Accor Sa

Thank you for standing by. My name is Ellie and I will be your conference operator for today. At this time, I would like to welcome you to the Accor 2023 Half Year Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, please press the star followed by the number one on your telephone keypad. If you'd like to withdraw your question again, please press the star and the number one on your telephone keypad. Thank you. I'd now like to hand you over to Martine Guerreau, Group CFO. Martine, you may now start the session.

Thank you. And good morning, ladies and gentlemen. Thank you for joining us on this call, which is my first earnings call as a CFO for ACO. So let's just dive right into the presentation, our first half results. I'm going to start with the financials on slide three of the presentation. So we are very pleased with the performance in the first half. We've seen continued solid growth momentum and strong earnings and cash flow. Our rest part is up a very healthy 38% versus prior, and that's on a like-for-like basis in the first half, and 25% in the second quarter, which is also very solid. And as compared to 2019, we actually saw an acceleration of the growth in the second quarter. Our pricing momentum continues, contributing about two-thirds of the overall REFBI growth, with occupancy gains contributing for about one-third. Our net unique growth actually accelerated this quarter, reaching 3.5% when you measure it over the last 12 months, and that was driven both by a higher number of openings as well as low returns. And this translated into group revenue of 2.4 billion, which is an increase of 35% versus prior, again, on a like-for-like basis. Now, moving to earnings and cash flow, we delivered strong earnings and cash flow in the first half. Our EBITDA more than doubled versus last year to $447 million. And services to owners was positive in the first half. which is in line with the STO guidance we shared with you during the capital markets day. Recurring free cash flow also significantly improved versus prior to 157 million, primarily driven by EBITDA growth. And that was partially offset by higher working capital reflecting the higher activity. And I remind everyone that we do have a seasonal working capital with H1 being much lower than H2 because of working capital. So in light of these results, we have raised the four-year guidance for EBITDA to $930 to $970 million for 2023. So let's dive in, starting with REF PAR, which is presented on slide four, which is well-balanced across both divisions. And we've shown in red the contribution of rates and in blue the contribution of occupancy to the growth in REF PARs. So starting on the left, premium mid-scale and economy division posted a REFAR growth of 26% in the quarter versus prior year. And as you can see, that's driven by strong pricing gains and occupancy, which is actually not close to 2019 levels. Moving to the region, Europe and North Africa, REFAR was up 20% in the second quarter versus prior year. And just to give you a bit of color on some of our key markets, France remained strong. with large inflows of international leisure and business guests in Paris for large events. So we had the Bourget Airshow, Vivatech, and of course, Roland-Garros. Now, to note that riots in early July did not have a significant impact on our summer booking thus far. In the UK, we saw a very, very balanced performance across London and the province. And Germany, we were pleased to improve significantly in the second quarter, and is actually now back above 2019 levels. Now moving to MES-PAC, second quarter was up 37%, REF PAR versus last year. Really, really good performance in Middle East Africa, despite difficult comps, particularly in Saudi Arabia. Growth in the Pacific is in line with the previous quarters, which is encouraging considering that Australia recovered earlier, as you may recall. Southeast Asia and India is well above 2019, notably in large cities, and that's supported by the return of international business guests. And in China, we've seen a strong acceleration despite what is still a very limited flight capacity in this region. So moving to the Americas, which, as you know, is dominated by South America for premium mid-scale and economy, the REF part in the second quarter was up 24%. with stable occupancy as the region recovered faster than the other regions. And Brazil, which is our main market in this region, occupancy is slightly above 2019s and rates are significantly better. And I will now move to luxury and lifestyle on the right. So we posted a rest part growth in the quarter of 24% versus prior with, as you can see here, balance, pretty balanced across occupancy and rates gains. The growth in this segment is in line with the growth in PM&E, and that is good because you may recall that, again, that segment recovered faster. So luxury, second quarter REF PAR was up 25% versus the second quarter. Luxury accounts for about actually slightly over 70% of the room revenue of the division, and it's mainly Fairmont and Sofitel. And as we saw in PM&E, the region ME and ASPAC was a key contributor to the growth. Our brands have a very strong presence in this region. And finally, lifestyle, second quarter REF PAR was up 20% versus last year. And like for luxury, lifestyle had recovered somewhat faster in 2022. But to note that REF PAR is now twice, more than twice the level of 2019. And this is actually driven by the resorts component of our lifestyle portfolio. Speaking of portfolio, let's move now to slide five, where we see the breakdown of our hotel portfolio by division with premium mid-scale and economy on the left side of the slide and luxury and lifestyle on the right. So as indicated in my introduction, overall net unit growth for the group accelerated to 3.5% in the second quarter, again, on an LTM basis. and was well-balanced across both divisions. The majority of openings came from conversions, which demonstrates the strength of the Accor brand portfolio. Premium mid-scale and economy portfolio grew by, net portfolio grew by 3.6% over the last one month, driven by MEA-ASPEC and China, which demonstrates the strong recovery and momentum in these regions. Luxury and lifestyle portfolio grew by 3.4% over the last 12 months, driven primarily by Ennismore, which, as you know, is our lifestyle brand. We do expect the growth to pick up material in the second half based on the planned openings for luxury and lifestyle. Total pipeline is 217,000 rooms, notably driven by PM&E, which benefited from strong signings in the