Avolta Ag Unsp/Adr

Welcome to the Evolta's Q2 Results 2024 conference call and live webcast. I am Moira, the chorus call operator. I would like to remind you that all participants will be in listen-only mode and the conference has been recorded. The presentation is followed by a Q&A session. You can register for questions at any time by pressing star and 1 on your telephone. Webcast viewers may submit their questions in writing via the relative field. For operator assistance, please press star and 0. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Xavier Rossignol, CEO of Avolta. Please go ahead, sir.

Thank you very much. Good morning, good afternoon, good evening. Thank you very much for being on this first half 2024 Avolta results presentation. I'm here with Yves Gester, our CFO. we will first have a presentation and then an open Q&A. We are going to use the presentation we have put in our website this morning. I will be referring to the pages we are going to use. So we will start in page four with some of the highlights. First, we are presenting a very strong set of first half results. Once more, and now it's six quarters in a row, we are presenting results that are in line or ahead of expectations, and in line or ahead of our own outlook. We have grew The first quarter and the second quarter, an 11% year-on-year with an organic of 7.1%. EBITDA has grown more than that, almost 16%, thanks to the expansion of the EBITDA margin by 40 basis points on the top range of our outlook, reaching already 9% for the first half of the year. Taking into consideration our seasonality, this is a very good result. Even more expansion on the equity-free cash flow. We can see that not only the top line goes well, but the synergies and the cost discipline is reflecting in the EBITDA and in the equity-free cash flow, growing that number more than 30% versus the same period of 2023. The key business development is also going very well. We have in this page, and it has been published during the semester, the several renewals and new signing of contracts across the board. At the same time, we keep finalizing the active portfolio management and exiting the less or the least profitable concessions we have. That's why the combined number of wins and losses and exits is close to neutral. But with the timeline and the signings of 24, 25, and 26, we believe that number will, of course, remain on the positive side over the near future. And the last idea on the highlights. We are not only performing well on the short term, but we are growing. step by step building this new company, the foundations of continuing this good performance over the next few years. I'll deep dive in that in a few minutes, but we are transforming the physical stores. We are transforming the digital engagement with customers and we are even exploring new ways of using the data that we have not done so far. Flipping now to page five, we have a little bit more details on the figures. We have reached 6.3 billion on the first six months of the year. 7% organic, 11% reported. July and the expectations for the summer remain very strong. Quarter one, of course, benefited from Easter that was moved from quarter two to quarter one in 2024. But if you eliminate this factor, the progression has been very stable. The comparables in the summer are, of course, more challenging. Last year, July was the highest ever. But despite that, we keep seeing very good performance at the beginning of the summer. I already mentioned the expansion on the EBITDA margin, a combination of the synergies that will be fully implemented in 2024 as announced, and also a general cost discipline because this is a clear priority on our strategy, which also converts into a higher equity free cash flow. Yves will explain in more details the different elements of that equity free cash flow. Also, net profit, core net profit after minorities has reached 182 million, which is also an extraordinary result. It's 47% more than the same period of last year. We continue deleveraging, reaching already 2.35%. which is clearly in line with our continuous focus on deleveraging. Again, if we'll explain more in a few minutes. Moving now to the next page, we have some data on the regional split, on the category split, and on the segment split. We typically don't discuss that, but I think it's very important to use this data to see how diversified is our business, particularly into the business lines. Almost a third in each of the key businesses, duty-free, duty-paid, and F&B. That allows, together with the geographical split, to be very resilient, very predictable, and very constant on the performance. By region, some of the headlines, EMEA had the growth like for like close to 10%, which is pretty strong taking into consideration that Europe has lacked some of the highest spenders for geopolitical reasons. and also has been suffering some of the countries, the effects of the Middle East conflict. Despite that, the behavior of consumers remain very strong because, as we said several times, if one place is not open for holidays, they go to another place. And overall, our EMEA activity is extremely strong and growing. Also, it's pretty extraordinary that we have some of the main shops in Spain under refurbishment. north america also a very strong performance with a like for like of more than six percent working very well both the fmb the duty paid and a little bit better even the duty free as you know the north american business is more domestic than the rest it's a very stable business and it's more on fmb and duty paid than duty free duty free It's starting getting more and more traction because some of the Asian passengers that were lacking last year are starting coming. Not the Chinese, but other Asian nationalities. Latin America, also very strong performance. Once you take into consideration that Argentina was particularly strong last year due to a very particular situation of the exchange rate. Now Argentina is back to the traditional level of sales. If you discount this factor, the region is growing more than 10%. And the reason is because Mexico, the Caribbean is remaining very strong. They are holiday places. And on top of that, now we have Brazil picking up with the recovery of the traffic and the consumption in the country. So overall, also a very strong performance. Even if we had, of course, as is the season, some effects on hurricanes and other aspects, but we don't explain those because one year is one thing, another year is another thing. But they're still very stable. Asia-Pacific, where we have done the biggest restructuring of the portfolio, but when you do like for like, it's also growing 13%. which is particularly impressive taking into consideration that on the locations that rely mostly on Chinese passengers, that's not the case. Chinese are traveling less internationally, and they are consuming less than last year. Despite this factor, and thanks to the diversification, we've been able to more than compensate that effect in other parts of the portfolio. That's why, on a like-for-like, all the regions report a positive growth. If we go now to page eight, I'm gonna use a few slides to give a little bit of a strategic update. The first page is well known, but I'm not sure it's always taken into full consideration. We are in an industry where the number of potential customers increase three, three and a half percent per year. But the cumulative effect of this means that in 15 years, you double the number of potential customers. And those are customers that are in front of our stores, in front of our shops or restaurants. And on that basis, if we go now to page nine, we have a very clear strategy which we have explained many times, but I think it's good to remind it. Pillar number one is the focus on the consumer. Those passengers that are already in front or even sometimes inside our stores have an average consumption, an average penetration of 25%. So there are many passengers that happen to be there, they are not finding what they want there. or on the way they want it. And that's why we are investing a lot of time and effort, and I explain some cases in a few minutes, and how to attract those. And that could include the hybrids, better use of data, the entertainment. The second pillar, which maybe we didn't mention in the last few calls, is the constant and continuous operating improvement. And that's why the growth in sales, it's projected into more growth of results and cash flow, because we keep a very