Julian Diaz - Chief Executive Officer Andreas Schneiter - Chief Financial Officer

Jon Cox - Kepler Cheuvreux Volker Bosse - Baader Bank Paul Bonnet - Bank of America Merrill Lynch Jorn Iffert - UBS Charlie Muir Sands - Deutsche Bank

Thank you very much. Good afternoon and thank you for participating in the call.

These are Andreas Schneiter and Julian Diaz participating from Dufry. We are going as in previous calls to use the presentation disclosure this morning in our website.

Please go to Page 6 of the presentation highlights. In half year, we delivered 7.2% turnover increase compared with 2017, reaching CHF4.1 billion.

The main driver was organic growth, increasing by 5.5%. During the second quarter organic growth was 4.2%, and was impacted by the seasonal calendar effect and the slowdown of our operations in Spain, Brazil and Argentina.

We also continued with our very health growth in most of all the other operations worldwide, especially in Asia, UK and US. As part of the organic growth, like for like contributed 3.5%, and the new concessions net 2%, confirming again the value of our diversified concession portfolio creating positive results at the company consolidated level.

During half one, we have opened 109 shops with 13,200 square meters of new commercial space. The plan for this year is to open around 20,000 square meters.

We also refurbished 22,400 square meters out of our plan of 43,000 full year, including a very good new generation store in Heathrow terminal 3. During the first six months we have signed 14,100 square meters of new commercial space.

10,000 will be open along 2018 and 4,000 in 2019, including the new MTR fast train terminal in Hong Kong, the new Jazeera terminal in Kuwait, the retail operations in Chicago Midway, and Perth airport in Australia, and [increases] with different companies among other projects. At June 2018, the Group’s pipeline opportunities were 40,000 square meters.

Most of them, as is obviously commented on several times, focusing division three Asia with 43% of the total. The total - just for reference point, the total number of square meters operated by Dufry on June 23 was 446,700.

Moving to gross profit margin, we reached 59.9% compared to 59.5% last year due to the negotiation of better terms with global and local suppliers. EBITDA expanded by 50 basis points to 11.3% from 10.8% in 2017, reaching 464 million plus 13% compared with previous year.

EBITDA was in line with [2018] for half year. On top of the gross profit margin, 30 basis points of improvement, the contribution of cost rationalization due to our business operated model implementation and efficiency plans are on track, and delivered savings in personnel expenses and [expenses] of 40 basis points on turnover.

Concession fees increased by 30 basis points in line with the forecast commented on our last call, where we mentioned concession fees will increase between 20 and 30 basis points this year, and this is still our target by year-end. Cash EPS increased by 14.5%, reaching CHF2.68 compared with CHF2.34 in 2017.

With that significant good performance of financial expenses due to the financial reorganization negotiated last year and despite the negative impact of the increasing one-off income taxes, where an important part is related with non-cash payments. Free cash flow reached a record for the period of CHF330 million, more than double than previous year.

So on top of EBITDA, growth and better performance in net working capital 4.9% on turnover compared with 5.3% last year, and continued Capex growth 3.1% on turnover compared with 4% last year. And finally with the free cash flow reaching CHF222 million versus CHF16 million in the previous year.

If then we move to Page 7, here we have again the information regarding the turnover, where we increased by 7.2%, 5.5% organically, but I would like to comment on the performance division by division. Division one, southern Europe and Africa.

Turnover increased by 7.3% reaching 833 million compared with 766 million in 2017. Organic growth was 0.5%.

On top of the seasonal effect due to Easter and the slowdown affected Spain with single-digit negative growth due to the shifting of international passengers mainly British to other destinations, especially Turkey and Greece, and substituted by local Spanish passengers with lower spend per head. Good double-digit positive performance in Turkey, Malta, France and African countries.

Single-digit positive growth in Italy and Greece. During the first weeks of July also it is still very early for reaching any conclusions about it.

The trend in the performance is very similar. Division one performing single digit positive growth with Spain remaining with same negative performance compared with previous quarter.

Division two, UK and Central Europe. Turnover increased by 3.5% compared with previous year and reaching CHF910 million.

Organic growth increased by 3.3%, excluding the contract exited in Geneva and minus 1.2% taken into consideration this operation. Very good performance in UK, Switzerland, Sweden and Finland with single-digit positive growth with slightly better performance during the first weeks of July.

Also with single-digit growth led by good performance in UK and Switzerland. Division three, Asia, Middle East, Eastern Europe and Australia.

Turnover increased by 20.3% reaching CHF546 million. Organic growth remained very high 22.1%.

Double-digit growth performance in Macau, South Korea, Indonesia, Cambodia, India, Jordan, Kuwait, Russia, Kazakhstan, Bulgaria, Armenia and Australia. And single-digit growth in Emirates and Serbia.

