Carrefour S.A.

Jerome Bedier - General Secretary Pierre-Jean Sivignon - CFO

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Ladies and gentlemen I am very pleased to be able to welcome you here for the presentation of the 2014 Annual Results of Carrefour in name of Georges Plassat our CEO with Pierre-Jean Sivignon and myself and all our teams. Josh is doing well, we're in daily contact with him and he will be very soon back with us in his office in fact before the end of month of April.

And he has asked me first of all express his very warmest thanks to you for the many expressions of sympathy which he has received and which touched him very much and naturally would have very much preferred to be here himself to present these 2014 results. The results which are in fact the result of the new confidence which Carrefour has obtained but now what you are waiting for is the figures.

So let me hand over for this to Pierre-Jean Sivignon sitting here.

Thank you very much, Jerome. Thank you for that introduction, and good morning, everybody.

Now before we look in detail at the financial results for this year, let me make a brief comment on the main features of 2014. This is a year which was confirmed the dynamic growth of Carrefour.

In 2014, the growth of group sales accelerated with an organic rise of 3.9% this is the best increase that we have enjoyed since the last -- over the last five years. Our results have increased both in Europe and also in the emerging countries.

One is a recurrent operating income, which is globally up by 10.6% at constant exchange rates. Now, performance is not uniform in all areas but if I had to sum them up in just a few words, I would say this.

In France, good performance illustrates the dynamic nature of our multiformat model. In Europe, there is an encouraging sign of a turnaround.

In the emerging countries, performance which has been boosted essentially by Latin America is quite remarkable. In China, we are modifying our model to adapt to the context of the more frugal mode of consumption there.

Our results have been a witness to the success of our multiformat and multilocation strategy. A strategy which we have been rolling out now for over two years.

We confirm that the action plans which have been implemented are bearing fruit and that Carrefour has clearly and lastingly improved its fundamentals. In 2014, we continued our investment with the program to upgrade our assets and to modernize and develop our stores.

We have considerably strengthened our multilocation and multiformat presence. All this makes the contribution to the current balance of portfolio both in terms of different countries and different types of business.

And finally, we shall propose to the forthcoming annual general meeting, a rise in the dividend for the third consecutive year, we figure this year will be €0.68. We will look at all this in more detail but first of all, let me come back to some of the main events of the year which you can see here in slide number 5.

Jerome will talk about all these topics in more detail in just a moment in his own presentation but let me just mention a few highlights of the year 2014. First of all, the foundation of Carmila last April which owns the property of our 180 sales areas and this is a total asset value of €4 billion and Carrefour, let me remind you, has a 42% holding in this.

Secondly, the targeted acquisitions of DIA in France and of Billa and Il Centro in Northern Italy. And thirdly, the strengthening which we announced already last December, of local presence in the second largest market for Carrefour, that is Brazil, through the arrival of Peninsula which has taken a holding in the capital of Carrefour Brazil.

And then the fourth point I want to underline is the signature of our purchasing agreement with Cora which has become effective since January 1, 2015. Now as you can see, 2014 was a year full of events and this has left Carrefour in a considerably stronger position.

Now, let us have a look in more detail to our accounts for 2014 with slide number 6. Here are the key figures for 2014.

Sales before tax, €74.7 billion and this is a rise of 2.9% at constant exchange rate. And the figure is more or less, stable to a current exchange rates because of the impact of the change in exchange rates in Latin America and because of fuel sales.

Excluding fuel sales, and excluding the exchange rate impact, the rise is now at 3.9%. Now, for the second consecutive year, our commercial margin and our EBITDA has gone up compared to the previous year, both in absolute terms and as a percentage of sales.

With a figure of €2.387 billion, the current operating income has also increased by 10.6% at constant exchange rates or 6.7% at current exchange rates. Now, as in 2013, this rise corresponds to 20 basis points in our operational margin.

Now, recurrent operational income after subsidiaries and associates is €2.423 billion and the total group share for continuing operating business is €1.182 billion, that is a rise of 24.6% compared to 2013. The adjusted net income group share is just over €1 billion and in fact, €1.04 billion and that is a rise of 11.9%.