strong discipline. And we are learning a lot. And we are learning how to be more efficient in the cost, how to be more efficient on the capex. And over time, I think that will keep reflecting in an expansion of margins and cash flow. The geographical diversification. I think the behavior of Europe, to give an example, it shows that the strategy of having a wide network on the different regions is very important. Because nobody can predict exactly the geopolitics or the economical situation of every single country and population. But if you have a wide network of countries, you can compensate those effects. Europe is very clear, North America is very clear, Latin America is very clear. And over time, with expansion we expect in Asia, also in Asia. The geographical expansion properly done, it gives you predictability and visibility on the results. And of course, we keep committed to our social aspects of the activity. And we keep investing in reflecting our activities into the communities where we are. If we go to next speech, In one slide, what means this strong market and this clear strategy? It means that Avolta is unique. Avolta is uniquely positioned from a competitive point of view for three clear reasons. And they're not opinion-based, they're factual. Number one, we have the widest network in the industry. on number of locations, on number of countries, on number of stores. And that is reflected also on the size of our concession portfolio. And very importantly, that that portfolio is in duty-free, duty-paid, and F&B. So we can cope with any movement in the market, and we can benefit from any new trend better than anybody else. Second, our scale. We are the largest. That is undisputed. And that means also gives us advantages on the relationship with the brands. And if we combine innovation to that, we can attract more and more value from them. And the third undisputed fact is that we have access to more data than anybody else. Now, What you could claim is, well, this is factually true, how are you gonna take advantage of that? And that's what we are doing, and that's why the numbers are what they are, and we can continue doing. But our basis makes us unique. What are we doing? A couple of slides on that. So if we go to next slide, slide 11, we are acting in our portfolio in two things. On the physical stores, restaurant and shops, with a concept we call flex. Flexible stores, local stores, entertainment, and the X factor. And we are advancing progressively on the digital engagement end-to-end with the consumers. On the first pillar, physical stores. This flex, which is a bunch of initiatives, but is packaging four ideas to simplify the explanation. All our newest stores or restaurants are with a standard skeleton, which means we can change the shelves, we can change the concept, we can even have a F&B concept that could be personalized to events with practically no cost. The message is very simple. We try to be fast in adapting to consumer needs without having to make a big investment on changing the shop or the store. Local. It's clear that there is an increased presence of local products, local brands, and local sense of place, and we emphasizing that in more and more stores. If you choose the right products and you choose the right brands, this is an upside on the sales of the shop, because you still sell the global brands, but on top of that, you have a new segment of sales. Entertainment. That has been on the table for quite a while, and we are getting traction into that. It's not only the number of activations we do on the stores, it's that we do it systematically, and we measured them. That's something that was not the case in the past. Now we know what works and what doesn't work, and then it's easier to extend. And with the proper entertainment, you can change the flow of a store. And that now, thanks to the smart cameras, we know we can change the flow in the store. And with that, you can impact sales. And the last one is that includes several things. One, the hybrids. We receive from time to time some skeptical questions about hybrid concepts. We estimate the hybrid market will be between 10 and 20% of the overall market over the next few years, but it's going faster than we initially anticipated. To give you a data point, on the tenders, that they have been issued this year in U.S., 25% of them included hybrid concepts. Specifically, you can offer F&B, you can offer retail, and you can offer hybrids, with an average of 20% of the space allocated to those hybrids. And it's not rocket science that we have a competitive advantage there because there are less players that are capable of doing advanced hybrids. Smart stores, we will reach 100 stores this year that will represent a significant part of our sales. And as I said, it's not only important to have the cameras and the software, it's to use it to improve the layouts, the assortment, the pricing, where you place the people. We are also advancing on the cross promotions and the cross sell between the different activities. And the places where we have retail and F&B, or at least one of the two types of retail and F&B, it's material. And for that we don't need any tender, we don't need any new contract. we already have the footprint. The only thing we need to do is the commercial activities to benefit one activity from the other. And we see at least a third of our footprint that could benefit from cross promotion. So many of the things I said are possible only thanks to the merger. Others could be done standalone, but some of them are thanks to the merger. So we repeat that the merger has been successful not only on the capacity to generate cost synergies, but also on the capacity to position us over time to keep adding new business. If we move to the second page on the implementation is the end-to-end digital engagement. And I want first to give a bit of data. And then to go to some details. This year, there is 8.7 billion people going through airports. So this is airline traffic, of which we are exposed to a fourth, 2.3 billion. Which means also that, following my earlier slide, that in 20 years, in 15 years, we are going to have 5 billion people potential customers going through our location. Of that, about 25% buys on our store. So today, we have 500 million of customers. And a fraction of that are loyal customers. Of course, the loyal customers are frequent flyers, so those are a fraction. But the expenditure that you can get from those loyal customers is higher than the average. That's why we believe that we need to get information from the passengers, from the clients, and from the loyal clients. In each of them, with more granularity, but for all of them, data. Where are we on this process of using the data? We are in early stages. So this is not something that will transform the company on the next six or 12 months, but has the potential to bring the company to another level three, four, five years from now. So for the next few years, we will keep developing what I mentioned before. But for afterwards, we will use more and more of that data. That data has the potential to improve the way We use assortment pricing, the physical stores, the layouts, also optimization of cost because we are finding out, for example, with the smartest stores that sometimes we don't have the people on the right place or the right number of people. So you can optimize cost. You can optimize working capital. But you can also generate potentially over time new lines of business thanks to using this data. Great market, clear strategy, deployment of that strategy on all key matters. And as a conclusion of that, and that's my last slide, page 13, we confirm the outlook. Because the outlook is not just a bunch of numbers. The outlook is the consequence of all the things I just explained. I'm going to repeat the numbers, even if everybody knows them. An organic growth of 5% to 7% per year, with an expansion of EBITDA margin of 20 to 40 basis points, with an equity-free cash flow increasing 100 and 150 basis points per year. Probably this year, all those metrics will be on the top range, and a very clear capital allocation. We continue with the target to keep the leveraging until we reach 1.5 to 2 times net debt to EBITDA. And we will use one-third of the yearly equity cash flow to dividend, which, of course, as the equity cash flow increases, also the dividend will increase, and two-thirds either to strategic growth or deleverage. Now I hand over to Yves. Thank you very much.

