Avolta Ag Unsp/Adr

Good afternoon, good evening, and welcome to this half a year results presentation for Avolta. My name is Xavier Rossignol. I'm the CEO of the company and next to me, Yves Gester, our global CFO. I'm going to use the presentation from our website and also projected here going straight to page number four. The highlights of the first half a year. are another, and I think it's 12 now, quarters in line with our outlook. Very strong performance across all the key measures. It started with a reported growth, same currency, of 7.1% for the first six months of the year, which is a strong organic growth of 5.7%. As we're going to discuss in the next few minutes, this Percentage is particularly strong taking into consideration the challenges of the first half of the year, the slowdown in the U.S., the Middle East crisis, and the ongoing geopolitical challenges either in the Middle East, on Ukraine, or in other parts of the world. Despite all that, we have delivered a clear positive growth on the first half of the year. EBITDA margin has expanded again 30 basis points at the midpoint of our mid- and long-term outlook, and we have generated also a very strong equity-free cash flow. Of course, the cash flow per quarter is affected by the seasonality of the business and the CAPEX, as Yves is going to explain later on. Commercially, we continue not only with a strong like for like, but with a positive business development in all of our four regions. And we've been reporting during the last few quarters advancements in all of them, both in food and beverage and retail. And we never forget that we are here to deliver value. And in the business development, that means focusing on profitable and good return investment. So we continue with an active portfolio management, focusing on getting the right ones and when necessary exiting the wrong ones. We continue the strong push on the commercial and digital transformations. Our Club of Volta has reached, in June this year, 13 million members. If you look at the latest data we gave, it means we are recruiting about half a million new members every month. We are getting more and better data, and we are able to keep improving our performance thanks to that. We confirm again our mid-term outlook, the 5% to 7% organic, the 20 to 40 basis points EBITDA margin expansion, and a continuous growth of 100 to 150 basis points on the equity-free cash flow. As we said in our Capital Markets Day, we want to be surprising for the passengers in our stores, in our restaurants, but we want to be tremendously predictable in the investors' community. And this quarter and this first half a year are again an example of this predictability. And part of this predictability is how we approach capital allocation. And it's exactly the same that we've been saying now for almost two years, focus on growth, focus on the leverage, and focus almost obsessively in shareholders' balance. Moving to the next slide, we can see that the growth was strong not only during the full half a year, but also in quarter one and quarter two, despite all the challenges I mentioned. I think we explained in the past, our outlook of five to seven is based that, assuming that the market condition, the geopolitical conditions could change. And if we have a bad year, we should be at the lower range, and if we have a less challenging year, we should be more on the top range. If we move to the next slide, we can see that this positive growth, like in the first quarter, is in all the regions, with the exception of North America. And the weakness in North America is motivated by a lower number of domestic passengers in the U.S. This is well-known in the market. This is TSA-available information. The number of domestic passengers in the U.S. are slightly negative, and that's why our organic growth in that region is flat. Which I think puts even more value to the overall results. And I'm sure Another year might be in the other way around. But this resilient growth is because our strategy and our focus on customer does work and also because of our strong geographical diversification and business line diversification, food and retail. Going to the next slide. This is just a of what we explain in full detail during the Capital Markets Day. Our growth is based on like-for-like passenger values plus spend per passenger, which is either the average ticket growth or the conversion growth. On top of that, we have the business development and potentially, if they come to the right value, potential mid-size, small-size M&A. And we achieve the organic growth thanks to what we call the Avolta growth engine. And the Avolta growth engine is this extreme focus on increasing the satisfaction and the sales per passenger. Combining things on the physical space, the pricing, the assortment, the flexible spaces, the local look and feel, the combination of FMV and retail, the entertainment, but also the digital side with the smart stores, with the data, the loyalty program. And we do that not only to increase the sales per passenger, but also to attract and give more value to our brands, benefiting them, but also benefiting our margin, and also benefiting the landlords, the airport owners, Because if we sell more, everybody gets a higher return. And I want to make a quick mention. Yesterday, AENA, as you know, our largest airport partner worldwide, made a specific mention to us and gave us or put us as an example on how airport and operator can work together to increase the performance of in this case of retail, benefiting both the landlord, the airport partner, and the operator. And I think it's particularly relevant because it's a very sizable operation, and it was not easy to achieve the performance we are getting. But it's a good proxy that investing in the customer benefits everybody that is in the airport or in the transportation ecosystem. I'll give a few flashes on each of these pillars. Of course, there was much more detail in our capital markets data, and I think the video is available in our website if somebody wants to deep dive on that. Pricing and assortment. It's a key element of our basic business, and