And finally, the group's net debt at the end of 2014 was €4.954 billion that is rather better than we expected and it reflects the control of our investment program that includes the payment for DIA. Now, let us have a look at these figures in more detail beginning with our sales figures.

Slide number 7 then, and here you can see the change in sales for 2014 and then 2014, organic growth, apart from fuel sales was strong, and with a rise of 3.9%. This is explained mainly by a rise in sales on a like for like basis of 2.8%.

Now, that is the best performance that we have recorded for more than 7 years now. The change in fuel sales reflects the fall in prices mainly in France and this has an impact on the Group's growth representing 1.1%.

Acquisitions and disposals had a more or less neutral effect to just plus 0.1% and so sales before tax at constant exchange rate are up by 2.9% and for the second consecutive year, in 2014, the exchange rate impact was negative, that has an impact of 3.1% on our sales, mainly because of the depreciation of the Brazilian real and the Argentinean peso with respect to the euro. Total sales for the year, therefore, amount to €74.7 billion, that is a drop of 0.2%.

Now let us talk about the organic growth. As you can see on slide 8 in 2014, the group had a new acceleration of its growth in sales in France in 2014, organic sales, excluding fuel were up by 1.2%.

This follows a rise of 1.1% in 2013. And this concerns all formats, all the formats are up in France for the second consecutive year.

In Europe, in 2014, sales stabilized after several years of drop. This is a performance which has been brought about by the recovery in Spain combined with a good stability in the other countries and this is particularly true in the fourth quarter.

This is important, the fourth quarter of 2014. Brazil and Argentina have enjoyed a remarkable year with combined organic sales that have risen by 18.1%.

That means that over the last three years, the organic rise apart from fuel sales here is close 50% in this area. And finally, in Asia, organic sales have gone down and now that reflects a more frugal style of consumption in China and there is no sign that this trend is going to change in the fourth quarter.

Overall, in the group's organic growth has improved once again from plus 2.3% in 2013 to plus 3.9% in 2014. Let me move on now then to slide number 9 where we are going to talk about our commercial margin.

And this is up by 1.2% for the year following a growth already recorded in 2013. That constant exchange rates, the commercial margin has gone up by 4.9% for the year.

The figure now for 2014 is therefore 22.8% and that is a rise of 30 basis points as a percentage of sales which means that a rise of 80 basis points over two years. In 2014, all the geographical areas made a contribution to the improvement of the margin.

Now, slide number 10. And here, we are talking about operating costs.

Operating costs including the cost of assets have increased by 0.4% over the year. At constant exchange rate, our operating costs have risen overall by 4%.

As a percentage of sales, they are well under control and have increased by only 10 basis points. And so virtually stable.

One or two details about these costs. Costs are stable in France.

There is a controlled rise in Europe as was the case for the first half year. And in Latin America, as was the case for the first half year.

In Latin America, they have gone down in volume terms and there is a very slight drop as a percentage despite continuing wage inflation. In China, they reflect the persistence of wage inflation in a context where sales are falling.

This wage inflation concerns essentially the lowest salaries. Now asset costs have gone down over the year, they were stable in the second half year as was anticipated.

This is the result of the new round of investment that began two years ago. Let us have a look now at our performance region by region.

This still concerns costs and let us begin then with France. This is slide 11.

Now consumption has held up well in France and in an environment which as you know, has been characterized by very low growth rates. In 2014, our performance bears witness to our robust positioning in the food sector and also it reflects the dynamic characteristics of our multiformat model.

In fact, as I have said, all our formats have enjoyed growth in sales in 2014. The positive impact of remodeling should be noted to with a total of 87 hypermarkets and approximately 200 supermarkets which were renovated as part of this program at the end of 2014 including 38 hypermarkets and approximately 100 supermarkets just in this last year.

The improvements linked to these remodelings and all the formats have led to this good performance but it is more quickly visible in the small formats, why? Well because it is these formats, these smaller stores which enjoy a greater frequency of purchase.

So overall, sales before tax and with fuel amounts to €35.3 billion. Excluding fuel, organic sales are up by 1.2%.

Our recurrent operating income continues to improve. At the end of the year, the rise was 6.1%; the figure is €1.27 billion.

