you will ask me 20 times what happened with the 13% EBITDA margin?

What happened with this margin is, this is the target for the company? Then I will say, yes.

How we are going to do it? I already explained it.

And then gradually, we will be implementing it. It's the only thing we can say, is that we are trying.

What is a possible mitigation of not reaching this level? The strategic plan.

I comment on three different channels: border shops and Downtown shops that have different P&L structures. And the P&L structure is different because the EBITDA is lower.

And we are going to announce during the next, probably one or two months, I hope that it will be during the first month, three important projects in this street channel that will impact the company significantly in terms of volume. And this will have an impact in the P&L for sure.

What is the main value of this project? What is the main value of this project, is the internal rate of return of the project are very similar to the ones that we have today.

Why? Because investment [ph] is lower, a lot lower.

That's more or less the explanation. This is strategic view for 2018.

Then, the strategic initiatives that I mentioned here, we want to be a multi-sector company? Yes.

We want to be a multi-channel company? Yes.

We think that will retain. And those are, as I mentioned before, the targets for 2018.

If we move to Page 18, a significant, obviously, also on challenging situation is how this company is going to engage with the customers. Here, what we are discussing is that, and as a consequence, how this pampered passenger will increase.

And how this contribution for this part of the business, digitalization, will maintain the organic growth during the next five years. This is the final explanation is what we want, as a digital company, that we'll focus on the customer, external and internal customer, we are now developing a full integrated digital plan.

But today, we have developed significantly, the digital part of focusing the customers to customer. ' How it's going to be implemented?

Number one is, and I have repeated in the past, what we want is the sales employees in the company, the sellers, will be digitalized through iPad. This is obviously, the best way of communicating.

We will have 20 different nationalities going through. You have, in this iPad, information about the product, about the prices, about the currencies, even this iPad can communicate in the same language of any passenger that you can imagine going through the shops.

The customer research. We are creating, and we have a significant global database of customers and what we want now is to build it step-by-step the information that probably is relevant on this regard.

The number of sells tickets that we have 250 [ph] million. And in most of the cases, especially, if it's a duty-free operation, we are authorized to obviously, record and register information about the passengers because we are authorized to collect this information.

Again, this is obviously, something that we need to do properly, but the idea is to really prepare a global database of passengers, we think the information the famous CRM database that will facilitate the connection with the passenger. The omni channel strategy.

We are continuing expanding the generation store, the new-generation store. We will expand the red program and the other applications, the loyalty program, and reset and collect.

We are today, in more than 20 countries in each of these projects. By the end of 2018, we'll be in the full market of the company worldwide.

And finally, another area we are providing this new product is specialized for retail and/or only for Dufry, and we have several examples, I mentioned it in the past too. The next target in this area is continuing with the organic growth.

Our target is continue with the same level of organic growth for 2017 - 2018, sorry. The next one is focused on cash generation.

In order to reach this level, permanent level of satisfaction in terms of 2.5, 3 times net EBITDA level and the more relevant that it's also obviously, important because if a great event is the returning cash to shareholders. So use that still we have not announced properly all the information because the Board of Investors is going to meet during the next days and April, the 5th of April, we will have the information.

But I cannot comment on what is going on. There is obviously, the intention to pay a dividend.

The dividend will be naturally between 2% and 3% as minimum. I said as minimum.

And there are the several alternatives. The two most important ones is on Special dividend on one side, and on the other side, a share buyback.

Obviously, significant said buy back. This is the information and will be announced after the board where will be the 5thh or the 6th will be announced.

Obviously, the board has to authorize it and it has to be in the [indiscernible] family, in any case. Then, I think, Andreas, I pass through Andreas now the presentation.

Thank you. Good afternoon, everyone.

So let me move to - directly to Page number 20. I think as Julian already has mentioned, organic growth for the year was quite strong, 7.4%.

Fourth quarter equally good as 5.7%. Now I think what is interesting is we go to the chart at the bottom left is that you see that the comparables have to become increasingly higher and higher every quarter, and we continue to perform very strongly there.

My conclusion on that one here is like for the fourth quarter, we are almost, kind of, a run rate level. And so if you compare fourth quarter last - 2016, it was 5.6%, this year 5.7%.

So I think we are now at a run rate level. And I think, the fact that we continue to perform well over comps are harder is a very strong sign.

If we then go to the right-hand chart and look at the fourth quarter performance by division, I think you have one division, which is slightly lower, that is U.K. and Central Europe.

The main driver there is the closing of Geneva. If you would look at on a like-for-like basis, the like-for-like growth for in this division is also in mid-single digits, so I think this is performing well.

On the positive side, the one that is really performing strongly is Asia and Middle East, with 19%. I think, there, it's a combination of new businesses but also very, very strong like-for-like growth.

I think, conclusion here is, very strong 2017, very good fourth quarter, all divisions doing well. So I think we have had a very, very year in terms of organic growth.

Now I move to Page 21 and let's look at the FX impact. I think, before we start here, one thing that is fair to say is in 2017, the FX volatility has been a lot more benign than it was in 2016 and '15.

So if you look at the past few years, we had this huge volatility almost in all the currencies, especially in emerging markets. This year, it has been a lot more moderate.

Now going through the slide itself and looking just at the main currency, our translation effect was really marginal, minus 0.1% for the full year. Trend wise, first half was negative, second half was positive, mainly due to the strengthening of the Euros and assuming that exchange rates stay where they are, currently, we would expect to have a very small positive FX effect also for the coming quarters.