The group performance in operations targeting Chinese and Russian passengers continued also during the second quarter. The performance during the first of July continues double-digit growth, but at a lower level due to the tough comparables.

Division four, Latin America. Turnover reached 820 million.

Organic growth reached 4.2%. Double-digit growth in the Dominion Republic, sales from more cruise lines and Mexico.

Single-digit positive growth in Ecuador, Chile, Peru, Uruguay, and [indiscernible]. Brazil is lightly - negative performance and Argentina single-digit negative performance deteriorated during the last part of the quarter.

Also measured in local currency, all these operations performing very well, especially Argentina. During the first week of July the situation in South America is lower down in [same space].

Division 5, North America. Turnover increased by 5.5% expressed in Swiss francs, reaching 850 million in 2018, very positive organic growth of 7.7%.

Driven for a significant increase in productivity and new contract added to the portfolio. Both retail concepts performed well, duty-free double-digit growth and duty-paid single-digit growth.

During the first week of July, the trend has been similar than in half year results. If we move now to Page 8, we always comment on the trends in terms of the passengers, especially international passengers’ growth.

The only information we can comment so far officially disclosure is April. And in April, the increase in international passengers worldwide was 7.1%.

In locations where Dufry is operating this number was 5%. The leading regions were Africa and Asia Pacific.

Regarding international passengers growth forecast we remain very strong and continued to be very positive in terms of the outlook; 7.2% in 2018, 6.3% in 2019 and 5.7% in 2020 led by Asia-Pacific, Europe and Latin America. If we moved to Page 9 of the presentation, a bit more detail about the gross retail space opened.

We have opened 13,200 square meters. The total target for this year is 20,000 square meters with several important openings.

In Madrid, new Hudson International shops. In Malaysia, the first downtown shop in the region in this specific country.

In cruise lines, 12 new ships that were opened during the last part of the first half of the year. In Holland, America, in Carnival and in Piano and in several locations as always there is more location in 23 new stores in North America.

Regarding the refurbished shops, we have completed 22,400 square meters with a total target for the year of 43,000. I would like also to comment that this is an important part of the like for like growth and we are so far expecting that during the second part of the year at least 43,000 will be complete.

Every time that there is a renovation the spend per location increased between 15% and 25%. The reality of the refurbishment done during the first half are here listed; Malaga, three stores, Heraklion, Greece; Toulouse, Malta, Heathrow terminal three and Liverpool.

If we move to Page 10 of the presentation, new space signed so far during the year 14,100 square meters. Main contract already disclosure, MTR railway station in Hong Kong, Perth in Australia, Chicago Midway, and Boston Logan.

The project pipeline’s opportunities remain obviously significantly high, 40,000 square meters. 43% of this, 40,000 square meters are located in division three, in Eastern Europe, Middle East, Far East and Australia.

If we move to Page 11, segmentation what we have seen on the right side of the slide bottom and top part is the confirmation of our rich diversification strategy in different divisions. We have reached 23% of the business in division UK and Central Europe, 21% in Southern Europe, 22% in North America, and 20% in Latin America.

Probably the most relevant issue is that we have increased the mix participation of Eastern Europe, Middle East, Asia and Australia from 13% to 14% this year as a consequence of the accelerated growth that we have had in this division. By channel, we confirmed we are airport retail 91% of total sales, but we are growing now in the three strategic channels that we have identified for diversification on top of the airport retail duty-free.

And duty paid we are now trying to develop cruise lines, borders shops and downtown shops especially in division 3. If we move to Page 12, top and bottom side on the right part of the slide shows the performance during the first six months; we are still focusing on personal care.

Perfumes and cosmetics 32% of the total sales with an increase of around 7% compared with previous year; food and confectionary with 18% of total sales with an increase of close to 9% compared with previous year; and luxury products with 13% of total sales with growth of 6% compared with previous year. Dufry by sector.

The operations in duty-free generated 63% of the total sales and duty-paid 37%, quite in line with the previous year. And if we move to Page 13, in Page 13 and Page 14, I'm going to explain the status of two of the most important projects we are developing so far.

One is the business operating model in Page 13. Many times repeated, this is our way of increasing the efficiency of the operation, but also impacting the P&L in 2019 and 2018.

The business operating model implementation is right now being implemented in Europe, Middle East and South Africa as expected. Launched in 39 countries, where 14 are already certified and we expect that all the countries will be fully implemented by year-end 2018.

The expected efficiencies that will be impacting the P&L, 50 million will be split 26 million in 2018 and the difference in 2019. The scope of the business meaning what are the pillars of implementing the business operating model.

The first one is the standardization of IT systems. The second one is the standardization of organizations meaning the footprint of each organization.

The third one is process and procedures. The fourth one is supply-chain; the standardization with the three platforms that we have already announced in the past, and finally the global implementation of E-Motion.