In France, over the last two years, the recurrent operating income has increased by some 38% that corresponds to 100 basis points of growth as a percentage of sales compared to 2012. This is the fruit of the action plans that we have been implementing for more than two years now.

Our commercial margin continues to benefit from a better balance between the standard prices, promotions, and the various loyalty offers, this is more particularly visible in the first half year. This led us to continue to improve our price image throughout the whole year.

I would also like to underline the improvements made thanks to our logistic plan and our plan to reduce write down losses. Operating costs remain stable over the year, in particular, thanks to our continuing efforts to improve efficiency in our overall management and personnel costs.

This includes the reinvestment of the whole of the CICE and that is the tax credit for competitiveness and employment. The whole of that tax credit has been reinvested in our stores to improve service to customers.

Let me also remind you that as from 2015 onwards, we shall have to pay a higher [TASCOM], which is the tax on sales area and that will represent recurrent additional charge of more than €30 million per year for the Carrefour Group in France. So we can say that France remains on course and continues to implement its action plans and continues to strengthen its multiformat model.

Let us move on then to the other European countries, this is slide number 12. In Europe, as you know, we are doing business in an economic context that remains difficult.

In this environment, the very robust positioning of the Group in the food sector is clearly a great advantage. But I would like to underline nevertheless that our exposure to the non-food sector has been one of the key factors in the turnaround of the results in 2014.

In Europe, our sales before tax are stable at €19.2 billion. For the whole year, the commercial margins has risen slightly in terms of rates and in 2104, with operating costs that were under control.

The recurrent operating income amounts to €425 million compared with €388 million in 2013. That is a rise of the 20 basis points as a percentage of sales.

The improvement of profitability was most obvious in the second part of the year, and particularly thanks to a fourth quarter which was up in almost all the countries in this -- in Europe. In Spain, the economy is showing signs of stabilization and are strengthening our position there.

In 2014, we recorded like-for-like increase in sales for the first time since 2008. There again, we are continuing to develop our multiformat model and we now have the total of 285 convenience stores, 111 supermarkets, and 12 Superco hypermarkets which strengthens our position where originally we were present only as hypermarkets.

Profitability is up and this is the result of the action plans, which have been implemented over several years now. In Italy, the economic environment remains difficult but our teams are continuing to roll out our action plans.

We can see some encouraging signs in this country. Trends seem to improve at the end of the year, thanks essentially to our non-food sales.

As I said earlier, we have begun to integrate the networks of the Billa stores and that was an acquisition made in the first half of the year and then Il Centro, the stores around France, all these a part of our supermarket and convenience store formats. And that, of course, strengthens our positions in the northern part of the country.

We are continuing this effort. In Belgium, sales on the recurrent operating income went up once again in 2014.

Poland, Poland continues to be a difficult environment and in fact here, operating margins went down in 2014 but the last half year seemed to show signs of a notable improvement and this again is the fruit of the work and I ask often in these countries. And finally, in Romania, development is continuing, the country has posted good performances in terms of sales and in terms of recurrent operating income.

To sum up then, we can say that in Europe, we are beginning to see the signs of recovery, particularly in Spain, but all this needs to be confirmed in the future. We are however, confident in the potential for growth in this zone.

As you can see on slide 13, Latin America has had outstanding performance in 2014. The organic sales excluding fuel for the area is up 18.1% and the recurring operating income is up 23.2% at constant exchange rates.

Because of the depreciation of the Brazilian real and the Argentine peso vis-a-vis, compared to the euro, the hike in sales at constant exchange rates reaches plus 0.8%. The ROI is up 9.4%, the operating margin is up 40 basis points as expressed as a percentage of our sales.

Profitability in Brazil is still increasing on the second half of the year, driven not just by the performance of our stores but also by that of our financial services. The commercial margin is also up and the controlling operating costs meant that we could make our sales grow in Brazil; we are still converting our position as a food market leader and the new openings of stores and the net increase of the like-for-like basis of all formats contributed to that.

For hypermarkets, the 18 upgraded markets on the total fleet of 102 stores means that we have had very good performance and performing actually -- at competition. In other words, the stores that haven't been upgraded so far.