Now if you look at the sales split by - of the turnover by currency, roughly 40% U.S. dollar, 25%, 24% Euro, 16% pound, the rest, 19% different currencies.

Again, not a lot of change compared to the past. Then, let's move to Page 22 to the income statement.

Now the way I would like to play this is, I will go quickly through this income statement. There's quite a number of one-offs, and I wanted to explain that then later on the separate slide.

But let me start here and then go into the details afterwards. So I think we already talked about turnover.

Gross margin, 80 basis points improvement. Main drivers were the synergies from the [indiscernible] acquisition.

I think, very good result. Then on the concession fees, the increase was 30 basis points year-on-year to 27.5%.

Again, as mentioned in the past, one driver was the minimum guarantee in Spain for one matter. We had a few renewals but that was quite marginal.

The other big element in the increase was mainly mix effects. Now if we go specifically to Q4, and we look at the same numbers for Q4 only, you would notice that the concession fees will be flat year-on-year.

So when we commented in earlier calls, we said, look, there were some temporary increases, that we mentioned, that they have vanished. So this has neutralized or corrected themselves.

And also, the other thing that you will see is in the Q4, do you have a seasonality impact so concession fees tend to be lower in the fourth quarter generally, and I think that also helps the average for the full year. Then we move on to personal expenses.

They remain flat year-over-year. I think on one hand, we had synergies from world duty-free, on the other hand, we had some rate inflation in the U.S.

also in certain Latin American countries, so that netted itself out. Other expenses, this is about higher buyback, 30 basis points year-on-year.

And there, the main driver, as commented by Julian, were some sales taxes that we had in Latin America, and then a few bits and pieces elsewhere. Then share of results were impacted by a one-off charge.

We already commented about that one in the second quarter, so nothing new there. And then, we talked about EBITDA, just about CHF1 billion, best result ever.

So very pleased with that. Below EBITDA, we have depreciation, CHF159 million.

This is basically, similar to the last year as an absolute amount but because of the growth, if you measure it as a percentage of turnover, whereby 20 basis points better. Amortization was CHF424 million.

In the year, we have about CHF65 million of impairment from the Nuance transaction. And I will come back to that in a minute again.

The [red] amortization was about CHF360 million, some CHF20 million lower compared to last year. And improvement - the relative improvement was 50 basis points.

Then linearization, as expected, CHF59 million and just to remind everyone, this is related to the Spanish contract. Two elements, on the one hand, we have the straight lining of the minimum guarantee increases that happen every year; and the second one is the effect of the prepaid concession fees that was duty-free there at the time of the signing the transaction.

Now for 2018, linearization will be, give or take, CHF47 million, about CHF12 million lower compared to last year. And the charge in the first quarter will be CHF39 million.

So again, we will have this huge swing in linearization, as we have seen it in 2017. Order operational result was positive by CHF53 million.

Now there, we have a number of one-offs. For the biggest one was, again in relation to Nuance, so we released provisions of about CHF81 million, CHF80.8 million, in relation to the Nuance acquisition.

Again, we'll see that later on. Then coming to EBIT, reached CHF419 million, a 53% increase year-on-year.

Financial result was CHF217 million. This includes, again, one-offs related to the refinancing that we had, CHF41.6 million there.

And then to conclude taxes, CHF91 million. Again, a one-off of CHF41 million.

Minorities were CHF54 million for the year. In the fourth quarter, we had about CHF16.8 million versus CHF13.6 million last year.

So there was an increase, and this mainly, driven by the growth and the better performance in the U.S. and in Latin America.

Now for 2018, minorities will increase due to the Hubs and IPO. Just on a comparable basis, if you were to look at the same number for 2018, we would look to minorities in the order of magnitude of about CHF70 million for 2018.

Now adding back the acquisition-related amortization, our cash earnings, plus 14%, CHF368 million. Now if I move to Page 23, and here, I would want to go, again, to these many one-offs that I explained.

And we have tried to also detail them out on where you can find them within the P&L. Let me start first with the Nuance adjustments that we had.

We had effectively two. One, the CHF65 million in the amortization and the impairment, and then the CHF81 million that we had on the other operational result as a release of provision.

So if you want in very simplistic terms, the net effect from the Nuance acquisition, is a positive CHF15 million, okay? Then other items that we have in the other operational result.

We had, again, a profit of about CHF22 million due to the U.K. pension fund.

So we changed the accrual calculation method of the U.K. Pension Fund that resulted in a lower risk, and as such, we could reduce the liability, and we could book these CHF22 million as a gate.

And then, we have another CHF6 million, CHF6.1 million of costs related to the Hubs and IPO that are also booked here. Then if we go to the financial results.

There we have a one-off charge of CHF41.6 million. This is the refinancing, I'm going to talk about it a little bit later.

Of that, CHF22 million cash, CHF19.6 million are non-cash. And then finally, the income taxes.

So this additional tax of CHF41 million, that is related to the tax changes in the U.S. the new tax law in the U.S.

We do have tax laws carry forward in the U.S., which are quite substantial. And because of the lower tax rate, we needed to revalue the deferred tax assets and deferred tax liabilities.

As a consequence, we booked this non-cash tax charge of CHF41 million. On a positive note, going forward, we will pay lower taxes in the U.S.