I'm going to comment on E-Motion in the next page. Everything is on track and the efficiencies announced are expected to be delivered in the timing also disclosure.

Let us move to Page 14, this is one of the more relevant strategies especially for the future of the company. Digitalization is the most important foundation on top of the number of passengers for accelerating organic growth like for like and new concession and for improving the efficiency.

We have identified three types of priorities in this digitalization process. Number one is drive revenue.

We are not going to be digital. We want to be a very efficient company, a more efficient company based in digital.

This initiative will drive revenue growth especially organic as I said from now to the year-end 2023. The second one is drive cost savings and efficiencies.

The initiative will drive better, more efficient process and procedures and this will be also impacting the P&L. And finally we are preparing the company for the future, building capabilities and building the platform that will develop the future Dufry.

For developing this new Dufry, in the future we need to have very solid technological platform with the areas that the company is going to implement during the first part of 2019 and - during the first and second part of 2019 we are going to develop the platform that will allow us to really implement at the maximum level the idea of digitalization in Dufry. This is going to be reflected in two projects.

One is E-Motion. E-Motion is in this page.

In the bottom side is the update of the project. In the top side are the initiatives.

Starting with the initiatives, just for reminding, the first one is reserve and collect is online site. The area is expand internationally, reserve and collect service for pickup and departures and arrivals of the merchandise from the digital devices.

RED by Dufry, the loyalty program. Personalized benefits depending on the customer, and creating a CRM database.

Sales tablet, for the employees in the digital shops in the new generation stores. Improving the mobile payments and training and personalizations for expanding all the know how of the company through the different employees in the new generation stores.

Social media and forum is obviously our social media platform forum connecting the airport’s brands in the social channels and the new generation stores that are today in several countries, Melbourne, Madrid, Cancun Terminal 4, Zurich, London, Heathrow. In the future we will be in Cancun Terminal 3, planning for 2018 Buenos Aires and Amman in 2019.

And this part of the digitalization is allowing us to increase the sales in most of these locations close to double-digit growth and double-digit growth especially in Asia. Strengthen communications with brand stories and novelties.

In reserve and collect, already launched in 20 countries. CRM and RED, already launched in 32 countries and social media and forum, already available in online.

With all these rollouts with the tablets the shop employees in new generation stores are ready to attend and welcome any type of nationality and customers with specific subjects, including products offered, pricing policies, products that could be related with their experience in the past. There are many aspects of this program that will be very relevant in order to increase the spend per passenger.

It is very interesting because in the different research that we have done, if the ticket is 100 in a standard transaction when the customers don’t interact with employees. If the customers interact with employees the spend per ticket is multiplied by two.

And this specific move from non-interaction to interaction is one of the areas that we are developing more with the utilization. Finally, [indiscernible] customers, employees, omni channel and new product and services.

We move to page 15, in page 15 what we remind here is the cash return to shareholders in 2018 the dividend that we paid in May 17, 2018 [$0.375] per share. Total dividend was 198 million and in the future reassurance commitment is to pay minimum 200 million and the sustainable return to stakeholders 40% of cash net earnings as a target.

In terms of the share buyback program already announced it. The share buyback program is up to 400 million during 12 months.

Share purchased until [July 27] is 1 million 350,000 total amount of share buyback program is executed by July 27 is 182 million. The intention as we already announced it is to cancel the shares both.

And then I am going to pass through Andreas Schneiter CFO for continuing with the financials.

Thank you Julian Diaz and good afternoon and good morning everyone. If we move directly to page 17 there we have the organic growth which in the second quarter was 4.2% after first quarter growth of 7.1% apart from the very strong comparables that we had in the second quarter last year we also had the impact of the Easter effect in 2018 which was negative in the second quarter as the start of the Easter was in Q1.

Now the Easter effect is about 70 to 80 basis points of quarterly growth. So this was contributing to Q1 this year, but not to Q2 where it was missing.

So adjusting for this effect the expected run rate in Q2 was about 5.5%. So the remaining difference of this 5.5% to 4.2% was actually driven by the lower growth of Spain, Brazil and Argentina as already commented by Julián.

Now on the organic growth by division Julián already explained that in detail. So in a nutshell division Eastern Europe, Middle East and Asia continue to perform very strong, State North America, UK and Central Europe had stable growth and division southern Europe and Africa as well as Latin America both slowed down relative to the first quarter.

Then on page 18 we have the [ethics translation effect] which in the second quarter was strongly positive with 3.5% due to the weaker Swiss Franc against the Euro and the British Pound. Based on the current rates we do expect that the ethics translation effect remains positive for the full year 2018.

Then if we move to page 19 where we have the income statement we already talked about turnover. So let's move to gross margin.