We are also working on revamping our assortments, costs, logistics and the upgrade of our operating practices in that particular network. May I recall that in Brazil, which is a country that has a huge potential for the Group, we decided to open the fourth quarter at first, convenience stores, two formats, Superco and Express.

Argentina, against a challenging economic environment, the ROI is stale or was stable in 2014, and great resistance in other words, resilience. At the same time, our business in Latin America is very dynamic which there again, shows that the multiformat approach of our group is the right one.

Slide 14, Asia, organic sales are down 1.8% and going down a bit more in the second half, the recurring operating income is €97 million compared to €131 million in 2013, the rates of commercial margin has gone up. Operating costs reflect the increase of low wages in the context of pressure on our sales.

In China, there was no change concerning the frugal or limited consumption for the second consecutive year, our sales of shopping carts of the -- and discretionary products suffered from that environment. We opened nine hypermarkets in China in 2014 and thus, adapting our opening phase to that environment.

As I said before, we also shut down a few stores. Against that background, Carrefour has -- is making its model the -- is developing a change in this model.

We are setting up -- or optimizing this and Jerome will talk about that. This certainly shows that we want to be -- to stay in China in the long term.

Taiwan, things went well in terms of sales but also in terms of profits, which are improving. Let me move on to slide 15, in 2014, the Group -- performance of the Group certainly strengthened the balance of our portfolio as you can see on the slide, the pie charts that you can see show that France accounts for half of our sales of our income and the rest of the world, the other half, three highlights and first of all on our domestic market, France, we are consolidating our performance.

Second, in Europe, things are improving and our potential as shown by Spain in 2014 is real. Third, all emerging markets are certainly a great driver for growth and our performance in Latin America only bears witness to that.

In Latin America, we have had two thirds of our sales and 90% of the income of the emerging countries as far as Carrefour is concerned. Let me move on to slide 16.

Income statement. We don't need to talk about the recurring operating income because we have talked about already but the share of income from associates and joint ventures reached €37 million, up €7 million, mostly coming from our business in Turkey and to a lesser extent, because we took into account Carmila from 2015 in line with the recommendations of the international accounting standard body, we will b including that share and the operating income of the group.

The net non-recurring income was €149 million, stable compared to 2014 but includes the capital gains from divestments when we decided to setup the company Carmila last April and it is offset partly by reorganization costs in different countries in 2014 and that is a key. Our financial expenses reached €563 million to be compared to €722 million last year.

Our financial expenses which are linked to our debt service are down €30 million for the entire year, mostly because of the drop in interest rates. Over the year, the average net debt is €6.6 billion to be compared to €5.8 billion in 2013.

May I recall that the financial expenses in 2014 included an exceptional expense of €119 million because of the bond buyback that we had to do -- that the taxes, now taxes are €709 million in 2014 and the tax rate is €35% down on 2013, including exceptional items which were in our favor? The underlying tax rate is in line with 2013 that is 37% roughly; minority interests are €118 million.

Overall net income from continuing operations is €1.182 billion, up 24.6% on 2013. Overall, the adjusted net income group share, in other words, the net income from continuing operations group share adjusted for exceptional items is at €1.040 billion, up 11.9%.

Let us now focus on our working capital. That is on slide 17.

So 30 days constant exchange rates, and this cash working capital is quite stable and it had gone up at the end of the first half, you may recall and we told you that it would go back to normal at the end of the year and that was the case. And so inventories and suppliers payments terms increased at the same pace and reflecting the reinforcement of our assortment and the pickup of our non-food business.

Customer accounts are stable from one financial year together. Slide 18, now, if I may talk about investments region in line with our plan, and so you have the breakdown that the development of these investments per region.

In 2014 as in 2103, the Group continued its upgrade investments and at the same time, several remodeling programs were started for different formats, in particular in France but also in Brazil. And last but not the least, selected multiformat expansion is still going on, overall investments reached €2.4 billion in line with our plans.