So overall, I think if we do the math and just add it up, we had about CHF51 million of one-off elements now in this year's P&L. So if you would say, what is the normalized cash earnings that will be a recurring cash earning, we would talk about roughly CHF419 million.

So if we then move to Page 24. Here we have the cash EPS.

And I think there are a couple points which I find quite interesting. So as a starting point, we already mentioned that cash EPS grew 14%, so I think that is positive.

But what is interesting is if you look at the five years development. Now you may remember, we did two big transactions in 2014 and 2015, and you can really see, if you look at the cash EPS and how that has impacted our performance, but what you also see now in '16 and '17 is that the performance is coming back.

And effectively, if you look at the 684 in 2017, we have now a higher cash EPS than what we had before in 2013. And if you were to ask back this about CHF50 million one-off, so if you would say, this about CHF1 additional cash earnings, if we were to go to normalize it, so if you say we have normalized cash earnings of about CHF7.80, this will be the highest cash EPS we have had in 10 years.

And I think, the key point for me here is I think, it shows that we have created shareholder value, and I think there's more to come. If I look at 2018, I think we have the organic growth.

We have the profit improvements. We have some savings also on the financial.

So I think there should be more to come. If I then move to Page number 25 to the cash flow statement.

Free cash flow for the year was CHF460 million. Again, there were some there were some one-off impacts we are going to talk later on.

I will explain the free cash flow in more detail later on. I think the part that also is worth mentioning to see the interest paid.

This includes, as I mentioned beforehand, the one-off costs related to the refinancing. Now on Page 26, we have now the details of the free cash flow and what we have tried to do here is to show the difference of the various line items between 2016 and 2017.

I think the part that is most obvious is that changing the networking capital have been quite substantial with CHF108 million. Now as we have commented about this in previous calls and Julian, commented it beforehand as well, we have a project this year, which generated a cash outflow of around CHF104 million, and you see that on the right-hand side of the chart.

So you see CHF74 million of this CHF108 million were related to investments in working capital that we have done for these new projects in Southern Europe and in Latin America. So if you were to look at it on the normal basis, on the normal operational increase will be roughly around CHF30 million.

Okay? So it's much, much more moderate than what you're seeing here.

Same thing for CapEx, you see the increase in CapEx from 2016 to '17 was CHF21 million of which CHF30 million was due to this [one-off] project. Again, if you were to normalize it if I can say that way, you would have almost same result as last year.

Now if I go to the - sorry and I think what is important obviously then the free cash flow before project was CHF570 million, plus 18%. Now if you go to our KPIs as we usually do and I will start with the CapEx first, we were at 3.4%, including this CHF30 million, so I think we are fully in line with target.

If I then go to the networking capital, the top chart, we were at year-end around 5.5% of turnover, again, in line with our target. I think what you will also see here is that in the year, we had about CHF40 million of investments in networking capital and core net working capital.

Reason for that? A, growth and B, new project that we're to open new locations that were needed more inventory.

Then if I go to the balance sheet, I think that's not very interesting, if I may say that way, there's no big change apart from the reduction of the concession rate, which is expected all the changes are relatively small. And then let me move to Page 29, the financing and the covenants.

So starting with the leverage, 359 versus the threshold of four times. So I think we have a comfortable headroom there.

Net debt improved about CHF70 million. If you were to strip out the FX effect, we were about CHF150 million.

Then, Julian, already talked about Hudson IPO that generated net proceeds of CHF714 million. So on pro forma basis our leverage will be 2.9 times.

In the last week, we also bought some treasury shares, CHF110 million and then more importantly I think, Julian also mentioned on this is that we will return cash to shareholders for the questions not if just how much and how? And I think we will look forward to be able to giving you more details on that one later this month.

Now I think if I try to conclude on what we're seeing here, in a way in my personal point of view, this picture would understate the re-improvement that we have made. I think the CHF70 million - sorry the CHF80 million improvement that we have in the net debt is marginal, but I think reality will be because we are seasonal that we're going to see a lot stronger deleverage along 2018 than what it shows here.

And the second thing is it's obviously with the Hudson IPO we have reached a three times leverage, which we always said, it will be target well ahead of time. Now on the debt refinancing that we have on Page 30, we already commented about it, but I wanted to give the full picture again because I think we do put some pieces in different moments of time.

And just to give you a quick overview, so in December 2016, we repaid U.S. dollar bonds, which had a 5.5% coupon.

In October 2017, we refinanced the €500 million bond with a new bond and reduced there the coupon by 2 percentage point, so from 4.5% to 2.5%. And then in November, we also refinanced the banks facilities, where we reduced the spread between depending on the currency 50 and 70 basis points compared to 2016.

So overall, I think we have generated substantial savings of about CHF50 million compared to 2016. By the same token, we have also extended the maturity, so from 22 to 24, so the next literally five years, we don't have any refinancing to do.

We also have a short-term facility with the Hudson IPO, we already paid that one back. And there are some [indiscernible] benefits that we have now with a new financing structures that we have on hand the covenant threshold which stays at four times of the life of the facility.

We have a much bigger RCF which provides additional flexibility, and we also have locked in quite I think a quite attractive coupon with a 2.5% now for an extended period of time. As a last point, I want to talk a little bit about KPIs, and I think we have discussion with several people of you and the question is what are the right KPIs and what you wanted to do is develop a broader on KPIs and to give you even a better feel and the better analysis on how the business is performing.