Gross margin improved by 30 basis points driven by the negotiations with the suppliers and also the initiatives that we developed together with the brands mainly on promotion and the brand's plan. Concession fees increased by 30 basis points to 27.7% in the half-year.

The increase is actually fully attributable to the performance in Spain where the lack of growth in combination with the increase in minimum guarantees has led to a relative increase in concession fee charge. For all the rest of the business there were actually some pluses and minuses with the overall concession fees as a percentage remains stable.

Personal expenses and other expenses together improved by 40 basis points in the period. This is mainly due to the efficiencies from the business operating model as explained by Julián.

As a result EBITDA grew to 464 million and EBITDA margin improved by 0.5% to 11.3%. Then moving on depreciation was slightly higher than in previous quarters at 2%, 2.3% of turnover and this is a result of our continued investment in refurbishment as well as new space.

Amortization increased slightly as an absolute amount to 183 million. As a percentage of turnover the ratio improved to 4.5%.

Linearization was 40 million as anticipated. As a reminder linearization comprises of the non-cash elements of the Spanish contracts i.e.

the straight lining of the minimum guarantee increases as well as the pre-paid concession fees. Due to the seasonality of Spanish business linearization charge will be positive for Q3 but for Q4 there will be a charge again.

For the full year the linearization charge will be around 50 million. Our operational results for a half year was 23 million Swiss Francs of this amount about 14 million are related to new projects and startups as well as restructuring and closings.

Financial result improved by almost 30% to 64 million. This is mainly due to the refinancing and the better terms that we got and this is something we executed in 2017.

Income tax was 47 million in the half-year. Of this charge about 35 million so three-quarters roughly relate to defer taxes and our non-cash in nature.

This amount includes one-off charges of about 20 million which are in majority related to the restructuring in the U.S. that we did due to the Hudson IPO.

The other part is a mix or a shift effect whereby we accrue more profits and taxes in the faster growing operation. Taxes are quite difficult to forecast.

Our best guess at this stage is that in 2018 we will end up with a tax rate of around 25% for the recurring income plus the one offs of about 20 million that will come on top of it. Moving on, non-controlling interest were worth 23 million Swiss Francs of which the largest part is due to our business in North America.

The 23 million already includes the Hudson minorities since the IPO in February this year. The resultant basically is cash earnings which improved by 15 million to 142 million Swiss Francs.

Then let's move to page 20 where we have the cash EPS. The growth was about 15% for the half year.

This growth trajectory is a little below our target for the full year and was mainly impacted by the tax charges which I just explained which however, should carry less weight in the second half of the year. So if everything goes to plan we should have an acceleration there again.

Then moving to page 21 where we have cash flow statements. We had a record cash generation with free cash flow at 330 million and equity free cash flow at 222 million for the half year.

The first half did not have any exceptional items or major projects. So this really does reflect the full performance of the business as it stands.

We will review the various key elements in more detail in a minute but just as a side comment because I commented on the taxes and the income statement before hand you do see here in the cash flow statement that cash taxes are much more stable and growing in line. Below the equity fringe cash flow we have the proceeds from the Hudson IPO of 665 million as well as the cash that we return to the shareholders i.e.

the share buyback and the purchase of treasury shares on one hand and the dividend payment that we made in May on the other hand. Together we returned about 420 million Swiss Francs to our shareholders since the getting of the year.

Now let's look at the different cash flow elements in a bit more detail and let's start with the seasonality on page 22. So the third quarter as you see is typically the quarter with the highest cash generation.

As you also see we have an outstanding second quarter in terms of cash generation which was even higher than the third quarter last year. Now given that we already have a good improvement on working capital in the second quarter and we're going to see that just in a minute we should expect less relative improvement from working capital in Q3 this year compared to 2017.

Moving Then to page 23, in the first half of 2018 core networking capital improved by 14 million and the percentage of turnover improved by 0.6% points. Looking at the same period last year core net working capital was flat with no improvement there.

So typically the core net working capital is below 5% in Q3 and then it moves back about 5% at year-end. Overall across the year our goal is to keep the core networking capital at around 5% on average.

For CapEx in the first age first half 2018 we were at 3.1% of turnover and this is fully in line with our target range of 3% to 3.5% of turnover and we do expect to end up within the same range for the full year. So no changes there.

Then if we move to page 24 we have again our key performance indicators on cash flow. In both cases for the free cash flow and equity free cash flow our expectation for the full year remain largely unchanged compared to previous calls.

For the free cash flow we expect to reach an EBITDA conversion of 50% to 55% and for the equity free cash flow we expect to end up at the higher end of the initial range which was 300 to 400 million i.e. our expectation today is that we can generate an equity free cash flow between 350 million and 400 million for the full year 2018.

Then moving to the balance sheet on page 25 the asset side hasn't any major changes. What you see that is concession rights continue to decrease as we amortize them.