quarter. And you can see our fee per room. is in line with the guidance that we shared with you at the CMD and to know the 1 to 3 ratio in favor of luxury and lifestyle. Overall, we confirm our annual net unique growth guidance between 2 and 3%, bearing in mind that in the last 12 months, no compensation of 3.5%, it does embark a strong second half of 2022. And that effect will subside as we lap over those two quarters. I will now move to slide six with the revenue breakdown by segment. So the group revenue, again, reached 2.4 billion in the first half, up 35% on a like-for-like basis. On a reported basis, you see the growth is a bit higher at 39% due to the consolidation of Paris Society, which sits in the hotel assets and other segments and which we acquired at the end of last year. For premium meat scale and economy, like-for-like revenue growth is 34% versus prior year with a revenue of $1.4 billion. Management and franchise revenue was up a very healthy 39%, which is well above REVPAR, thanks to a strong recovery in incentive fees. And we're actually very pleased with that strong growth in incentive fees in the first half. And this demonstrates the solid operational performance of the hotels across really all regions and segments. Now, services to owners also grew slightly faster than Red Park. And finally, hotel assets and others was up 24%, which is primarily driven by Australia. And again, the recovery took place earlier in this region, hence the somewhat lower growth in this activity. Turning to luxury and lifestyles, Like-for-like revenue was up 40% in the first half to reach slightly over $1 billion. Management and franchise revenue was up 58%, again, significantly outperforming the REFPAR growth, driven, again, by the very significant growth in incenting fees. Services to owners in line with REFPAR and hotel and assets on a reported basis mainly reflects the acquisition of Marist Society. So let's take a closer look at M&F fees on slide seven. For premium mid-scale and economy, all the regions are delivering solid growth with ME-ASPAC leading the pack, if I may say, with 68% growth in the first half. Growth in luxury and lifestyle M&F fees was also very strong at 58%, with both activities growing well above REVPAR and, again, driven by the growth in incentive fees. The share of incentive fees within M&F is actually now back to 2019 levels. So I will now turn to slide 8. As, again, in the introduction, the group's overall EBITDA in the first half more than doubled versus last year, reaching $447 million, and it's really The combination of strong recovery in M&F EBITDA, driven by solid growth in both divisions, and cost discipline on services to owners, which led to a positive 21 million EBITDA for STO, as compared to an 87 million loss in 2022. Regarding premium mid-scale and economy, EBITDA is up 71% on a like-for-like basis to 330 million, M&S EBITDA is up 33%. FTO EBITDA is back in positive territory, again, after being negative last year due to the step-up in marketing efforts that we did to support the rebound of travel. And as for hotel assets and other, EBITDA slight decreases is related to cost pressure we've seen in our Australian operations. Turning to luxury and lifestyle, EBITDA more than doubled. to 174 million in H1, driving about 50% of the growth in EBITDA for the group. M&S EBITDA jumped by 76% like for like with very solid operating leverage. For STO, I'll make the same comment as for PM&E, which with EBITDA slightly positive as well. And as for hotel assets and other, again, EBITDA mainly reflects the acquisition of Paris Society. And finally, to point that we have held our holding cost, the cost for the holdings, flat to prior year. So moving on to the rest of the income statement on slide nine, we achieved a net profit of 248 million in the first half versus 32 million in the prior year. Now, I'm not going to go through all the elements of the income statement, just point out a few highlights. And I'll start with the share of net profit of Associates and GEV, which turned positive at 9 million versus a loss of 27 million in prior year. And this improvement essentially stems from our 30% share in AccorInvest. With the recovery of the European activity, AccorInvest reported a significant result improvement as well. Our non-recurring items were essentially not material in the first half. Net financial expenses benefited from Higher interest income and cash equivalents, but was negatively impacted by non-cash items, which included FX and change in fair value of investment. Speaking about cash flow, I'll now move to slide 10. The recurring free cash flow reached 157 million in the first half, as compared to 41 million in prior year, and it's really mainly driven by the growth in EBITDA. So the main highlights on cash flow, I point out three. First one, the cash cost of net debt decreased to 28 million, and that's, again, mainly due to higher interest income, as you know, over 90% of our debt is fixed. Recurring investments slightly increased to 80 million in the first half. For the full year, we continue to plan a level of around 200 million for recurring investments, and that really reflects the group's acceleration in the development of luxury and lifestyle, which requires higher key money. And finally, the working capital change is negative $88 million versus a negative $25 million last year, and that really reflects the strong growth in the business. And as I pointed out, our working capital is seasonal, our recurring pre-cash flow is seasonal, and we do expect this working capital impact to reverse in the second half. Finally, MedDebt reaches $1. 0.8 billion slide increase versus December 2022. And this is due to some one-off items essentially, such as the FIFO advance report, sorry, advance reversal, advance payment reversal and the pre-context arbitration. So to close this presentation before I turn the floor back to you, let us move to slide 11 with the key takeaways of the first half. As I just shared with you, we had a solid momentum in the second quarter, and we expect a sound demand this summer, which is on the back of high comps. We had also a good summer last year. And so with this backdrop and taking into consideration the current macroeconomic uncertainties, we have raised our guidance for the full year of 2023. The growth in RESPAR is now expected as the top end of the 15% to 20% range. And our consolidated EBITDA is now expected between 930 and 970 million for the full year. So I thank you for your attention, and I will now open the floor for questions.