So we've prepared two pages here. First one is basically Page 30.

So what we're trying to do going forward, we will use additional KPIs, cash EPS and free cash flow, I think we already commented about in the past but the idea is basically to do it in a more detailed way than what we do today. The interesting part about both and I think that is also relevant when we talked in 2019, about accounting changes, is that they are relatively immune to accounting changes.

So IFRS 16 will have an impact enough these two KPIs will not. So that's why we feel it's good, if we start talking about them in a little bit more detail than what we're doing today.

And then the second one is capital structure KPIs, and I think that is also important in light of the comments that Julian made beforehand. So if we're going to a new business is where there are different P&L structures, but returns are attractive, I think that should be reflected of somehow and you may not that in the P&L strictly.

And that's why believe it's important to have also capital structure KPIs. The ones we feel are the most appropriate one is equity free cash flow because I think it really shows what we're generating in terms of cash for the shareholders, and the other one is the cash return on equity, where we use it, if you want cash earnings over book equity to show what how efficiently we deploy the capital.

I think this is just a heads up. We haven't done now for this one detailed analysis as of yet.

It's going forward from Q1 18 onwards. You should expect it to see a bit more granularity and the more explanation on these KPIs.

So that's is from my side. So I'll hand back basically to Julian

Thank you, Andreas. I don't want to spend a long time in the conclusion, in three areas.

One is the performance in 2017 has been in line with our expectations and with our plans. I think we have the delivered EBITDA cash generation and increasing in EPS in line what we were obviously planning, basing all the initiatives that we have explained.

Relevant for 2018 the new priorities for 2018 has been obviously - have been already explained it. Then the new organization will obviously facilitate and support these targets.

Number one is the implementation of the business operating model and as a consequence, the savings of both EBITDA, total target CHF50 million and gradually impacting the P&L in 2018 and the level of CHF23 million. Driving U.S.

strategic initiatives, we are going to continue standing in duty-free and duty-paid, but also we want to expand alternative channel that will obviously amplify our opportunities in Asia and also will mitigate the different obviously levels of growth in different divisions. Finally, as exited explanation customer focus in digitalization for increasing the per passenger simply.

And focusing in development and continuing obviously with generation of cash. The relevant point and probably because it's new is we confirm as I said the intention of the Board of Directors to propose to the General Assembly in the next General Assembly, a dividend payment that would be with a minimum 2%, 3% yield of the dividend and then alternatives that are still under consideration that could go from special dividend to a share buyback - significant share buyback opportunity.

That's all from my side. I think the best now and the most interesting are the questions and all the questions obviously are welcome.

[indiscernible] Sorry to come back on the 13%, but just so understand it's crystal clear so you maintained the guidance of 13% EBITDA margin, but do you maintain it for '18 or it's an aspirational kind of medium term skips clear? And sorry to come back on the building block, but again so that it's clear.

So your gross margin expanded by around 80 basis points as you said in '17, but that was almost entirely or entirely due to the synergies with well duty-free. So what are going to be the drivers so we understand in '18 and '19 and also, sorry, to continue on the building blocks, we talked about general expenses going from 6% to 6.3% and as you explained there were to one-off items which drove this increase so should we assume that in '18, this should revert back to around 6%?

Thanks.

Thank you very much. The first question, obviously, I was expecting this first question because if the only [indiscernible] we have delivered the record year in the history of the company in EBITDA and everything.

Okay? I talked about the EBITDA margin.

Thank you. Because I like to talk about the EBITDA margin.

The question regarding the EBITDA margin is a reference point that internally in the company, we have in order to reach a certain level of efficiency, okay? But obviously, we don't measure the company only in EBITDA margin, but we're measuring the company as I said it's free cash flow, it's EPS, all these things are also important.

What I maintain is we have the target to reach around 13% EBITDA margin. 13.1% or 12.9%, you know what I mean?

But initially is why because we know that this company with a significant effort will deliver more efficiencies. Where these efficiencies are allocated today?

One of them is a gross profit margin and you've seen the opportunity. We believe that next year, 50% - 50 basis points could be added to the gross profit margin structure in the P&L.

Why? Because obviously, still we have improvements in governing negotiations with employer and in local negotiations with employer because 20% of the total assortment of the company is still today's local.

And what we have done is globally approached all the suppliers, but still we have a significant part of the company that can be negotiated. And this 50 basis points will come from renegotiation, mainly.

The second part is what is also important in order to maintain - to reach this level of leverage? You have personal expenses, general expenses and concessional fees.

In concessional fees, I think it's realistic to think in 2018 that 20, 30 basis points will increase. And if more than anything, [indiscernible] but you have one reason.

The Spanish market will increase again. Because if this is public information, it is nothing that secret.

And then there is the blended. Okay?

What is the opportunity we have is to generate enough gross profit margin for compensating the increasing concessional fees plus extra value. Then is the General Expenses.

Last year, it was 6%. This year, it was 6.3% due to these recent expense, I believe that it could be below 6%.

I think the strategy today is based on the business operating model blacked the reorganization of the company. We will generate 50 basis points of EBITDA in terms of cost savings.

And this is something that obviously mathematically works. The issue here is how long and how far will be delivered?

In my view, most of this will be delivered in 2018. What I don't want now again is to open the conversation, it will be in 2018, 13% or 12.9% or 15.1%.