Thank you very much, Xavi. And good morning or good afternoon to everybody on the line. Let me start directly with the profit and loss statement on slide number 15. with a comment on the two first line on turnover and cross-profit margin. So turnover came in at 11% plus reported, which represents an organic growth of 7.1% versus the same period of last year. The cross-profit margin improved by 110 basis points. And those two lines together represent where we as a company stand at the moment in the industry. Turnover growth and at the same time, relevant margin improvement can only be achieved thanks to the strong demand by our customers on one hand side. And secondly, and that's even more important, by our initiatives on the travel retail revolution, which start to get grip, be it on the digital side or on the more conservative traditional side, including everything Xavi has mentioned before in regard to the strategic update. be it the flex model or the digital initiatives. Looking at the cost side of the profit and loss statement, starting with concession fees, they're in line with the performance of last year with 25%. Personal expenses is slightly higher as a percentage over turnover, but that's related to some effects of last year where we had some lacks in the hiring of the people still in the first quarter of the year and some minor effects on the six plus six and six plus five months comparison between the acquisition of and combination with AutoGrid last year versus this year. On general expenses, there is no material difference between last year and this year. And that yields in an EBITDA margin of 9%, bang in line with the improvements of the outlook we provide of the 40 basis points, the higher end of the guidance of 20 to 40 basis points per year we target in the medium term. Below EBITDA, the different lines do not bear any surprises. They are very well managed and ultimately yield a profit, a net profit to equity, which is significantly higher than last year and any year before, also on a comparable basis. So it's the strongest half year, first half year the group has ever reported, also on a pro forma combined basis. If we move on to the next slide with the cash flow statement. So the cash flow statements or the cash flow in general, first and foremost has been supported by the strong operational improvement, starting with the ABTA. On network and capital, and with network and capital, I basically mean the first two lines of the cash flow statement. There's also no surprise that's roughly in line with the performance of last year. On CapEx, we have seen a slightly lower number as a percentage of turnover of what our medium term guidance represent. So it's a 3.5%. We are slightly behind the 4%. We do still expect the 4% to be there in the medium term. Otherwise, the cash flow statement does not bear any surprises. The equity-free cash flow came in at 313.5 million Swiss francs, a very strong result, and also here the strongest we have seen ever in the company for the first half of the year. What is also important to note here are the couple of lines below the equity-free cash flow. We have started again to pay dividend. So that's the 104 million of dividend we have paid in the second quarter. Secondly, we have bought some treasury shares. And thirdly, we had a FX difference, and that's a pure translation impact to transfer or translate the debt in foreign currencies into Swiss francs. And all of that together results in a change of net debt, which is slightly negative for the first half. Moving on to the next slide with the balance sheet. So there is nothing specific to report on the balance sheet. Some of the lines have been impacted by FX translation impact. This is, again, a pure translation impact. So nothing to worry about that. And on the other hand, we have seen a slight increase in inventory. This basically follows the normal seasonable pattern we see in our industry. So we are purchasing ahead of the peak season in summer and therefore slightly higher inventory position than at the end of last year. Moving on to the next slide. with the net debt and the leverage. So as I've already mentioned before, net debt slightly increased. Those effects are on one hand side, the improvement due to the cash flow generation. So that's a positive contribution. And on the other side, we had the dividend payment and the FX impact on net debt, as well as the treasury share purchase. Looking at leverage, disregarding the slight increase of net debt, we were able to reduce the leverage even further. We currently stand at 2.35 times, coming from 2.6 times by the end of last year. So quite an improvement, again, especially taking into account that net debt slightly increased. Obviously, that's thanks to the operational improvement, the increase in EBITDA, which is the second part of the quotation for the leverage. What is also important to note here is, again, and to repeat once more, but Xavi has already mentioned it, the leverage target, which we have for the medium term, which is 1.5 to 2 times. And we are on the trajectory to reach that target and further deleverage the organization. Moving on to the next slide with the maturity profile, a couple of comments here. first one you still see there in 2024 a small portion of a maturity that's the second leg of the debt of the bond so as a reminder we have refinanced that bond already in q2 what is here is the remaining maturity from a cash flow perspective later this year but what is important to note the refinancing has been completed in that regard so it's just from a repayment perspective that this is to come up in october Having said that, a couple of other points which I like about the current maturity profile. First, the maturity profile itself with an average duration remaining lifetime of the debt of around three and a half year. Secondly, the split of product. We have a good split between bonds and bank financing. Thirdly, the split of different currencies. So we are refinancing in line with the exposure we have from an operational perspective to the different currencies. And lastly, but probably most importantly, we have done ahead of COVID a shift into fixed rate coupon debt. We have enlarged the amount of exposure to bonds. And thanks to that, the expenses of interest expenses during COVID did not increase massively. We profit from that perspective and still today have around 70% of our debt on the fixed rate coupon and the remaining part on the floating rates. We have some maturities which come up. And as always, I repeat the same thing I always said, we will refinance those maturities significantly ahead of maturity, which for us typically means between 12 to 18 months ahead. Moving on to the next slide, which is my last slide. So look, just as a quick wrap up, what this is all about. So on one hand side, we as an organization, We profit from the secular growth in our industry together combined with the strategy Javi has mentioned before. We have a very disciplined cost structure where we are focusing on cost discipline and also cash flow generation. We are very resilient in regard to our diversification, be it in regard to products, geographical diversification, financial discipline when it comes to projects, etc., And last but not least, all of that will lead to increase over time on shareholder value with increased performance, increased profitability and ultimately improvement in the cash flow generation in line with the destination 2027 and the outlook we have provided. And with having said that, I hand over back to Xavi.