the only message here is we are more and more driving both based on data. It's less a decision driven by procurement, it's a decision driven by the data on passengers. Second, the flexible spaces, and I gave some data during the Capital Markets Day from space Flexible space of less than 10%, 15%, we are moving to 30%, 40%, 50% on the new areas, on the new shops and the new restaurants. This business evolves very quickly. The profile of customers changes very quickly. We need to be having flexible stores. If we move to the next slide, also tremendous focus on the sense of place. Every airport, every service area, every cruise line has flexibility. certain particularities. Addressing those on the look and feel, on the assortment, it's a way to increase satisfaction and sense. We had some journalists this morning here in Italy and they were asking data about Italy. And two or three things came out that were pretty interesting. So, number one, SQ we have in the Italian airports and in the Italian activities is cheese, is Parmigiano-Reggiano. We sell more than three tons of cheese a year. That is, if you want a small example, but it shows that even the number one product in retail can be a local product. The other key pillar, and that is only possible thanks to the merger between Autogrill and Dufri, the new Volta, is the potential to use F&B and retail to mutually enhance each other. From cross-promotions, sharing data, cross-pricing, all the way to physical spaces that combine both, which could be a retail... Shop with some F&B or vice versa. Coffee and convenience. Food and duty-free. Champagne and luxury wine and spirits. Branded corners from why not to brand a retail space with a chocolate brand or a perfume brand, etc., etc. That capacity... It's pretty unique at a scale in this industry. And what is very interesting is we see more and more examples of market moving into that direction. More tenders, more spaces allocated to hybrid spaces. On the next slide, entertainment. I'm not going to go. We have shown videos in the past. It could be from a flight simulator, a Formula One simulator. specific festivities linked, but what is really important is the bottom left of the slide. We do measure everything we do, not only on entertainment or on everything. This example is of camera analytics, and we can see what our commercial actions produce on the spaces that we are operating. We can see how the flow changes. We can see how people look at certain displays or not, how they react if they talk to our personnel or not. And that is thanks to the smarter stores. And the smarter stores, they have the front end and the back end. Part of our digital push in the physical spaces is for passengers, from digital advertising to self-checkouts to QR coding ordering processes. interaction, perfume simulators, and part of it is to improve the back of the office, providing data, for example, on AI-generated copilot for our shop managers. If we move to the next slide. Data, one of my favorites. This data I'm giving in this slide is well known, but I keep repeating it because it's pretty amazing. Last year, we had exposure to 9.5 billion passengers in the locations where we are, 670 million of actual customers, and now I realize I'm not sure. I said 2.5. No, no, no. Okay, sorry. Just making sure I was. And then we have 13 million of members, as I mentioned, in our clapboard. From non-customers, just the people that go through our locations, the 2.5, we have data. We have data on how they move, how they behave. in the shop. From our customers, we have much more data. We have basket size, average tickets, and maybe we have the boarding pass. We have the passport. We have the destination. So it's a lot of additional data. And for the Club of Bolta members, of course, we have a level of intimacy, a detail that is much bigger. And we are using more and more of this data to fine-tune each of the pillars I've been mentioning in the prior slides. And to finalize this, again, some highlights on the loyalty program. The 13 million members that I already mentioned, and it's pretty consistent that they keep spending three times the average ticket. So they are the Philcorn flyers, and they are the highest vendors. At this speed, probably this year, the sales generated around Club of Volta will reach 6% or 7%. So it's already a sizable percentage of our sales. Next slide, please. All that is why we keep confirming our outlook. Despite all the things that are happening in the world, because of our Volta growth engine and our strategic focus and our diversification, we still believe we can generate this outlook I mentioned earlier, 5% to 7% organic. 20 to 40 basis points of EBITDA margin increase per annum and equity free cash flow conversion increasing by 100-150 basis points and my last slide is on the capital allocation this company and this management is tremendously focused on value first we invest in growth our existing stores the commercial transformation the digital transformation Second, we invest in business development, new locations. And potentially, third, we could be doing from time to time mid-size, small-size, bolt-on acquisitions. Only if they deliver clear accretion to the company and only at the right valuation and only if financed with our debt capacity and not with new shares. Second, financial discipline. We continue deleveraging this quarter again with a target to be a net debt to EBITDA of 1.5 to 2 times, potentially going to 2.5 if there is some specific strategic growth. But extreme discipline on the balance sheet. Last one, value for shareholders. Progressive dividend of one-third of the equity free cash flow every year. If you see the outlook I just mentioned, you see that the equity free cash flow will increase materially every year, and therefore also the dividend. On top of that, if there is excess cash, we will continue doing share buybacks. We already did one last year. We announced another one for 2025 of $200 million last year, $200 million this year, and we have acquired so far almost half of the shares needed for this year. With that, I'm happy to hand over to our CFO, Yves Gester.