It's very difficult to work like that because if we don't work like that, we don't work because we don't want to give to EBITDA margin, let's to be clear. We want to generate value for the shareholders and we want to return cash to the shareholders.

If the conversation is about EBITDA margin and we talk about EBITDA margin, I can talk hours. Because if ability but it reference point, I cannot - I don't want to avoid the conversation.

Because the question is straight and I'm going to say you, yes, we have the target of around 13% EBITDA margin. Nothing is higher.

But then the conversations and the questions about this company that is performing better than ever cannot be about the 13% EBITDA, the 12.9%, what is the issue here? You know what I mean?

I am very disappointed with myself because I cannot explain the good values of this company because most of my time is explaining why the 15% EBITDA margin is not there. When you have the cash generation, when you have the data dividend, when you have the dividend that we are going to pay, I spend most of my time today as a CEO of the company, explaining why the 15% EBITDA is not there.

Fine. I can play this role too.

I don't disagree. I think you have obviously the right.

I could try to answer the question. But let's be more open minded.

This is a company that can perform from the cash point of view, from the EPS point of view, from the dividends point of view. What is?

Okay? Sorry for that because the 15% EBITDA.

I am going to be known like 15%. Okay.

Thank you. Is clear now?

You need anything else?

Thanks. Jon Cox from Kepler Service.

I have few questions. On the EBITDA margin, maybe we can just start with the lack of deleveraging last year, which obviously upset the market today you saw quite a violent reaction with the stock price.

It looks like, as of Q3, you're around CHF3.5 billion net debt and then at the end of the year CHF3.7, you just explained maybe what happened in Q4. Particularly when you spent CHF100 million on the shares it looks like in Q4.

Are those shares part of already buyback or is this some sort of incentive scheme, you can you elaborate on that? Let's start with sort of free cash flow, what happened?

And then maybe you can give us a best guess for equity free cash flow for 2018, obviously we can see that the interest payments are going to come down pretty dramatically and there are also different things, but may be you can just help us with understanding what might happen in 2018?

So let me start with Q4 2017, I think you have a number of effects here. The first one is and I think we have said that in the last year as well, Q4 typically is a quarter where we don't generate any cash.

And I think that hasn't been any different in 2017. So if you go back and unfortunately, we forgot to put a slide here, I didn't put it here it is like if you go back and say what was the free cash generation in 2016, free cash flow generation in 2016, it was minus 53.

2016 was zero and this year was plus 12. So it always has been zero.

And I think there has been two effects facts that you would - that notice if you just look at the net debt one thing is this reversal of the working capital, if you say where do we use actually the working capital - the cash flow in the Q4 that we generate? It's all reversal of working capital because Q3 is low, it's end of busy season.

We have lowest inventory, we haven't paid the suppliers yet, we haven't paid the highest concession fees yet and that all reverts in the fourth quarter and that is the reason for it. The second thing that is here is if you look from end of Q3 to Q4, we have at about 80 million of FX difference because the exchange rates adjusted accordingly.

And I think that has been the two main drivers to why the net debt looks a lot higher. And I think that's what I'm saying it doesn't really show on how good we are.

But you also have seen along 2017 is like for example in the third quarter the amount of free cash flow that we have generated. So I think yes, we are seasonal and we are kind of swinging back and forth, but we do generate cash and I think that's critical.

I don't think you should look at it on a quarter-by-quarter basis. That's the first thing.

The second thing is on the treasury shares, we [indiscernible] in Q1 so this is not part of 2017 numbers. I think our view is we don't have a lot conditional capital.

We have few hundred thousand shares left. But I think from that perspective, from our perspective, it's quite normal to live from treasury shares - partly for PSU, partly for smaller transition so it's just something that we think is good practice to have, but nothing special to read into it.

Sorry in 2018, I forget that. So I think if I start with my favorite rule of thumb is to say, EBITDA - sorry free cash flow with financing is about 50% of EBITDA and then you say okay, look what else do we have?

We should have financing costs now everything - after everything that we have done somewhere in the 150 million to 160 million range. Little bit depending on how interest rates move and be on what we finally do on the returning cash to shareholders that could both impact and then we will have about as I said beforehand give or take 70 million of minority.

So if I just do very simple math and don't want to guide anyone because if I would say 1.1 billion EBITDA just to pick a number 50%, 550, let's say roughly 200 something of cash out for minorities and interest, we should get well above 300 of equity free cash flow just to be very simply math.

Just to follow on the incentives, this new return on equity, that will be proposed at the Annual General Meeting and that will be part of a long-term incentive plan in management or are you talking about this...

Sorry. I miss explained that.

So I think we already have the so called PSU in placed, where we used shares and the way we have done it in the past and we also plan to do it in the future that we always bought the shares in the market and then whatever is vested will be given to the management. So we don't issue new shares for the PSU and but we use existing share and that's the same context that we want to plan - that we want to use going forward.

And then finally on the you talked about a minimum 2% to 3% yield being paid out, what's the highest we could expect?

Well this addition of board. I could say one thing the discussions have been more in the minimal analyzing the market and analyzing obviously what happened in the Swiss market, and the maximum depends on the combination of the other part, is possible special dividend and/or possible share buybacks.

It's not discussed so far. It's a combination things because what I think the Board of Directors is clear is that this is and we now announced it during 2017 is the year where the General Assembly, supersede that proposal, especially in these lines because it's the right time to do it.