You may remember concession rights are mostly due to acquisitions. 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 from Hudson as well as the cash generation that I explained beforehand.

Then on page 26 to conclude there we have the net debt as usual so we reduced our net debt to 3.15 billion as per June and our covenant was a 2.95 times net debt to EBITDA. So we are within our target range of 2 to 3 times net debt to EBITDA on one hand and well within the threshold that we have agreed with the banks of full time leverage.

As mentioned the earlier calls we have a long term financing in place and there are no maturities before 2022. So this concludes my part of the presentation and I hand back to Julián.

Thank you Andreas. Let's move to page 28 as a conclusion in my view we have had a good first half of the year with strong turnover growth organic growth, margin improvements in all levels especially in EBITDA margin and record of cash generation.

We have also communicate a significant number of new contract wins across all the channels including downtown, [indiscernible] and sells onboard cruise lines. The first efficiencies of the business operating model are already reflected in the P&L and full year this 2018 we expect 26 million Swiss Francs on both EBITDA.

The share buyback program and the execution and the dividend payment that happened in May and the priority for 2018 remain unchanged. Number one is implementation of the business operating model in 2018.

Number two is the digitalization and the implementation of initiatives that will become the company more efficient. The strategic initiatives in order to expand the business in other channels as I mentioned before and as a consequence of all of these focus on cash generation and deleveraging what is reflected in the information that we just comment on.

I think from outside in terms of the presentation is done and now I suggest we open the Q&A section. Thank you very much.

Yes. Hello?

Can you hear me?

Hello. Yes.

We can hear you now.

Yes. Hi.

Sorry, it’s Edouard Aubin from Morgan Stanley. I guess there was some confusion.

Two questions for me one on southern Europe and one on your free cash flow. The first one on southern Europe just to get an order of magnitude, am I right in thinking that when you look at the transfer of traffic from away from Spain to Greece and Turkey am I right in thinking that Spain is roughly 10% of yourself and then Greece is roughly 4 and Turkey 1 so that's number one.

In terms of the sales evolution I think you - just to clarify I think you mentioned that sales were down in Spain in Q2 but if you could get give us an indication of how much sales were up in Greece and in Turkey and lastly on southern Europe am I right in thinking that your EBITDA margin is very high in Greece maybe 25%-30% but it's all variable when it comes to concession fees? Are they all variable versus fixed in Spain so that's for southern Europe and then on free cash flow so historically you had significant cash flow leakage in the past and then clearly that was not the case in the first half.

So just a few clarification am I right in assuming that the one of the negatives 104 around 100 million Swiss Francs in the first half ‘17 also Andreas if you could please comment on the working capital improvement in the first half ‘18 not related to the one offs and lastly on the free cash flow I think Andreas if I heard you correctly I think you talked about an equity free cash flow from 350 to 450 for the year. Is there any reason to believe that the number that the amount would not be more or less similar next year?

I know it's a bit premature but for example are you aware of any upfront payment you need to make for in terms of concessions next year? Thank you.

Okay, I will answer regarding in the first part Andreas and you will take the second part. Regarding sales in Europe what is happening as I mentioned is that the international passengers mainly [indiscernible] are now flying and more are flying to north of Africa and inner operations especially to Turkey and to Greece.

This is correct and they are substituted by Spanish passengers what impact in terms of the [indiscernible] per person as a consequence of the profitability of these operation and sales. The participation of Spain, Turkey and Greece is more or less what you said and as a consequence obviously the impact is different in Turkey.

The growth has been double-digit very high and in Greece the increase has been single-digit and regarding the increase of sales of the [indiscernible] in Spain the problem is that in two lots as I said many times we are paying a minimum guarantee and as a consequence a minimum guarantee if in fact if the sales are dropping is impacted more and higher in this year and this is public information. You can obviously check it in the internet.

The mark increased by 6% as a consequence the percentage of rent on the total sales because the sales are dropping it will be higher. This is more or less what you asked.

Is there anything else?

No. So - yes that's perfect and on the variable concession fee in Greece if you could comment on that that would be great.

No, I cannot comment on that. This is information that we don't disclosure and is not possible to disclose because it's confidential based in the contract.

Right, and so just to follow up on Spain, on my calculation your profitability is going to be extremely low this year likely. So if the terms of the contract will not change when you have to renew them end of ‘19 and 2020 would you basically walk away from the contract in Spain?

If it's [indiscernible] today yes but there are opportunities and I think I answer this question in the past if there are opportunities for increasing significantly the sales but this is based on three aspects. One is configuration of the substances.

The second one is configuration of the assortment and third one is the configuration of the traffic flow and if this is happening I think the mark or the minimum annual guarantee is not going to be a problem. The problem is the way we operate today that is subject to the contract sign it five or six years ago but I am very confident.