Hello, everyone. If you'd like to ask a question, please press the star button and number one on your keypad. We have our first question coming from Vicky. from Barclays. Please, your line is now open. Yeah, morning, Martine.

First question is just talking about the rev par for the Q2 did come in a little bit better than consensus was expecting, but the EBITDA was pretty much in line. So just trying to get it if there's anything to call out there in terms of phasing of cost, incentive recognition, sort of first half versus second half, really just sort of the implied drop through on that rev par, which does seem just a little bit lighter than expectations. And second one on the demand outlook, as obviously it all sounds pretty confident, just are there any cracks anywhere? And specifically just Australia, which does seem to have flatlined now, is one of your biggest markets. So just thoughts there on the outlook and the potential to continue to see year on year growth in that market or any risks that you think it could turn backwards. And then finally, when you see the trends playing through in the luxury segment in the US, where some of that very extreme pricing growth we've seen is now just starting to pare back a bit. How does that leave you feeling about the potential to sustain the current sort of very significant price increases you're seeing in some areas? And I'm thinking more into the next six, 12 months. Thanks.

Hi, Vicky. Thank you for your, uh, for your question. Um, in terms of the, uh, ref bar, um, uh, growth being slightly above consensus, uh, really, I mean, really nothing to, uh, you know, to signal here, you know, we, we, uh, As you know, we recognize incentives on a quarterly basis, on a best-estimated basis. So there is some, let's say, judgment that comes into that, but nothing to underline on that. Regarding the outlook, you know, as I commented, Australia did recover faster. And so, you know, you see a, you know, a softening, I'd say, of the growth versus prior. But there's, you know, that's to be expected as you come closer to the recovery, your sequential growth rate will, you know, will slow down. But on the other hand, China, which is also in this region, has accelerated and still has very strong potential given the very limited flight capacity in this region. And I think your last question was, is there any crack in the model? Again, thus far, we see very sustained demand going into the summer period. and no sign of the sign of slowing down other than, you know, the obviously quarter over quarter growth rate, which as we lap over recovery periods will, you know, will somewhat soften.

Thank you. So just coming back on the first one then about that flow through to EBITDA. So sorry, is the point then that the way in which you receive the incentives or you sort of account for the incentives is more sort of backend skewed and therefore you sort of effectively have a better portfolio EBITDA slash revenue flow through from the REVPAR H2 versus H1?

Yeah, I wouldn't say, well, I'm not sure I would say it's back and loaded, but we have a really full visibility of the incentive fees at the end of the year. And so during the year, we do, you know, we do estimates and they're fairly, you know, they're obviously fairly linear in that respect.

Okay, thanks very much.

This is going to come from Richard Clark from Bernstein. Your line is now open.