Thank you very much, Yves. Last slide. A few key messages. another quarter of excellent performance, and that's six in a row. Second, some structural uniqueness based on the size of our portfolio, on number of locations, number of countries, on scale, and on access to data, which is the guarantee, if you want, or at least the basis of of an excellent execution in the next quarters and years to come. Now, in a nutshell, what is a Volta? A Volta benefits in a unique way of people traveling, because it doesn't matter if you fly in an airline A or airline B, It doesn't matter where you go. It doesn't matter if you go with your family or by yourself. It doesn't matter if it's business or pleasure. It doesn't matter if it's a two-hour flight or it's a 10-hour flight. In all those cases, you depart or you arrive to an airport or other channels like the motorways and the cruise liners, but mostly at the airport. And we are there. And we have what you need. F&B, duty free, or duty paid. If on top of that basis, we improve the way we do things, that's on top. But we are very unique because of our size and the capacity to offer the three key segments in the airport experience. Thank you very much for your attention. And now we go to the Q&A.

We will now begin the question and answer session. Anyone who wishes to ask a question or make a comment may press star and 1 on their touch-tone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use only handsets while asking a question. Webcast viewers may submit their questions or comments in writing via the relative field. Anyone who has a question or a comment may press star and one at this time. The first question is from Hirani Chadani from Barclays. Please go ahead.

hi guys thank you for your uh presentation um just firstly on your organic growth of seven percent in h1 do you think that there is any pressure on the delivery on the upper end of the guidance expectation um given that comps kind of get tougher from here on this is a general trend flagged by other companies in the in the travel sector so what gives you the level of confidence that you have and i guess You've also got the added pressure of the current issues that you're seeing in Hong Kong, Macau and Argentina, which maybe then you don't expect will continue into H2. So that's the first question. Second question is, can you give us any more comments on current trading? Maybe that would help. You know, where was July tracking so far? And then finally, you mentioned the business development is going well, which is great to hear. But at the same time, you've obviously said that you're still exiting contracts which aren't profitable. Can you confirm that you said earlier in the presentation that this exits kind of optimization process ends this year? And so should we actually start to see those benefits of new units come through next year? And what would the range of that net new concessions be without these exits? Thank you very much.