First of all that this year in 2018 the situation is now going to be at the level that probably looks like today just because a few days of the high season in June and the second part of the year I hope the situation will improve. The second level of the discussion here is what is going to happen at the time that this concession will finish if I can say so.

With the current scope of the contract it's very difficult that anybody will operate this in a profitable way. What you need to do is changes that will improve and increase the performance and those changes in the incumbent side that we are the incumbents are very clear.

We have been operating in this company for 30 years and we know exactly what to do and this is a conversation that is already open with the airport authority and we will discuss within our initiatives in order to really implement these initiatives as soon as possible.

Thank you so much. And on the free cash flow please Andreas?

Yes, so on your first point on the 2017 numbers you were absolutely right there has been projects or extraordinary project of about 104 million cash outflow of which about 75 million or 74 million were covered in working capital and 30 million were covered in CapEx. So if you were to normalize 2017 first If H12017 we would have had a normalized cash flow of about 233 million.

So the increased year-on-year on a normalized basis is about 43% of which about half is working capital improvement and the other half is really growth and profitability. Now to the equity free cash flow so what we are currently thinking is that we will get between 350 and 400 million of equity free cash flow this year and we should have at least the same if not slightly higher numbers in 2019 as we continue to grow and there is no leakage as you pointed out.

There are no specific projects that would require material cash that we have currently in the pipeline that we do see for 2019. So based on today's position we should see at least the same if not higher cash flow also in 2019 equity free cash flow in 2019.

Okay. That's great.

Thank you so much.

Yes. Good afternoon guys.

A couple of questions for you just on the tax rate Andreas you're talking about 25% plus 20 million this year. Any thoughts about the coming years because I think most people assume your tax rate would be below 20% amid the U.S.

tax changes and then if you can just give us a rough breakdown of what the cash as far as the taxes would be and what you think as well in the coming years. To go back to free cash flow Andreas I thought you said 350 to 400 my colleague was saying 350 to 450 which you seem to agree with.

Can you just gives a bit of clarification on that and as an add-on on that the fact that you've done so well already in Q2 and it's still the - it's not even the high season Q3. It's obviously high season I'm surprised if you just keep it at 400 on the top why are you nudging up the top end of the range given the sort of size of the beat and then just a last question on Latin America.

Can you just give us a bit of an update on what's happening there and what maybe you're doing to try and offset the issues there and maybe just tell us I think in terms of profitability Brazil is actually one of your poorest profitable operations these days. Is that still correct?

Thank you.

So let me start with a tax rate and the cash flow question and then Julián will take the Latin America and Brazil question. So under tax rate yes the tax rate has actually increased.

I think there are a couple of elements that I try to explain that maybe I wasn't fully clear. So you are right that in the U.S.

actually the tax rate is reduced but for our purposes we didn't pay any taxes in the U.S. in the cost because we have tax loss carry forwards.

Now with the change in tax regulation we have started to pay taxes. That is still relatively marginal so this is not a huge amount but with the IPO and the changes in the tax rates as [indiscernible] we are slightly less efficient in the U.S.

today as we were in the past but that is - if you want the marginal contributor to the tax rate. The other part that is happening is that we are growing in market and we're growing profits in markets where typically we have either higher tax rates or less tax loss carry-forwards available.

So, if you want the tax structure that we have historically had - has become somewhat less efficient. So, that’s why based on what we see today, the tax rate is actually moving up, it’s nothing some that is actually new.

We have seen that already in the past that it has accelerated to certain extent in 2018 in the first half. As I said, look, it’s very hard to forecast taxes.

So, take everything I said with a pinch of salt. But that’s our best guess going forward.

On the cash taxes, the simple way of or the most simple way doing it at least from my perspective is, if you take the EBT that we have in the income statement and add back the acquisition-related amortization because that is typically - that is not typically that is no tax-deductible and then you will have actually a very good base of taxable profit where then you can apply the tax rate. So, what I want to say here is like if we look on, how the tax - the cash taxes are trending, you can assume that they should grow in line with profit growth at a EBT level if you want them in the past.

Then to the equity free cash flow, our guidance is CHF350 million to CHF400 million, not CHF450 million for 2018. But obviously for 2019 as we continue to grow hopefully we should be able to increase that.

Now why do we not go for a higher guidance and this is because if you look at how cash flow in 2017 developed, we did have a very strong working capital improvement in the third quarter, and this year we already have preempted that if I can call it that way in the second quarter. So, in a way what I want to say here is like the Q3 2018, I don’t expect a relatively as much stronger as Q2 was, and that’s why maybe the CHF350 million to CHF400 million are slightly cautious.

I may take that. But I feel more comfortable with that also in view of the fact that there are some new projects coming.

We have 1 Perth. We have Hong Kong coming up.