Compared to 2013, they were up €250 million and mostly because of the upgrade of our assets but also to a lesser extent, because of the upgrade of our information systems in 2014, we invested in simplifying our information systems and we decided to roll out the multichannel approach in --- especially in France and in Spain. In France, investment reached €1 billion and roughly in line with 2013.

These investments include the inclusion of the 12 [Credenza] stores and the opening of our hypermarkets on -- in rather, Villeneuve-la-Garenne. In Europe, investments were up €130 million and mostly -- this investment went to mostly maintenance and remodeling.

Latin America investments went up €165 million and that is plus 36% at constant exchange rates. This expansion was quicker for Atacadao which has now gone back to its original rate of new openings.

The upgrades of the stores continued for the entire area region. In Asia, investments were €240 million and that is a drop of €47 million reflecting a more targeted number of store openings in China.

In 2014, we acquired 930 branded stores, 28 hypermarket, 180 supermarkets, 27 wholesale stores and also 695 convenience stores. So taking into account the shutdowns, the fleet of branded stores has gone up 700 -- or went up 755 stores last year.

For 2015, our investments will be between €2.5 billion and €2.6 billion, and that is a third year of catching up and remodeling of our assets. This is a continuous effort and this is also the first year of the inclusion of DIA.

Let me move on to slide 19. Now, and I would like to say a few words about the cash flow statement.

In 2104, cash flow was €2.5 billion; it was €2 billion in 2013. In 2014, the working capital requirement variation was an asset of €18 million which is a development that can be compared to a cash consumption of €285 million in 2013.

Investments were already detailed, €2.4 billion up €250 million. These asset variation and supplies that means a use of cash of €17 million to be compared to a resource of €372 million 2013 which can be accounted for by the acceleration of our investments at the end of 2013.

And indeed, this is something we found under the supplier line for our balance for 2013. Free cash flow of €106 million up €26 million on 2013.

In 2014, cash outlay for exceptional items in discontinued businesses reached €358 million, down on 2013. It was over €1 billion last year and so we had a few questions in the previous years and so we had told you that there would be a major decrease of exceptional cash outlays and as you can see, this is the case in 2014.

And free cash flow after taking into account the exceptional items and impact of discontinued activities, with €554 million in 2014, reflecting the ramp up of our investment plan. Let us talk about the development of our debt.

At the end of 2014, our net debt was €4.954 billion, we -- it's better than expected and it has been better than what we told you in our balance sheet at the end of last year and that takes into account the price we had to pay to acquire or to purchase DIA France. In 2014, acquisition aligns for stocks and the disposal were into three elements, there was the payment of the share part of DIA France as I just mentioned and there was the creation of Carmila and the sale and disposal of 10% of our Brazilian subsidiary in December.

May I recall that in 2013, there were proceeds from disposals from the reorganization of our portfolio for €1 billion overall. Also, the payout of the dividend in May 2014 led to a cash outlay of €149 million and 65% of our shareholders went for the payout of that dividend in shares in 2014.

Let me move on to slide 21, group liquidity. That has been changed slightly on last year, and so the liquidity profile of the group improved as we can see on this slide, and as we saw in the previous tables, this means that we could be upgraded by S&P, that was just a year ago.

We are now rated a BBB plus. In July 2014, we proceeded with a bond issue of €1 billion for eight years with a compulsory -- or with a bond buyback for €318 million a year.

So all of that is on this slide and at the same time, as you can see, there is this small circle really, coupons, for each of these bond buybacks and as you will be able to see in the next few years, there should be a significant decrease of our coupons because of the bond issues that we have carried out over the past two years under very different market circumstances and taking advantage of our rating, the improvement of our rating. At the same time, there was -- we proceeded with another bond issue, €750 million with a 1.25% coupon, in line with what I said and that meant that we could have a longer maturity for our debt from 4.2 years end of 2013 to 4.7 years today.

So Carrefour is still strengthening its liquidity position which is a key asset in our industry and especially given the current economic environment. Slide 22, dividend.

The board of directors will be offering to the shareholders during the annual meeting that will be taking place on June 11, a dividend of €0.68 per share and up 10% on the previous year. This is in line with a distribution rate of 46% of the net income group share adjusted for exceptional items and in line with our dividend policy we have setup three years ago.