But there is no discussion today until we know all the pieces that this decision will be component. Thanks.

Thank you.

[indiscernible] One question on labor cost inflation, a couple of companies mentioned that they have seen increased labor cost inflation. You will run the quite labor intensive business at the operations.

What do you see in terms of labor cost inflation? The second question is on Dufry on the free float, according to the [indiscernible] that you're free float is increasing quite dramatically or 20%.

Well, what's driving that, in that respect I also ask about to largest shareholder, HNA, did you hear something from them?

Regarding what Andreas mentioned, labor inflation last year it was due to the difference between the change in rate in the countries, compared with the local currency. For example that out local currency what we pay in local currency, cases like Argentina or Russia.

Due to their revelation of the rubble and the translation of it and the devaluation of the currency last year was not a soviet inflation, for the reason we had labor increased cost increased, but it's yes that due to the translation effect. It's not increasing in the labor cost or whatever it is you have 5% devaluation in one country of the currency this year.

And you have 20% inflection due to the labor cost. This 50% is not absorbed by the devaluation and we obviously will report in Swiss Francs and these countries absorbed normally because the devolution of the currency is higher than the inflection in the labor cost.

But if this is a decision, why not we have enabled - is not significant at all as you 13.5% of the labor cost compared with the total. The second question was?

The free floats and HNA. So I'll start and end been shipping.

Look, I think when we look at the HNA position, the way we understand it is that they have economically, virtually no exposure anymore to Dufry. So the transactions that we understand it is like the both those shares to correct.

They overlaid [indiscernible] cost structure, so-called structure about over it, which means that if you net everything out, there is a very, very small corridor or they still interest with Dufry. So from an economic point of view, I think they are - if you want out of the picture.

Now the other part and I think we only have indications of that we can improve that and there is no official disclosure, is that a lot of position has also been borrowed - sorry lent to the bank. So the banks themselves have done a hitch by selling shares.

So how should explain up is reality is that if you think about the HNA stake, most of that has already been replaced in the market again. Okay?

And the problem that we have, if you want in very simplistic terms is like technically, HNA is still a shareholder and that what it appears in the registration. Then if because they actually lent their shares and their shares were sold in the market again, we have now more than 100% of shareholdings because actually you're counting the shares twice.

So we went back to the excited for [indiscernible] for free flow calculation, it is not correct to assume that HNA should be carrying 20% because the way they have structured the whole transaction, I think, the way it has been disclosed, it's rather clear that if you can have exposure lower. So what we're saying is like look the real way to count it as accounting the shares in the market and that's why we proposed to the SIA to basically not count, if you want, the HNA space.

That was the background.

That one follow up you know who want the stakes now? That's in the public market?

Or are now in the banks, the major shareholders? I mean it's you're going to vote on dividends or stuff?

You are, smart technical person. I'll try to explain to you and then you tell me whether you got it all.

A lot it is through conversation that we have with different people. So take that with a pinch of salt.

It's not if you want official communication but it's just the way we understand, the things work. Okay?

So what happens is like when they structure the additional colors, HNA structure the additional colors, basically what happens is the bank that structured calls this has an exposure. And the banks will want to hedge out there exposure.

The way to do that is basically to sell shares, Dufry shares in the market. And when you see when these colors happen, this happened in October, but the last we have in October and December.

And for example in December you saw that at some point Elliott was buying the shares, which subsequently they sold again. And you will have seen that north increase their stake hold in December.

So there have been - if you look at the market movement, there has been a very strong correlation between structuring the color and people taking positions. So everything has been sold in the market.

So Elliott is less. [indiscernible] has a size their transaction.

So, yes, everything is the market. It is basically free float.

No more questions in the room? Yes.

please.

Thank you for taking my questions. Julian, you mentioned in your presentation that the channel strategies, the three steps we can possibly assume in the in the next announcement, in the next, I don't know, weeks and months.

First question to that, does that entail organic and inorganic growths or movements or steps? And the second part of that question is you didn't mention any, let's say, buildup of the famous SNB competence that you want to get enhanced, or maybe you get us - give us an update on that line please.

What do we have to we expect, and maybe on the timeline, if you can?

Regarding the first part of the question what we are talking about in this alternative channel is organic growth, is free organic growth. It's a tender that we have already won, and we in the process to negotiate our contract and we are in the process, prostitute, is purely organic.

That's what on the cruise line and exactly that.

For the three lines. It's for the border stores, for the downtown and for in the cruise lines.

That the contract that they refer to are organic contract. Therefore avoiding the - obviously the misunderstanding [indiscernible] is organic contract.

The second one is food and beverages. The food and beverages is using different business and the business we're doing with a different P&L, different returns, different CapEx.

What we have announced, and I think this is a rationale that has been part of the rationale in the U.S., is that or U.S. subsidiary, due to the type of market they're competing, because in this market structure of business is type of retail is completely the opposite that in the rest of the world, 60% or 65% of the business and this market - or capabilities in the specialty market, should be developed in order to compete in the same level of competence, with other competitors in the market.

One of this competence is food and beverages and this is located and issued, obviously, as a target in the U.S. As a whole business, I don't think so Dufry, today, as a whole company, you ask me the question, we are not in this moment of time focusing food and beverage as a strategic channel.

Still we have a lot of room for improvement and growth in travel retail.