So, there is also CapEx that will be kicking. So, we feel more confident with the CHF350 million to CHF400 million at this stage.

So, Andreas, just on the tax, so you assume it will be 25% over the next few years?

Sorry, yes, correct, that will be my best guess at this stage.

Okay, thank you.

Okay. Jon, regarding South America, what we have seen over the last three months, especially in the second quarter is this acceleration in terms of sales in US dollars.

As I mentioned, the performance in local currency is very high, especially in Argentina high double digit growth and in Brazil a single digit growth in local currency. And, don’t forget that most of the costs in these locations are in local currency.

We don’t pay the cost in US dollars. As a consequence, the profitability, especially margins is not affected a lot, especially in Argentina is increasing.

Regarding the profitability in Brazil, Brazil is not a low profitable company. You need to take into consideration depending on the calculation you do, the allocation of the different, obviously cost and margins in distribution centers.

If you ask me the question is in line with the other locations, worldwide. I would tell you, yes, in terms of margins it’s very similar - it’s very sizeable operation.

Thank you very much.

Hello gentlemen, three questions from my side. First of all, on gross profit margin and Julian you indicated in previous conference calls gross profit margin could be up by 50 basis points in 18 and the full year.

So, after H1, you had 29. So, would you confirm your indications of 50 basis points as of today?

And, the second question would be on concession fees, they are up by 40 basis points in the H1. So, what can we expect on a full year basis?

I mean, the run rate historically I think it’s 25 to 30 basis points on average. So, is it fair to assume concession fees to be slightly ahead of this historical average?

And, third question, sorry to come back on taxes. Just a clarification Andreas, what is the CHF20 million one-off related to?

Thank you.

I will start with the gross profit margin, the 30 basis points of increase in second quarter and first quarter is mainly due to the mix effect. And, I think, I mentioned that there are new operations started by the company that are impacting this gross profit margin.

By year-end, my best estimate is that it will be between 30 and 40 basis points, because as again, with the mix in summer, we will come back to that. To reach 50 basis points straight to the P&L, it’s possible, but I prefer to say between 30 and 40 basis points of increase.

Regarding the concession fees, it will be in line 20, 30 basis points of increase by year end. It is still the same.

This is obviously based also in the sales calculations, because most of the concessions are viable, but depends on the performance. But I confirm 20, 30 basis points.

The meeting is by year, we will be mitigating about the gross profit margin on top of the concession fees. Then it’s the leverage and the efficiency, business operating model plans that so far have delivered 40 basis points.

But as I said the previous times, it would be between CHF55 million and CHF60 million full year impact. This is what is obviously becoming the EBITDA in line or I confirm that we are in line with the projections, with the concessions by year end.

And, regarding the - what else?

Taxes, so on the CHF20 million, as part of the Hudson IPO preparation, we needed actually to restructure parts of the U.S. legal organization in order to be able to carve out, if you want the Hudson business and that has led to some internal profits.

But for tax purposes they obviously are still profits in that context. And, for that reason, we have deferred taxes of CHF20 million that you see on top of that normal taxes on the tax income line.

So, the exact amount for Hudson was CHF30 million and there are some other smaller stuff related to other projects and other restructurings that we did which accounted for the other CHF7 million to get to the CHF20 million. But the largest part as I said was the Hudson IPO, if I can call it restructuring or legal organization actually to be more specific.

Okay. Thank you for clarification.

Thank you.

Thank you. Operator The next question comes from Paul Bonnet from Bank of America Merrill Lynch.

Please go ahead sir.

Hi, Julian, hi Andreas. So, I had a quick question on, first the 5% to 7% organic growth guidance, because we’ve seen a slowdown in Spain and Latin America and that Spain gets slightly bigger in Q3, I guess, in terms of percentage of sales and Latin America depreciation happens throughout the second quarter, I guess, we should see that extend into Q3.

Are you still comfortable with the 5% to 7% organic growth guidance for the full year is the first question? And the second question is about the distribution center.

What can we expect there? Because I see they increased 200%, so almost CHF30 million of impact on the revenue.

What can we expect there for the second half of the year? Thank you so much.

Okay. Thank you very much for the question.

Regarding organic growth, I confirm that we expect to be above 5% in full year. This is our best estimate still today.

Obviously there will be two different parts. One is the high season.

The other one is the fourth quarter. In the third quarter, I think we’ll be obviously below 5%.

Being a specific, it really would be around 3%. But I think due to the obviously the information we managed today that during the fourth quarter we will recover and the estimation we have today is above 5%.

Regarding the distribution centers, it’s difficult to really forecast because the distribution centers depends on contracts between companies and to depend on the level of sales of each of the company, the allocation of the gross profit margin could be higher or lower, it’s not something that we manage. It is a contract between the distribution center and the different company.