This year, we shall offer payment of this dividend in cash or in shares and the dividend will be released for payment on July 17. To conclude, as you can see, Carrefour is still functioning on the same objectives and overall investments linked to the inclusion of the DIA will be between €2.5 billion and €2.6 billion.

Despite this increase, there should be -- we are aiming for an increase of our free cash flow, an increase of our free cash flow. And last but not the least, as you know, we want to stick to our financial discipline and we want to keep our BBB plus rating.

We have now reviewed the financial highlights of 2014 and we have talked about the future and 2015, and I would like to thank you for your attention and I would like to give the floor to Jerome Bedier.

Thank you very much, Pierre-Jean. Now as you see in this detailed review of the situation, our performances show that Carrefour is still aiming for growth.

The results are there, and they confirm that our 3-year plan is continuing to bear fruit. Carrefour has got back to basics and we have some very strong levers and those were strengthened over the last two years and will continue therefore to support our level of performance.

What are these levers? Well, the first is the good balance of our country portfolio.

Following the geographical refocusing that took place in 2012, we now have a well-balanced model present in ten integrated countries where we combine a solid domestic base which relies on stable consumption -- consumption that is stable despite a growth that is still rather inadequate. We rely on Europe where business is recovering, we can see this particularly in countries like Spain.

Then there is Latin America, where our performance is going up strongly despite a difficult economic environment. And then there is Asia where in China, we are adapting our model to take into account the frugal habits of consumption which we narrated out.

So our model is relevant and it is consistent. The countries in which we do business all share a strong culinary and gastronomic tradition.

That means that fresh produce is very important. For example, in Spain, in Andalucia, which was hit hard by the crisis as you know, there, the turnaround has been led, above all by fresh produce.

This is a key feature for the consumer. Overall in more than 80% of our sales are in the food sector and this is what we could call an essential category where demand is always very resilient.

And we are also present in countries where the number of consumes is increasing very rapidly. So we are present in the emerging countries where mass consumption is developing very rapidly.

This is the case of Brazil with more than 40 million new consumers over the last 10 years and China; these are two countries which continue to have considerable potential. And finally, we have very strong positions in our three main markets which taken together, represents 73% of total sales.

[indiscernible] here we have strengthened our leadership position thanks to the action plan which has been implemented over the last two years and which has made a contribution to the improvement in our price image and has led to an increase in traffic in our stores. The acquisition of DIA has still further strengthened this position.

It reinforces our coverage and our market share in two key zones. Paris and the Southeast.

These were areas where Carrefour was underrepresented particularly in terms of convenience stores. Moreover, this network has enabled us to offer our customers a considerably increased number of pickup points for their purchases, and we will come back to this in a little while.

In Brazil, Brazil is our second largest market and here, we have consolidated our leadership position thanks to two complementary banners, the Carrefour Hypermarket and the Atacadao format. The performance of each of these formats continued to improve in 2014.

In December, we still further reinforced our local positioning with the acquisition by Peninsula of a 10% holding in the capital of our subsidiary. The expertise of the new shareholder in Carrefour Brazil and in particular, its knowledge of the retail market in Brazil will be precious advantages for the continuing development of our multiformat approach in this country.

That is the first stage before a possible entry into the stock market in Brazil. We are continuing to prepare for this and the dates of this operation will, of course depend very much on market conditions.

And then the third country is Spain. Here, we remain in attacking positions thanks to the work done by our teams there.

We make use of the advantages which enable us to create a difference compared to our competitors. And notably, our knowhow in fresh produce in the non-food sector and thanks to our competitive pricing policy, and well-targeted and affective loyalty program Now the second lever which benefits our results is the strength of our multiformat approach.

Carrefour, today, is much more than a simple hypermarket group. We are par excellence in multiformat player.

We have a very strong position and in fact, a unique position among the world leaders in retail. Each format has its own specific role which matches a particular demand.

Multiformat is an essential element in the dynamic approach that we have adopted. It enables us to respond to the needs in different areas and it enables us to respond to changes in consumption and client demand and it also enables us to seize opportunities for growth in all the countries where we are present.