Sorry, maybe I don't act on.

Maybe I didn't refer my question correctly full gear carriage competence in the U.S. and I remember in the quality time, you said that is going to entail a small possibly - a small acquisition of a team or whatever.

Here is my question. Ready standing a process that something that we can access?

The answer is straight. It's a social state.

It's a strategic move that we are going to do in the U.S. through acquisitions.

The answer is yes. Meaning a small size yes that they are not going to happen in 20018.

We will have it probably in 2019 because we have enough now room for growth in the U.S. in 2018.

I was interested in that impact and effect from IFRS 16, which is going to be impeccable starting next year. And then, I wanted if you could comment a little bit on the project in networking capital and what's behind the numbers you announced for next year.

So on the IFRS 16, the base mechanics on how we'll work if that we will work that we will need to capitalized all the components of concession fees or rent which are fixed and/or can be determined in a reliable way. So how in our case, the largest part will be that we will need to capitalize minimum guarantee.

Okay? Now we're currently in the process, on doing the proper analysis on that one, I think we have given the first wide-ranged indication of CHF5 billion to CHF10 billion of assets and liabilities that we will be capitalized.

We will need to refine that, I hope in the next quarters, we will be able to give you a more precise update. That's the balance sheet.

That's easy. The more complicated part will be on the P&L because you will have on one hand the concession fees that will be substantially reduced.

So your EBITDA will be a lot higher. But you'll also have an additional amortization charge and you will have additional interest charge.

I think at this stage, I will prefer not to talk about too much about details, but there will be some fundamental change to the P&L. That's why we also think adding new KPIs and starting to track them early on will increase the comparability over time.

I think that's the sole process that we have behind. Now I think in terms of the working capital, I think there are two things that - well, the things I really wanted to say is like look we do have a very, very seasonal evolution of the working capital, and you have seen it in 2017 on how these swings can be.

They can be more than 1 percentage point quarter-on-quarter. We actually do have a project.

And that is related to its centralized the supply chain, so this called one order, where we want to - if you want to further centralized the supply chain and that should give us some benefits on the networking capital. We haven't quantified however, yet on how much that is going to be, but that is part of the business operating model there embedded is also the centralization of the working capital, or the supply chain.

Any other questions in the room? Now we go to the telephone.

It's just two quickly follow-up questions please. The first one is on the EBITDA margin, if I may come back.

You described a couple of positive benefits materializing like you are already in 2018. On the other hand, you're also investing on initiative, shop upgrade et cetera.

Can you help us a little bit understand the trend of EBITDA margin into Q1? And do you have already improvement here?

And second question would be just a housekeeping one, and below the EBITDA line, other operating expenses what are you are roughly think will be the run rate here in 2018, '19?

Regarding the - I think that's a good question of 13% EBITDA. And let me come back to the explanation.

I think, first of all, it's very difficult to say now what is this speed of the all initiatives that we have already started to implement in 2017 and beginning of 2018 for having a very clear standing if we're going to quarter one, quarter two. This is not possible today.

This information is not possible. How this is going to happen.

I think very fast because obviously what we have is the intention to accelerate implementation of this initiative. If you want, I can repeat, again, the initiatives, but initiatives are what they are, is the new structure plus this operating model, we will contribute around 50 basis points.

If the 50 basis points will be gradually implemented. In business operating model what we forecast, because obviously, we have now better understanding about the speed of the implementation will be around CHF23 million.

The remaining part will come from the reorganization of the company, as I said. But the target is 50 basis points.

The other 50 points is coming - generated by the gross profit margin improvement. And then we have consequences I said, the increase in - concession fees, 20, 30 basis points.

This leverage that this 50 basis points of reorganization on business operating model that we go through the lines of general expenses and the line of personal expense. The upgrade of the shops, is very important.

But this is not related with obviously, any negative impact in the P&L because the capital we're investing is very similar and the reality of the outcome is very good. It's very positive because the increase spent-per passenger is tremendous in the places obviously we need to adapt the shops to the reality of the places because it's not something that can be repeated like pardon, but is going to have a significant [indiscernible] in spent-per passenger again.

Talking about the online because I've seen it's an important subject, we do in the market. Right?

There are two aspects here. One is the concession fee.

The other one is the online retail. And how the online retail will impact.

And the third one is the food and beverages part. One number one: How travel retail can really establish opposition or the same a position in order not to be disrupted?

And I think it's very important that we understand that there's not a formula or 100% right but we know is there are specific ways of engaging with the travelers that can only be done through travel retail and will be done through travel retail in this is confirmed because this spent-per passenger increased - and particular increases, and this is for the future, the main issue is we are in the position to engage with the customers in a different and better way than the high street. This is number one, and we have to capture audience and, the audience is enabled.

How this is going to impact the travel retail? It is my view the spent-per passenger is already there and especially Dufry will increase in our year-on-year.

The second part is how the concession fee will evolve? I think it's a combination of things.

It's blended. [indiscernible] because obviously there are many things that may influence.

If we see more in one operation, we sell more in another operation. What is the problem that we need to face here is that sometimes, we have established contact for the simple market in Spain that is gradually increasing and we will have an impact and we have also the mix.

How this impact will be 20, 30 basis points of the P&L? And finally, the issue about the food and beverages.

I don't think it's, today, for Dufry is on any interest to participate in food and beverage. It's a completely different business model.