Look, the way you need to read is that the organic growth you have seen on the first half is despite missing highest spenders in Europe, despite the Argentina more difficult comparables. So it shows that has been very strong. There has been some comments this morning. I mean, let's remember first quarter was higher than second quarter, but Easter moved from one quarter to the other. We still don't have the final numbers of July, but what we have seen so far is that the trends we saw in June continue roughly in July. You have one or two small effects. uh particularly the the crowd strike that took us a bit of a sales but that was two days and then so the trends continue um not everywhere i want to be very clear on that as you pointed out the chinese consumption hong kong macau and in general everywhere where chinese passengers go is not only not improving it's worsening from last year But what Avolta provides is, yes, we have that. But our network makes us more resilient because we use other better than last year performance. So these 6%, 7%, 8% you see is the average. If you just take the best performance, we are at 10%, 12%. But then, of course, they are the worst performance. That's why we believe that looking at our portfolios, The growth on the summer compared to summer last year, of course, is more challenging because it was a record historic summer. But probably the ratio you will see in the last quarter is going to be a little bit better. Overall, we believe the second half will continue on the same trend. Half a percent more or less is not so relevant because it still indicates the big numbers. Business development. Look, I didn't say this year, I think, and if I said this year, I said soon. What is happening is obviously we did the analysis of the non-performing portfolio, and we give a push. There are still a few things that we might exit next year, but let's say the voluntary exits will decrease over the next 12, 18 months, and then the net wins will be more obvious. We have been reluctant to give a number because that number doesn't depend on us, but it depends on the behavior of the market. And I want to say something that for me is fundamental. The danger, and we have seen that in other people, that you give a target and then you feel committed to that target and you might be signing unprofitable contracts. We want to grow? Yes. But our commitment is to cash flow generation. So we are not going to rush into a contract to show half a point more of new concessions if that is going to negatively affect the cash flow. First, cash flow discipline, and then new concessions. But if things are going the way they are going, next year and the following year particularly, it should add some additional positive. I think that's all the questions.

Yeah, great. That's really helpful. Thank you.

The next question is from Dara Manjari from RBC. Please go ahead.

Good afternoon. Thanks for my questions and congratulations on another good quarter. I just had three questions.

Ms. Manjari, we cannot hear you.

Hello, can you hear me now?

Much better. Thank you.

Great. Thank you. Sorry about that. Thanks for taking my questions. I just had three, if I may. The first was on the U.S. consumer. I wondered if you could give any color on what sort of spending behavior you're seeing out of the U.S. consumer and whether you're seeing any signs of potential weakness amongst that demographic. And then secondly, perhaps a couple for you, and whether that lower rate as a percentage of sales is to do with phasing, and we should expect a pickup in the second half, or could CapEx for this year come in slightly lower than the 4%? Secondly, I wonder if you could give some color on how we should be thinking about personnel costs in H2. Should we be expecting sort of that increase to fade off significantly, or are there any additional costs related to restructuring or layoff costs that we should be considering? Thank you.

Thank you. I will take the first. Look, the U.S., when you take into consideration a few aspects, actually is performing extremely well. In the U.S., you have some airports materially affected by the lack of aircrafts. There are some airlines, and that's public information, that they have had difficulties because of the issues on certain manufacture of aircraft. And despite that, we are delivering a like-for-like of 6.8%. We don't see weakening of the consumer. It doesn't mean we always reflect 100% what happens in the economy, because as I always say, when somebody's traveling by plane, it's already somebody that might not be in the worst-off situation of the general population, because it's that person is already spending and already has a reason to travel, either leisure or or business. So they might be less affected by any macroeconomic situation. That's why the consumer tends to be more resilient when they travel than maybe on their general expenditure. So we have not seen, and I've been receiving this question, I think, for four or five quarters, and I kept seeing. I know everybody wants to see a massive slowdown everywhere, but it's not happening. It doesn't mean there are no specific issues here and there, but the overall, the trend on consumption remains strong. Thank you.

So on the other two questions, let me start with CapEx first. On the CapEx, we have two messages there. On one hand side, yes, we have only spent around 3.5% in the first half of the year, and I do expect to see a certain catch-up in the second half of the year. Will we reach the 4% of the medium-term guidance this year? Yes or no, we will see. But look, the medium-term guidance of 4%, I believe, is still the right number. Again, it's a medium-term guidance. In specific years, we can deviate slightly, be it a little bit below or a little bit above that number. And the key reason for that is an obvious one. Look, CAPEX... typically is not evenly distributed over the years. The invoice don't come in evenly, and also the payment may happen before or after year-end closing. And look, this kind of shift you simply have in the cash flow statement. It's not that this is planned to descend ahead. But look, again, to summarize, yes, we do expect the gap to be closed or partially closed in the second half of the year. Point number one. Point number two on the personal expenses. So look there, the half year was a little bit of a one-off in the sense that it was elevated. In the second half of the year, I do expect to see a normalization of that picture. And from that perspective, I don't expect to see any relevant one-offs or continuation of the trend of the first half to go into the second half of the year.

Great. That's all very clear. Thank you.

The next question is from Jorn Ifrit from UBS. Please.

Hi, Javi. Hi, Yves. Thanks for taking my questions. Just three pretty basic ones, if I may. The first one is, can you confirm that food and beverage is growing... really stronger versus the classical retail business, or is this a misperception? I would take them one by one if it's okay.