Out of the total of 10,860 stores at the end of 2014, we had more than 1,550 hypermarkets and Atacadao stores. More than 3,000 supermarkets and more than 6,000 convenience stores.

So a genuine multiformat approach. Last year, we worked very hard on convenience stores, express banner is beginning to be rolled out in Brazil and we carried out a test of convenience stores in China, with a new banner, Easy.

In the north of Italy, we have strengthened our position thanks to the acquisition of the 53 Billa supermarkets and the 17 Il Centro convenience stores. And finally, the major acquisition in 2014, was of course the DIA network in France.

That, too, fits very clearly into this multiformat strategy. We are continuing to develop our differentiated formats with strong credential.

Atacadao continues to expand successfully and is now present in the 26 states of Brazil. And then Superco which was tested in Spain, has now been exported to Romania and to Brazil.

The strength of our multiformat approach is going to be shown essentially in the development of a multichannel approach because the future lies in the combination of the traffic in stores and the use of the internet. Our clients are now cross channel customers, digital technology has enabled us to highlight our offerings, strengthen our image and enable us to develop our sales.

We are strengthening our knowhow in all the fields, smartphones, contract free payments, click and collect, digital terminals in our stores. In this connected environment, the store is, of course, the major advantage.

It is the point where all these channels converge. Physical contact creates trust and this is something that cannot be replaced elsewhere.

According to our recent study, the store is the channel preferred by 68% of people in France. That is up from 55% in 2013.

So the density of our network of stores will make the difference. On average, every person in France is at -- 7 minutes on average, from a Carrefour store.

And this density is something which is useful for the development of the Click and Collect in the non-food segment which is now available in 700 of our stores in France. We are the leading general retailer in term of this service.

And as well as this new service in the non-food sector, we have our drive-in stores which are an essential part of our cross channel offering in food. At the end of 2014, we had 438 drive-in stores which correspond third party the demand of our customers and they are a complementary feature to our hypermarkets and supermarkets.

And finally, our portal, Carrefour.fr, in December, received something like 8.5 million single visitors. And innovation continues.

Recently, we invested in the Partech fund in order to make a contribution to the creation of new ecosystems. Our third lever is the return to the property business, property however in the service of sales since 2012, we have come back into the property market in order to drive sales.

It is essential now to control the customer experience, and that means there has to be consistency right through the whole experience from the car park, the store, and the adjacent shopping mall. We need a full sales ecosystem.

This is a priority if we are to strengthen the efficiency of our sales equation. Now as Pierre-Jean said, we have invested in the upgrade and the modernization and the development of our stores.

In 2014, 38 hypermarkets and approximately 100 supermarkets on the market banner were renovated in France. Renovations are continuing in Brazil and they have begun in other countries too, particularly in China.

Now, Carrefour Property, which is the owner of the buildings of our stores in France and Italy, gives strong support to this renovation program in those three countries. And with the creation of Carmila in last April, the aim here is to give greater value to the shopping malls which are adjacent to our hypermarkets in those same three countries with 180 sites today, valued at €4 billion, Carmila is one of the five leading property companies in Europe.

And Carrefour has a 42% holding in Carmila, and Jacques Ehrmann, the CEO is here with us. In 2014, Carmila delivered 22 renovation projects in France and 10 in Spain, 40 extension projects are underway.

The extension program therefore is continuing. And we can say after just a few months that the results are already convincing.

And then outside France, Spain and Italy, we are continuing to ensure that property development projects will benefit from the knowhow of the Group in order to optimize our holdings. And finally, the fourth lever, this is a subject which Mr.

Plassat refers to very regularly, and that is operational excellence in our business and the development of the women and the men who work for Carrefour. Over the last two years, Carrefour has been through several important stages in decentralization of responsibility and the simplification of its organization and its processes.

We need to look at the details. We need to ensure that we do a good job as retailers and we need to work better on our product mix with fresh produce and local produce, it is this that makes the difference.

We need to become more aggressive in terms of non-food. Here there's been a positive evolution, particularly in clothing and general goods.

We need to refine the management of our business. We need to improve our entry margins.

We need to put in place better management of product lifetime and wastage. We need to breathe new life into our relationship with our customers.