It's a completely different P&L. And I don't think it's coming to have a significant advantage on anyone regarding the travel retail, in fact worldwide travel retail is more healthy, growing faster and more profitable than the food and beverages market.

And it is very simple to compare the companies and you will see. Yes?

Obviously in food and beverages, you have to compare different lines not EBITDA because obviously the CapEx is very important and very relevant. Let's see.

I think there is an opportunity in terms of 13% EBITDA. The answer is yes.

And we will try to explain every time that there is a call or there is one-on-one meeting how we are progressing with this specific subject.

And the second question on your operational results, I think run rate will be probably between CHF15 million, CHF20 million per annum and that will be mainly including opening of new shops and startups cost that we have on hand and closing and restructuring costs on the other hand and that will be the typical stuff, but obviously than anything that comes in addition will be on top of it.

[indiscernible]

The first one is, if I may ask I didn't hear that your comments about the dividend at the beginning of the presentation. You said you expected at least and you gave a given number, which I didn't hear.

That was the first question. Then the second question is on the free cash flow to the firm conversion of 50%, sounds of a little conservative.

I was just hoping to, I guess, double-click on that. If one takes your guidance for taxes, working capital, I think, is like [5%, 6%] of sales and CapEx, you get a number that's actually quite above that number, you call from 60%, 65% free cash flow to the firm conversion before minorities and interest expense.

So I just hoping to understand why your - why you mentioned a number that seems to be quite, quite significantly below that? And then finally could you please just discuss a little more how the digital targeting of customers is advancing?

You've done that already, but specifically, should we be expecting some lunch or in the coming months, just allowing you to better target the consumer before he actually gets to the airport? Or how do you think about that?

Thank you very much. Let me repeat regarding the dividend that the Board of Directors who had were discussing today, wet a proposal to propose to the General assembly today this proposal will be finalized around April the fifth, in terms of obviously the agreement and then probably will be communicated on April 6, The basic proposal today is having a dividend or proportional dividend of minimal 2.3% per yield for the dividend side.

Would different alternatives on the other complement. One of the things could be a special dividend, one of payment, and the other one could be share buyback.

I think today what I could say is the share buyback is probably having the most important chances in order to really be confirmed because obviously we are very focused in understanding what is the shareholders of the company prefer, but this where we are today. And it will be announced very soon.

Regarding the .....

The free cash flow, I think you're - you're actually correct. Historically the free cash flow to EBITDA ratio was 55%.

Now the - I think the 50% in the way of conservative. I would agree with that.

I think I don't like to use the 55% because you do have swings year-to-year. And if you have a year like this year, where we're just below 50%, people will come back and say, you're too high with 55%.

That's why I am taking 50. But you're right that on a normalized basis, it can be higher and especially also if we grow the EBITDA margin, I think it could be close to 60% %, but historically 55% was the average.

You're right.

Regarding the digitalization a short explanation is about travel retail historically in travel retail our main problem was how to contact with the customer, with the travelers, especially before they travel. And the most efficient way of doing it because obviously you could do - or you could do whatever you want and finally the right or the most efficient way of contacting with the customer is enabled.

Then let's go to the presentation. In the presentation, one of the pages you have seen that we explained in four different areas where we are working.

Number one is the right application. Read is a loyalty program.

It's a loyalty program that obviously is created based in the customers we have every year. In the locations where we are operating, every year normally goes 2 billion, 2.5 billion passengers, depending on how you account it.

And we have 230 evidence - million of tickets every year. This is the idea in order to really collect information and to create this loyalty program.

Today, this loyalty program is expanded in 20 countries. As a consequence of this expansion, we are always trying to create the possibility to the customers to buy before they travel.

And this is the reserve and collect. This a product that is a parallel delivered at the same time.

And then expended in food and firm and portfolio of the company by the year end. Where is a challenge?

Facility now is only the channel strategy. Refer to that and I totally agree.

This is the one of the most important possibilities we have. And free contests that the customers with a home at a time that they book the travel, if they have our relationship with the two operators, then the hotels, then the airports, then the retailers, then the airlines and finally they go back home.

This is that the only channel strategy that is common in this Page of the presentation. Obviously, there are some gaps in this type of strategy because we don't control the food chain.

We know what we can do, if we control the chain. But we don't control the whole chain.

And we are now doing is negotiating and trying to reach agreement with different stakeholders of this chain, in order to really amplified the letters possible to continue with the customer before the travel. That's the process.

That's where we are going to do. And I think in my view, the targets for Dufry should be not only to cover for retail.

We need to lead the market for all these companies that are operating and enabled. We generate maximum 70%, 80% of total income for many of the places or landlords where we are if we can generate the idea to be the market prints for this companies, we will be able even to deliver the merchandise before they travel or after they travel if we're talking about duty-paid.

In duty-free, it is not possible because in duty-free, we're selling in a bonded area and we need to deliver the merchandise and charge the merchandise in a register in the place we are selling the merchandise. But his is more or less the opportunity and it's a huge opportunity.

The company will develop in its strength to develop in the shortest period of time, but during the next two or three years obviously this will have an impact in the organic growth.

Okay. I think that was the last question.

Last question? Any other questions in the room?

No? We're finished here.

Thank you for participating in the call. And, obviously, we are welcoming any type of comments, questions in the Investor Relations department and the rest of myself.

Thank you.

Thank you.