I don't know where that comes from. It depends on the regions. You have one activity growing stronger than the other. But it's not a general trend. It depends market by market, and it depends on the profile. So you have, for example, a bit of a stronger F&B in North America than DutyPaid, but DutyFree is growing more than both of the others, even if it's our smallest part of the business. In Asia, probably also F&B is growing more than retail, but for the reasons we know, I mean, the effect on the Chinese consumption. But in Europe, for example, we are having, which is expected because of the summer season, a stronger retail than a stronger F&B. But in all the cases, I'm talking about the small differences. We have growth in all of them.

all regions grow both fmb and retail a little bit more or less depending more on the profile of the customers than on the underlying business thank you for this um the next question is there is some new x-ray machineries at some airports and securitization has changed the rollout is much much much slower than anticipated maybe one or two years ago but you can actually bring your drinks um to to the um after security um areas is this something where in the regions airports that this is materializing do you see an impact on your water sales or soft drink sales or not really not really and actually the initial the initial feedback from the different operations where this has been implemented is actually the country

There is plenty of research that the most stressful part of an airport journey is the security control. It's uncertain. You don't know how long it will take. Even if objectively sometimes doesn't take too long, psychologically you feel exhausted. It feels it takes forever. You don't know after security control, if you don't know the airport, if it will take five minutes or 20 minutes to go to the gate. Sometimes you don't even know the gate. So it's a very stressful situation. If you calm passengers from that, when they go to the other side of the security control, they are more relaxed. Typically, they have a little bit more time, and that benefits our commercial activities. We have seen no negative. I cannot give you proof, quantitative proof yet, that there is an automatic uplift. But in general... the perception of our local teams is that it will be no impact or a slightly positive impact.

Okay, thanks for this. And next question would be please on the share buyback. What was it? 129 million or so. Let's look up in the slides. How do you think about this going forward? I mean, is this a kind of hidden shareback you want to continue the purchase up to 10% of your outstanding shares. What do you want to do with the shares? Is this going for M&A currency? Or do you want to flow to the market at some point in time again? So yeah, an update would be appreciated.

Sure. So look, we have decided to buy some shares on one hand side for the long-term incentive plan. As you know, the compensation of the executive management, but also part of the senior management of the group, or actually the senior management of the group, is compensated by some long-term incentive plan. It's a PSU plan. And that's one aspect. And the other aspect is just for general corporate purposes. So look, we can use those shares for any kind of corporate purposes going forward.

Thank you very much.

The next question is from John Cox from Kepler Chevrolet. Please go ahead.

Yeah, good afternoon, guys. It's John with Kepler here. Just back to that share buyback and the management incentive scheme, is this now we should expect something like that annually from you, that sort of figure? Was this just something extraordinary because maybe a new scheme is being launched and we won't see much of that again for a couple of years? Second question, just going back to what Xavier was saying about we think now on costs and cash flow capex, we can do things better. Why don't you just give us an, you know, an idea of this continuous improvement? You know, do you target, you know, 20 basis points or something per year, which isn't necessarily going to run to the bottom line, but is that... Is that something you're looking at? As an add-on to that, if you do CapEx more efficiently, then you don't need to do 4% anymore, or would you just take advantage of the fact that you can do it more efficiently, but you'd CapEx, say, redesign more shops at a faster pace than maybe you do normally? And I guess the last one on the margin structure of H1, Europe was the main driver there. But also that central services line was a lot better. I'm just wondering if something's changed there, what was behind that, the fact that that contributed, I think, 30-odd million more than it did a year ago. Thank you.

Thank you, John. On the first question, just to, I mean, as Yves said very well, some of the shares we bought are for the incentive plan. Some of them are for general corporate purposes. So they are not all for the management incentive plan. Actually, not the large part is not for that. And therefore, you should not expect something like that every year. It's a little bit of we found it was a good moment to buy those shares because we believe the share price is in a very good moment. On the cost and cash flow improvements, it's a very interesting question because when you establish a discipline in the organization of constant monitoring, constant measurement, zero-based budgeting, Combining two businesses that have never been combined before, if you keep the right discipline, you keep improving ways of improving your business. In the synergies calculation, it was never, for example, the local warehouses at airport level. Because the assumption is that at local level, retail and F&B have different needs. The reality is that when you go deep enough, Between convenience store and F&B, actually, the warehouse can be combined. You have two in an airport, you need one. Immediate savings on the warehouse, on the people, on the logistic cost. Flexible stores. Flexible stores will allow us that some of the upgrading of stores we do on a regular basis, and that's part of the yearly capex, it could be reduced. We are monitoring now the effect of all the things we do. So we know, and that's factual, that when you do a full refurbishment of a store, you get the highest uplift in sales. The new generation of stores we have implemented over the last year could give you 20% uplift on the spend per passenger. But you have to have a big one-off capex and also a few months of refurbishment. We will continue to do that when it makes sense, but we also realize that there are activities that you make the investment once, for example, on the software of a smart stores or on designing a new entertainment. Then, of course, the execution costs are several. So we are learning supply chain. We are reviewing the overall supply chain. So we continue finding ways of improving our business. I know you always like to see, okay, you gave these expectations. Can it be better? But if you think for a minute, 20 to 40 basis points of improvement on the EBITDA every year, requires finding some of the things I'm saying. Maybe we are finding them a little bit faster than we anticipated, but it's part of our long-term outlook. And both on cost and capex. We are not ready yet to say that the structural capex will be less than 4%, because it's too early for that. But if things continue the way that we see now maybe next year we can say that the structural capex is a little bit less for the time being it's only half a year has been a very good first half a year after an extraordinary year 2023 So the basis is very good, but I'd rather keep going quarter by quarter, improving the business, than maybe now going to much higher expectations. We keep the outlook, but every quarter we feel more comfortable with that outlook because we keep improving the business. I hope it's fair enough. Thank you. On the $30 million on central. I mean, look, the allocation by segments, you also have the savings on the synergies on the head office and the shared services, where, as we said, the synergies are coming from head office and supporting functions, are coming also from regional head office, and also from the U.S. So you see sometimes an over... On a quarterly basis, you cannot follow exactly, but it's basically the consequence of the delivery on the synergies.