Hi there. Good morning. Thanks for taking my questions. Just I guess this is your first session as new CFO at Accor. The release looks very similar to a normal Accor release. Any sense of what you might change? You've mentioned incentive fees a few times already. Will you start systematically reporting that? Anything you'd like to change in the presentation? Second question, just on the NUG, we had Hilton report yesterday and they were saying that we're in this kind of air pocket at the moment, but guided that NUG would accelerate by a percentage point into next year and then another percentage point effectively into the year after that. Is that what you're expecting as well? You'll begin to kind of build back up to that 5% NUG you did pre-COVID over the next couple of years. And then just the third question, appreciating the POTEL and Shavott deal is very small. but a little bit of a departure from the message of the CMD that no M&A was being looked at, really. Are there other deals like that? I mean, this is a simplifying deal, but are there other JV assets that you want to consolidate? You know, what's the sort of scope of that sort of consolidation investment phase that we might see?

Hi, Richard. Thanks for your question. You know, with respect to your first question, I have not thus far informed you as to whether there's anything that I'd like to change in the earnings release. Allow me some time to do that, if at all. Regarding the net uni growth, we do see, and we have communicated this at the Capital Markets Day, we do see an acceleration as we go in the outer years, and that will be, if you recall, primarily driven by the luxury and lifestyle, and actually the you know, the openings that are planned in this portfolio or in this division for the next year is very strong. With respect to Côté-les-Chabots, I mean, that's part of the, you know, strategy that we have to simplify our portfolio of investments. And we have not, you know, we have no plans to make a further M&A deal at this point, as we discussed in the CNBC. In Potere-Chabot, we're already a 37% shareholder, and this investment is part of the strategy that we have to expand our food and beverage offering, particularly in the lifestyle and the mice meeting and event segment.

Understood. Thanks very much.

We have our next question from Jaina Mistry from Jack Rees. Your line is now open.

Hi, it's Jaina Mistry from Jefferies. Martine, really great to hear from you. I've also got three questions. The first question, kind of going back to Vicky's question, but I appreciate there are some big events coming up in H2 and also the Olympics next year. How are you thinking about reinvestment and potential for more marketing required to really capture on these events and growth in H2 and H1 next year? And just on the back of that, how should we think about the sensitivity of EBITDA to REVPAR growth? Can you give any guidance? Um, as we used to in the past around, you know, one percentage point of REVPAR translates to X of EBITDA. Um, my second question is around the shape of growth really for next year. We've spoken about unit growth being a bit more challenged versus history. Um, But macro side, do you think that price growth can offset any weakness in supply? Anything you can say to help us think about the shape of growth would be very helpful. And then lastly, in terms of your pipeline, do you have any visibility around what proportion of your pipeline is under construction today? Thank you.

Thanks for your question, Jenna. With respect to the RevCar and the big events and whether we need to invest more into marketing, we've invested what we need to invest in marketing. There was a big investment that was made last year, and we've made a strong commitment and met that commitment in the first half of SQ being positive. So we will remain on that path. In terms of the shape of the growth, as you may recall from the capital markets day, what we guided in the medium term is a rest part growth of 3% to 4% for the group. So we have, in some sense, factored in the fact that the recovery is obviously well underway, and the rate of growth will slow down as a matter of fact. We also have a 3% to 5% net unit growth in the medium term as per the capital market. So when you combine the two, it still gives you a revenue growth, which is in the mid-single digits. In terms of the pipeline, I can't comment on what is new construction versus what is actually under development. But what I can say is that our conversion rate remains very, very strong. And that's the strength of the group because of the preference, but also the depth of the portfolio. of brands and our conversion rate is above 50% for, you know, for the pipeline, which is a very, very strong conversion rate.

Thank you. And then just going back to the first question, do you have any guidance around the sensitivity of EBITDA to REF PAR growth today?

So we actually don't, you know, we don't give sensitivity on REF PAR. You know, it's really... There's many elements that go into this. And so this is not a data that we communicate on.

Sure. Thank you.

We have our next question from Leo Carrington from CT. Your line is now open. Thank you.

Thank you. Good morning. If I could follow up on some of the earlier questions, on Rich's question on the net unit growth progression. The pipeline's obviously stepping on very well. Can you give an indication on how the signings are progressing within that? You know, I assume this is signings driven. And how did the pipeline signings tie into the pressure on openings for the rest of the year? Are you finding projects are sitting in the pipeline for longer between signing and ground breaks, and so we can expect a bit more of a pipeline build into H2? And anything on signings would be really helpful. Secondly, and tying into this theme, Can you give some more color on the portfolio conversion deal in Japan, how that deal originated, what the implications are for the business in that region, and more broadly, the scope for further similar deals? And then lastly, in terms of the credit rating, I know this is out of your control, sorry, but is it reasonable for us to expect that the ratings agency will revisit the ratings again this year? The reason I ask is I'm conscious that the performances, your Accor's performance is tracking well, well ahead of the S&P assumptions from earlier this year. Thank you.