Thank you very much, Xavi, and good morning and good afternoon to everybody on the line, also from my side. Moving on to the financial results with the first slide, slide number 15, with the highlights of the financial results. Organic growth came in at 5.7% for the half year, with reported growth at constant exchange rate or total growth of 7.1%. ABDA margin improved to 9.3% for the half year. This is an improvement of 30 basis point versus the same period last year, and in the midpoint of our guidance of 20 to 40 basis points improvement in the medium term. The equity-free cash flow came in at 216 million Swiss francs, in line or slightly ahead of expectations, which allowed us to deleverage to 2.15 times from 2.35 times, so by 0.2 terms over the last 12 months. reaching very close to the medium term outlook or guidance of 1.5 to 2 times net debt to a BTA. Moving on to the next slide, slide number 16, with the profit and loss statement. Before we look into the details, two comments to the profit and loss statement. Number one, it is affected by the slower growth relative to the Organization of North America. As you know, and as we have presented at the Capital Markets Day a few weeks ago, different concepts have different cost structures, but yield a similar APTA margin. Duty-free, convenience or duty-paid, and food and beverage reflect all quite different P&L structure, but yield the same APTA margin. And I think the P&L of this half year is a good example of that. because of the slower performance or growth relatively to the rest of the group, North America which is predominantly food and beverage and convenience has an impact on the group result and as a consequence we see a slight increase of the concession fee. Concession fee typically in North America because of the heavy weight of food and beverage is below the group's average. The second one is personal expenses. Personal expenses is more labor intense for food and beverage, and as a consequence is decreasing with the slightly slower performance of North America relatively to the group, and the same applies to general expenses. So that's the effect number one you see here. The effect number two is the growth engine, which you just have heard about. It's the continuous improvement of the cost structure and the performance of the group overall. That helped us to grow on the top line and has contributed to the turnover and the revenue generated in the first half, but it also has led to a reduction of personal expenses and general expenses overall, and ultimately yielded the 30 basis points improvement in the EBITDA margin. Then if we look at the P&L below EBITDA margin, you see a slight improvement in the financial result. This is mainly derived from the refinancings done over the last two years, but also the increase in the ratings by the two rating agencies, S&P and Moody's. On the tax and income tax paid, you see a very good result for the first half. That's obviously based on our approach to manage it, but then also we potentially see a slight pressure and a little bit more normalized picture in the second half of the year. In regards to the rest of the P&L, this is in line with expectation. ultimately leading a significant improvement of the earnings per share over the last two years by 19.6% in the half year 23 to 24 and 28.7% over the last 12 months from 1.22 in half year 24 to 1.57 this year. Moving on to the next slide, slide number 17 with the cash flow. Obviously, significantly supported by the operational results on the EBTA level with an additional 44 million of EBTA. The rest of the cash flow statement is actually quite uneventful, all in line with expectations and also previous year. CapEx slightly increased to 3.7% versus 3.5% last year, yielding ultimately the 216 million of equity-free cash flow for the first half. Just want to mention quickly two additional elements on the cash flow statement. That's the dividends to the group shareholders we have paid earlier this year of 143 million. It's one Swiss franc per share versus the 70 cents we have paid last year, an improvement of 43% or actually an increase of 43% year on year. The treasury shares we have purchased, which ultimately at year end, once we have purchased the full amount of up to 200 million Swiss francs, will be cancelled. So for the half year, we have purchased so far 92 million Swiss francs from a cash flow perspective. Moving on to the next slide, slide number 18, with the leverage. I've already mentioned it, but quite a steep deleveraging profile, disregarding the fact that we have significantly increased the dividend, as already mentioned, and purchased 100 million of treasury shares under the share purchase program of up to 200 million. So leverage stands at 2.15 times versus the target of 1.5 to 2 times net debt to EBITDA. On the maturity profile at the bottom side of the page, nothing surprising there. We have refinanced, as we have disclosed earlier this year, a 300 million Swiss francs facility, a bond, with a new 500 million euro facility. We will use that 500 million euro facility not only to refinance the bond, but also have now an additional capacity to potentially refinance with part of that cash the maturity coming up in 2026, the 500 million convertible bonds. And as you know, we have sufficient liquidity under the RCF and also cash on the balance sheet. And we also intend to generate some further cash for the remainder of the year. So no refinancing risk in that regard at all. The Euro bonds we have issued earlier this year, we have fully converted into Swiss francs. which will reduce the interest expenses from the coupon of around 4.5% to around 2.4%. So very attractive terms indeed. Overall, before I hand back to Xavi as a last statement, a very predictable financial result. And with that, handing back to Xavi.

Thank you very much. I'll move now to page 20. Just a few messages. I'm not going to read the slide, but very good performance on the first half. Similar start of the summer. Half one has been challenging. Despite that, we have provided a very strong set of results on the top line, but also on the results. We expect a similar second half, challenging environment. But because of our engine growth and our diversification, we will keep performing in the mid and long term in line with our outlook. We want to be a company that surprises the passengers, that provides an experience that they are not used to have, which of course incentivizes them to consume more to our benefit and the benefit of our landlord partners themselves. and our brands. But on the markets, on the investors' community, we want to be extremely predictable, both on the delivery of results and the use of resources on the capital allocation. And that, all of that, is what you have seen now for two and a half years. With that, I thank all of you for your attention, and we can open the floor for Q&A.