This is official contract, obviously, all is responding. But we cannot guess if it’s going to be higher or lower.

Presently, yes, because this is a trend that you use the same proportion during the half year, because this is probably is going to give you a better understanding.

So, if I can just chip in on that one. So, what you do see is like because of the business operating model, there is now high proportion of sourcing shifted through the distribution centers, especially for division 1 for southern Europe and Africa.

So, when you look at the overall change in southern Europe or Africa that it’s somewhat overstated, because due to the supply chain change that we have done there, part of the profit has shifted through distribution center. So, in a way that the change in Europe and Africa looks over proportionally bad, which is hopefully the case, it is lower and as it is before, but part of it is also in the distribution centers.

And, just to remind you all of the distribution center profits are internal profits. So, it’s a pure profit allocation between distribution centers and the divisions, if you want.

Makes sense, thank you so much.

Thank you.

Good afternoon, Julian good afternoon. And, yes, thanks for taking my question.

The first one would be on the EBITDA margins and the key drivers for the EBITDA improvements in particular in Q2, but also for the first half seems to be advertising income and the improving results from associates. And, my question is linked to the business operating model with CHF26 million, are they only fully coming through in the second half?

Or are they across and so you need to deduct something on the net line coming from the business operating model? And, the second question would be on the line below EBITDA and other operating expenses, we have CHF22 million now and after first half, what do you expect here for the second half and what we’re also seeing could be the run rate for 2019?

Thanks very much.

Okay. Regarding the first part, I will answer the first part, the margin and the gross profit margin, especially is obviously due to advertising and cost of products.

Sometimes you cannot separate, because the negotiation is done together, it’s not a split. Advertising is not only the advertising.

It is also the negotiation process basing the number of employees they provide us and the number of, obviously promotions. It’s not easy to split both in order to understand the margin.

I would say please take into consideration that 59.8 gross profit margin as a reference point. And, the business operating model so far is not impacting this gross profit margin, it’s only negotiations.

They are into business operating model impact is about EBITDA line is personal expenses, especially personal expenses and general expenses. The impact so far has been CHF60 million more or less until June.

And, we have spent the remaining CHF10 million by year end. But there is another part that I mentioned in previous calls is regarding the efficiency plan of reorganization of central offices in the different divisions and headquarters where we are going to deliver these total CHF55 million, CHF60 million of savings compared with previous year, yes, this is the key point.

You have CHF26 million due to the business operating model and the remaining balance CHF55 million, CHF60 million is due to the efficiency plan that I comment in previous calls.

Maybe if I just can make one side comment to share of results of associates, we have a negative one-off last year. So, I think this was more the negative impact last year than the positive this year.

So, this year we are completely recurring, so there is no adjustment if you want or normalization in that line required. But then to your point - question specifically to the other operation results.

So, we have in half year 2018, we have about CHF5 million give or take of let’s say something that I will consider really nonrecurring, which is Hudson related or other projects that are kind of more one-off in nature related. So, I would argue that for the full year, we probably should be ending up above CHF30 million to CHF35 million.

And, then for the full year 2019, my best guess at this stage would be somewhere between CHF20 million to CHF30 million depending on how the year goes.

All right, thanks very much. And, maybe if I may come back also to the organic growth, you indicated that organic growth in Q3 is likely around 3%.

And, what makes you confident that Q4 is improving again to reach your full year target?

And, we have almost, well, I cannot comment on it specifically because they are not open, but we are scheduling to open new operations too now.

All right, thank you very much.

Yes, good afternoon guys. Two questions please, the first one is staying with that organic growth plan or ambition.

To put another way, should we expect the contribution from net new space which was 2% in H1, should we expect that to build in the second half? And, my second question relates to your RED loyalty program.

Can you share with us any metrics around the level of penetration you are achieving in the stores where you have deployed that RED programs such as proportionate sales, where you’re capturing the passenger details? Thank you.

Okay. Regarding the second part of the year, I think the 2% as a target is a realistic target 2%, 2.5% for the new concessions.

Regarding the RED, it’s obviously compared with the total company, still is not important, but there are locations, so there are companies where we are reaching 10% of increase in terms of the penetration due to the [indiscernible] Red because all is connected. And, the target for the future, I’m talking about 2023 and 2024 is to reach around 10% of the sales at that time.

Great, thank you very much.

Sorry to come back. And, Julian you said that you could - sort of you are okay with consensus, did I hear you correctly?

And, what were you referring to the absolute EBITDA number or the margin expectations, which I think, you’re plus 50, plus 60 basis points this year, EBITDA is around 1.1 billion plus…?

Definitely, this is both in terms of total value and margin.

Thank you.

Okay. Thank you very much.

It has been always a pleasure to communicate about Dufry. And, thank you for the questions and the participation.

And, I look forward to meeting you soon. Thank you.