This is what the people working for Carrefour do on a day-to-day basis. And this operational excellence is something that is going to be still further amplified in 2013, with six priorities that we want to insist on.

First of all, we want to continue with the implementation of our action plans in all the countries. We're looking to constantly improve our offering and our price image in order to offer the best possible experience to our customers.

Secondly, we intend to accelerate our multi-format expansion. Overall, in 2015, we shall continue to expand all of our formats.

This will take the shape of continuous and targeted expansion. The major task in France will be the integration and the progressive renovation of the network of DIA stores.

The integration of DIA is in the hands of a specialist in turnaround with us in Carrefour, and it will take two years. Progressively the stores will adopt existing Carrefour banners, either Market or one of the convenience store banners.

All this will be done in order to match the specific needs of the various catchment areas. The first conversions towards the existing formats will begin next month, in April.

Third priority will be to continue our multichannel development. We shall make use of the complementarity that exists with the physical network of stores.

The network of stores offering click-and-collect facilities will progressively increase and our offering will become more deep-seated and denser. We shall continue to develop our ecommerce business in other countries, in key markets.

In China we are carrying out tests in the region of Shanghai. These will begin in the next few months.

In Brazil we need to relaunch our ecommerce activities in the second half year. In Spain we're going to develop in non-food e-business too in order to seize new opportunities.

We're testing click and collect in five pilot stores in Spain. Our fourth priority will be to continue to work on support functions.

First of all, the logistic system in France, we're continuing to adapt this to serve the multi-format cross-channel approach. This upgrade will enable us to make savings in cost and energy, with two key indicators, the cost per kilo and the cost per kilometer transported, all this in order to improve the service that we offer to our stores.

And finally, the simplification of our IT systems in France. We've made progress but we shall continue to progress.

Particularly we want to help to reduce wastage and to bring down inventory levels. In China, Carrefour is modifying its model.

And we are moving onto the attack. We are going to continue our selective expansion, focused on the areas where we already have powerful stores.

We're going to develop the multi-format approach, with the opening of new Easy stores in urban areas and with the test of e sales. We're going to open three new logistic centers in 2015, in Chengdu, in the west of China; in Wuhan, in the center; and in Beijing and Tianjin in the east.

And there will be two further centers in 2016 in the northeast and in the south. And that will enable us to cover all the catchment areas that we want to work in with these six distribution centers.

This will make us more efficient, both in terms of purchasing and in terms of logistics and store management. An operations manager has already been appointed in China to implement all these changes.

Fifth priority will obviously be to continue to upgrade our assets and to renovate our stores. And finally, the sixth priority will be to increase the attractiveness of our sites.

All the Carmila shopping malls in France, Spain and Italy will be renovated over the next two years. 40 extension projects are already underway.

This represents a total investment of approximately €800 million. This strategy concerns Brazil and China too, where Carmila doesn't operate.

So thank you very much for your attention. And I'll now answer any of your questions.

Pierre-Jean and I are both available to answer any questions you may have. Begin here in the front row.

Good morning. Bruno Monteyne from Bernstein.

Congratulations on these results. My first question regards free cash flow.

Clearly you have very strong market shares and it comes where you're operative stabilized. So one would expect very strong cash generation.

Looking at your statements, you're not yet covering the dividend because of the dividend. That's actually before you exclude the cost of the DIA acquisition, the other acquisitions.

On top of that you will invest even more next year, you say, on CapEx. So could you explain how important to you free cash flow is as a measure regarding -- rather than EPS or earnings and what you will do to improve that profile?

My second question is regarding China. You're using the language of a very frugal consumer, repositioning the format.

That seems a bit of an understatement given how much the results are getting worse, the like-for-like on profitability. And how bad do the results need to get in China before you consider more radical options, like the one Tesco did recently, trying to half exit the market?

And my third question is regarding France. You mentioned the logistics gains.

I was a bit confused by the word gains, to what extent these are operational gains from the efficiency programs you're working on or more financial ones related to revaluation of stock or changes in assumptions about stock losses. Thank you.

I didn't want to talk about these rumors to conclude, but that's the end of this press conference anyway. Thank you.