The next question is from Ali Nafki from HSBC. Please go ahead.

Hi there. Thanks for taking the question. Two for you, Yves. Just in terms of the margin and cash progression, H1 into H2, could you just remind us of how this moves from H1 to H2 historically? I mean, do you expect a large increase in costs relative to the level of sales growth that you're expecting? And then therefore, you know, you've got it to the top end of the range. Is there any reason why you couldn't potentially beat that? Secondly, just on the leverage target, I mean, how do you think about as a board, you know, whether you do a special dividend or a buyback, and what sort of quantum would this start to enter your mind? You know, is it when you get to 1.9 times net debt to UDA, or do you need to be below that and make it more material? And then, Xavi, just in terms of concession fees, they fell slightly in the first half. Anything to call out there? And could you just give us an idea on whether the returns or concession rates for new contracts are any better or worse versus pre-COVID. Thank you.

Let's look, if we start with the first two ones. So on the cash flow and the margin for the second half and the first half, look, we have seen, and you know our business is seasonal in regard to the EBTA margin on one hand side, but then also in regard to the cash flow. In regard to the cash flow, typically the first quarter is very negative. And you have also seen that this year, Q2 and Q3, Q3 are typically the strongest quarter, so Q3 clearly the strongest, Q2 a little bit behind. Now we have seen an extraordinary strong first half year. I think the performance was extremely good. Then Q4 typically is flattish to slightly negative. And when you look at the history of the organization, be it performer combined or also on a standalone basis, it always follows more or less that pattern. So, look, in regard to the outlook, we stick to what we said. In regard to the top line, in regard to the margin improvement and also the cash flow conversion, Xavi was very explicit on that on his last slide when speaking about the strategy. And we'll continue with that messaging also going forward. In regard to the leverage target look also there, what we said is 1.5 to 2 times. We fundamentally believe that the lower leverage compared to what the company had before COVID is clearly healthy and the target. But we also at the same time believe that a Too low leverage, let's say even a net asset position is not necessarily or definitely not efficient for the industry we are operating in. So a certain level of leverage to maintain that seems to be the right way to go. Now, if we get into the leverage target band of 1.5 to two times, we will need to see on what we do with potential excess cash generation. I mean, one of the things we have already mentioned, we believe in a further consolidation of the industry. We believe in further M&A opportunities in line with M&A. the way Xavi has outlined it, with a very disciplined cost discipline. So we are not buying market share. We are here to generate cash flow. But within those boundaries, there will be further small and mid-sized bolt-on acquisition. And as a consequence, also the deal average potentially The trajectory is a little bit flat, if those kind of M&As indeed happen as we go along with the deleveraging. And look, once the time is right, we can talk about other measures. But I think at the moment with the 2.3 times and with the potential for the bolt-ons, it's probably a little bit too early to talk about it.

Your last question on the concession fees. Look, this is the consequence of several things. Number one is more rational behavior, both of airports and operators. We said we expected that to happen, and it's happening. Less MAX, more MAX per passenger, even no MAX whatsoever. Second is our own active portfolio management. Exiting unprofitable markets or deficient activities. Bidding, as I said earlier on, I'd rather not win a place if it's going to come with negative cash flow. So our discipline in bidding and exiting is also helping. And also now, because we have retail and F&B, we can also be more selective where we grow. So I've been reluctant to give a number on concession fees because it depends on so many things, the weighted average, et cetera. But I do see definitely less pressure than the one that was before COVID. And that, of course, that is helpful on maintaining and increasing the margins over time.

Great. Thank you.

The next question is from Yvonne Cho from Nanfang Trinity. Please go ahead. Hi, can you hear me?

Yes.

Hello?

Yes, we can hear you very well. Thank you. Go ahead with your question.

Yeah, can you? Thank you. I must miss this, but can you remind me, I think you mentioned that the gross margin uplift young year is due to mixed effects. Can you elaborate a little bit on that? What sort of mixed effects was that? And then, I mean, you basically, over the last, I think, how many quarters, you've been basically repeating your own guidance. I'm just wondering what sort of things are holding you back from being more positive on your guidance overall for this year as well as medium term? Should we expect for this year that you should be dealing all your guidance in the purpose like you should be arranging top end of all the guidance either margin, cash flow conversion? Is that what we should be expecting?