Thanks for your question, Kiro. With respect to the pipeline, we don't see a longer conversion time between signing a and opening. As I mentioned, we do expect a very strong opening in the second half and our conversion market is strong and actually what we see is a growth in the pipeline in the next 6 to 12 months. With respect to Japan, what that allows us to do is to double the number of properties we have in Japan. Japan is a really, really good market. It's a market in which our incentives in particular are very strong, so we're quite pleased with this deal. And with respect to the credit rating, it's not entirely in our control, but we do have a regular dialogue with the agencies, and we're obviously planning to meet with them following the the release of our first half earnings, although that will be, you know, post-summer, and we will, you know, we will take it one step at a time. But, you know, strong results in the first half should certainly help.

Okay, thank you. If I might just follow up on the second one on Japan. Does this – does doubling your size there mean – potentially an ability to grow more in the country going forward, given more scale, or what might the implications of the doubling of size be? And then just very briefly on scope for further deals, not necessarily similar deals, not necessarily in Japan, but elsewhere. Yeah.

Yes, no, I mean, clearly having a, you know, having a base that's twice the size gives us, you know, further growth potential in Japan. And this is actually, you know, when I was talking about the region for Mea Aspect, Japan, you know, we saw good growth in Japan cities in particular in the first half. You know, they do tend to travel. They have high purchasing power. This is actually... an objective we had to significantly grow our presence in Japan. So again, we're quite pleased with the deal. Mercury is now a strong brand. The other market that we're looking at is India. As I think Sebastien commented on the capital market, this is a market that has really, really good growth potential given the emergence of the middle class and very good very good growth potential for us. Thank you, Martin.

If you'd like to ask any questions, please press the star and then the number one button on your telephone keypad. Our next question comes from Jared Castle from UBS. Your line is now open.

Good morning and welcome, I guess. I'm going to take slightly opposite angles to some of the questions and just revisit basically. I mean, firstly, just on your pipeline, actually it's gone backwards. It was 216,000 rooms at year end and then that was 214 at Q1. It's now 213. So do you think you'll finish the year up on last year's? You know, is it getting more difficult to sign people in? Are people more worried about high interest rates outlook? Just interested on your thoughts there. And then just China. I mean, you know, there's been obviously flags around, you know, slowing China or, you know, not recovering at the same pace as people expected. And I think some of the recent Repar data has also been a bit... Yeah, lackluster compared to kind of expectations at the very least. So are you seeing anything there recently? I'm talking about like, you know, May, June or July. And then just lastly, anything you can say on conversations about disposals at the moment, you know, such as Accor Invest? Thanks.

Thank you, Gerard. Hi. So let me correct you. So on the pipeline, our pipeline at the end of June is actually 217,000. So it is up versus where we were at the end of 2022. We haven't seen yet signs of slowing down in China. As you know, we have a very strong master franchise in this area. And for your last question, which was on AccorInvest, There's no change to the communication we've had before on this subject. I think the priority for Akko Invest is really to dispose of some of its assets and refinance its debt.

Okay. Thanks. My mistake.

Thank you. Our next question comes from Jafar Mestari from BNP. Your line is now open.

Hi, good morning. I've got three, if that's all right. Firstly, on incentive fees, can you remind us when exactly they reach 35%? What I mean by that is they've been fully recovered, but for exactly how long? Are they still a tailwind into Q3 and Q4? Or has it been at max levels for more than 12 months already? And then on operating leverage, I appreciate you do not have a communicated ref power sensitivity. But if I take the midpoint of guidance, You're now expecting two or three points better ref power for the full year. And in terms of IPDA, you're expecting about 10 million better. I'm sure you don't want us to think that the ref power sensitivity is only 4 million per point of ref power. So could you maybe talk about some of the other... there that I think you've alluded to, or are you just baking in a wider range of macro scenarios? And then lastly, could we get a short update on refurbishments and on the rollout of revenue management systems? Because at the CMD, I think they sounded like two very exciting drivers of REFR that aren't just macro. So curious if you're doing more of this, if you're posing refurbishments for the summer and resuming later, or is there a lot you can do before the end of the full year on those two points?