Look, the line was not perfect, so hopefully we are going to answer. I'm going to take the second one on the evolution of the gross profit margin, if we'll take it. But if your question is, we didn't say we will not achieve the outlook. We said we will achieve the outlook and we will achieve the top part of the outlook. So we were very reassuring that things are going as expected. Some people ask, could you do better? And my answer is always the same. We will try. Our aim is to beat the outlook. But our outlook is our outlook because you can not only expect the things you will do, you also have to give credit. some room for things that could happen in the market. So we confirm our outlook for the long term, for the midterm, and for this year, even on the top of the range of the outlook, and we feel comfortable with that. I think that's a very strong statement, particularly when you see what is happening in other places. On the gross profit margin, I'm not sure, I think you asked Why is it improving?

110% basis point. So look, basically the gross profit margin, the improvement is twofold, as I have explained in my speech. On one hand side, it's thanks to the high demand from our customers. So they do want to purchase, they do want to travel, and as a consequence, we see that improvement in the gross profit margins. Point number one. Point number two is all the initiatives Javi has mentioned before, where we as a company have done progress on our travel experience revolution initiative and on our strategy destination 2027 in general, with a lot of different initiatives, as explained by Xavi, be it entertainment in the stores, the flexibility of our stores, new product range, more sustainable products, entertainment, and all the digital initiatives.

Thanks. Next question is from Kasper Lund.

Thank you. Congratulations on a good quarter and a good first half in your business. I have two questions. One is on capital allocation, and the other is more broadly on shareholder value. Some people have asked on your share purchases in the first half, and I wanted to elaborate a little bit on that. You have a strong balance sheet now. You have access to, frankly, very cheap debt. I think that the yield on your bonds is around 4.5%. And you mentioned yourself earlier in the call that it was a good time to buy some shares in the quarter, principally for the Treasury. I wanted to understand a little bit better what's behind the current capital allocation and more specifically what's what's holding you back from, frankly, buying back more shares and canceling them, given the discrepancy between your high credit rating and your less, how should I say, less attractive equity rating? That's my first question. I wanted to understand a little bit what's holding you back and what's behind the current capital allocation. The second and related is broader on shareholder value creation share price has been a bit mixed the last year, three, five years, maybe even further. And I was thinking that maybe Switzerland isn't the right market for you to be listed in. You have a very diversified, very profitable business, which actually has very little to do with Switzerland. Would you or the board consider listing somewhere else, potentially in the US, where there seems to be greater appreciation of of businesses such as yours? Those would be my two questions. Thank you.

Thank you very much for the two questions. Point number one, rest assured that both management and board of directors focus a lot on shareholder value creation. We take that very seriously. Number one, to create value always. is to do a good performance. The company needs to generate good growth and good generation of cash flow. That's the basis of everything. And that's where management has been focused. We need to remember that we came back, we just came out two years ago from a big crisis. We did the big merger next year. Management is new, I joined two years ago. We put a new strategy 18 months ago. So management and board aligned that we had to put a solid basis for this new merge entity and this new strategy. And the focus was to build a long-term solid and profitable business. And on that context, it was felt that the best capital allocation policy was number one, to deleverage, number two, to pay a regular dividend to compensate directly with cash shareholders on a yearly basis, and number three, to potentially keep growing the business. This capital allocation policy has less than a year But the board and the management keeps looking at what happens in the market, what happens with the share price. So nothing, by definition, needs to be ruled out. So we are monitoring the situation. At this time, the only thing I can say is what is official. The capital allocation policy we explained is the existing one and is the one we stick for, for the reasons I just said a minute ago. In the near future, in the long term future, things might change. But at this stage, this is what we stick to. On the listing location, I think this company requires a little bit of stability. A lot of changes have happened, as I said, the merger, the exit of the COVID crisis, new management, new strategy, and I think a stable frame is positive. But again, in due time, the board might take a decision that might be different, but for the time being is very clear. Our outlook, our capital allocation, and the existing listing locations is what is the frame of a Volta today. We will keep focusing on delivering higher cash flow and higher profitability over the next three to five years, and we will keep monitoring the best way to generate value for the shareholders. Thank you for your questions.

We now have a question from the webcast. Azanai Harbin asks, have you seen any meaningful changes in SPP and promotional activity? Thanks.

SPP, on a comparable basis, so taking different, the weighted average of the different activities, seasonality, et cetera, keeps growing across the board with a few exceptions, like Chinese. Chinese are not increasing the spend per passenger. Actually, they are decreasing, but over the wide range. portfolio, we are increasing. So we keep seeing increase in passengers, but also increase in spend per passenger for each of the relevant constituencies. And this is the result, we believe, of the actions we do on the new stores, on the new commercial initiatives, on the entertainment, et cetera, et cetera, that we explained earlier on.

The next question from the webcast is from Timothy Malfet asking, hello, could you please repeat when the Melbourne effect will disappear?

Sure. The Melbourne effect annualized by the end of May 2024. So it expired 2023, end of May, and it lapsed in May 2024.

There are no more questions at this time.

Thank you very much, everybody. I hope it was useful. Definitely was useful to us. And as I just want to say a couple of final things. First, thank you to all the team members of Volta. It's thanks to you that we are able to deliver the type of results we delivered today. And the second thing, I don't know if you're going to buy shares or not, but please, when you travel, buy in our shops and buy in our restaurants. Thank you very much. Have a nice day.