Sure. Thank you for your question. So on incentive fees, they're back to 2019 levels, as we indicated. That being said, they're very much related to the operational performance of the hotel, so what they represent as a percent of M&S fees is important, but if the hotel continues to perform strongly, then the growth in that portion of our M&S fees will continue to improve, so you really need to take both into consideration. With respect to the RFPAR guidance versus the BIDA guidance, so RFR guidance was between 15% to 20%, right? So the midpoint was 17.5%. We're now saying, we're guiding now towards the top end of the guidance. And we have raised our EBITDA guidance, and I think we'll be able to give you a view on that as well as we publish our third service. The summer is an important quarter for us, and so we'll We'll keep you updated at that point in time if that is relevant to do so, but we feel that the guidance we put out right now is probably a good balance as we see it today.

Thank you. And then just this last question on anything micro you can do to support REFR at the CMD. You brought up refurbishments and you brought up revenue management systems. Is that something that's making a ton of progress in 23 or is that more medium term?

So on the RMS, this is more of a, obviously, we're starting to deploy that, but this will be more of an impact in 2022. And the refurbishment, we continue to do that. It's more of a three-year program, so that should have an impact, I would say, on a relatively consistent basis. No big one-off, but really consistent support of that part.

All right, thank you very much.

Our next question comes from Andre Julliard. Your line is now open.

Good morning. Congratulations for these strong results. A few questions on my side. First one is on the type of clientele. We saw that the recovery first came with the leisure clientele. What do you see on the corporate side and especially the mice segment? Do you see some big events being back, especially in some hotels such as Pullman and so on? Second question around the split of rest part by regions. The recovery in China is a little bit more painful than what we could expect initially. What do you see in the rest of Asia? Do you see that the recovery is taking place month after month or not? And in terms of pipeline, the pressure is improving on the pipeline almost everywhere. And Hilton confirmed that yesterday, as already mentioned. Could you give us some more color about the split by region of your pipeline? Thank you very much.

So thanks for the question, Henri. So with respect to the, you know, leisure versus corporate, so yes, we definitely see a, you know, solid growth in corporate and the event. I mean, in the MySpace in particular, we're seeing a very good recovery of the events, which is obviously going to benefit hotels such as Le Mans, but also Fairmont, which has a materialized activity. In terms of the, you know, ref bar, you know, China, you know, China, again, is growing very, you know, very, very strongly, which is to be expected given where they are on the recovery curve. This is, you know, primarily domestic China because the, you know, the inbound traffic is still fairly, fairly restricted. So there is further growth potential there. With respect to the other Southeast, you know, Asian countries, we've got, you know, good growth as well. And I mentioned the big cities. For example, Thailand is doing very well in this region. Australia is really the one that is where the growth is a bit more subdued. But again, Australia recovered faster. So you're just at a different point on that recovery curve. And I think you had a question on pipeline by region. Where we see a particularly strong pipeline is in the Asia-Pacific region and the Middle East in particular. Those two regions are quite important in our pipeline development.

Okay, thank you very much.

Our next question comes from Simon . Your line is now open.

Good morning. Just one for me, a follow-up question on the operating leverage. And I'm sorry if I missed some of your previous comments. But I think the management and franchise ABDA margin for the PME division was declining in H1. I mean, I'm a bit surprised even just trying to . What's the reason for this? And do you expect margin for the year for this division to improve year on year? Thank you.

Thank you for your question, Simon. So two comments on that. One is you have to remember that when you compare it to the first half of 2022, you know, we were very, you know, we were, and I'm not speaking about services doing an SEO part because we did make an investment in that area. But with respect to the MNF cost base, we entered 2022, obviously, with Omicron. So we were very, very prudent, not to say very cautious, in terms of growing up the cost base. Because there was uncertainties with respect to dimensions. So we start from a much lower cost base. And if you were to look at the drop through for MNF in 22 versus 21, you would see that it was a very, very significant drop through. So you have that baseline effect. or when you look at M&F for PM&E in the first half. And we do expect this effect to essentially reverse in the second half and the margin to improve as compared to the first half.

And so for the specific division, the 2023 margin should be up relative to 2022?

Yes, slightly.

Okay. Thank you.

Looks like we don't have any other questions. I'd like to hand over back to the management for the closing remarks.

Thank you. And thank you for your questions. Thank you for attending. And I wish everyone a good rest of the day and a good summer. And we'll speak again in the fall. Thank you.

Please wait the conference will begin shortly.