Earnings call transcript: Avolta Q1 2025 shows resilience amid diverse growth

Avolta AG reported its financial performance for Q1 2025, showcasing steady growth and a strong strategic position across diverse markets. The company achieved a turnover of CHF 3.05 billion, with organic growth at 5.3%, which adjusts to 6.5% without the leap year effect. The company’s impressive performance is backed by a "GREAT" financial health score according to InvestingPro analysis, with particularly strong momentum in recent months, delivering a 34.4% return over the past six months. Despite challenges in certain regions, Avolta maintained a robust performance, reflected in its improved net debt to leverage ratio and continued investment in digital transformation.

Key Takeaways

• Avolta reported a turnover of CHF 3.05 billion with 5.3% organic growth.
• The company launched 32 new stores and expanded its loyalty program by 1 million members.
• Net debt to leverage ratio improved from 2.6x to 2.2x year-over-year.
• Full-year outlook remains strong with a forecast of 5-7% organic growth.
• Continued focus on digital transformation and geographical diversification.

Company Performance

Avolta’s performance in Q1 2025 reflects a strategic focus on diversification and innovation. The company has made significant strides in expanding its geographical footprint, notably launching new stores and concepts in Europe and Asia. Despite flat growth in North America, Avolta’s diversified portfolio has helped mitigate regional challenges. The company’s emphasis on digital transformation and customer experience enhancements continues to drive its competitive edge in the market.

Financial Highlights

• Revenue: CHF 3.05 billion, reflecting 5.3% organic growth.
• Core EBITDA: €196 million with a 16.3% margin.
• Equity free cash flow: -€104 million.
• Net debt to leverage ratio improved from 2.6x to 2.2x year-over-year.

Outlook & Guidance

Avolta maintains a positive outlook for the remainder of 2025, projecting 5-7% organic growth and an EBITDA margin expansion of 20-40 basis points. The company anticipates a potential recovery in the North American market in the latter half of the year, supported by ongoing investments in digital initiatives and self-checkout technologies. Avolta’s strategic focus on data capabilities and digital transformation is expected to further enhance its market position.

Executive Commentary

Xavier Rocignon, CEO of Avolta, emphasized the company’s strategic strengths, stating, "We are a diversified company. We see strength quarter over quarter on our focused strategy, and we are delivering in all the key financial and commercial metrics." He also highlighted the importance of digital transformation, noting, "The digital transformation journey ahead of us is massive."

Risks and Challenges

• Regional market variations, particularly in North America and Asia, pose ongoing challenges.
• Potential macroeconomic pressures could impact consumer spending and growth.
• Continued investment in digital transformation requires careful capital allocation.
• Supply chain disruptions could affect operational efficiency and cost structures.

Avolta’s strategic initiatives and robust financial performance position the company well for future growth, while its focus on digital transformation and geographical diversification aims to mitigate regional challenges. The stock currently trades near its 52-week high of $53.89, reflecting strong market confidence in the company’s strategy. For comprehensive analysis of Avolta’s valuation and growth prospects, including exclusive financial health scores and detailed metrics, visit InvestingPro.

Full transcript - Avolta AG (AVOL) Q1 2025:

Moira, Chorus Call Operator: Ladies and gentlemen, welcome to the Avalta’s Q1 twenty twenty five Trading Update 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 is being recorded. The presentation will be followed by a Q and A session. The conference must not be recorded for publication or broadcast.

At this time, it’s my pleasure to hand over to Mr. Xavier Rocignon, CEO of Avolta. You will now be joined into the conference room.

Xavier Rocignon, CEO, Avolta: Good morning, good afternoon, everybody, and thank you for being here today in this quarter one trading update of Avolta. We’re going to make a presentation together with our CFO, Yves Gester. I’m going to go straight to Slide number four of our presentation. Quarter one, and we are also giving data on year to date April, has started very strongly. We have reported on currency exchange rate a turnover growth of 8.2% on the first quarter with an organic of 5.3%.

If we take into consideration that last year February was a leap year, the comparable growth on quarter one will be organically 6.5%. Our core turnover has also increased nicely in April. We already disclosed that there are some seasonality moves this year, Easter being in April instead of March. And as we already said, we believe that the year to date April is the right way to look the performance of the company. That will be even slightly better than quarter one with an 8.5% total growth at currency exchange rate and 5.7% organic.

Without the leap year effect, the organic will be 6.6%, very well in the long term outlook of 5% to 7% per year. Core EBITDA has reached €196,000,000 which is an EBITDA margin of 16.3%, again on the top part of the range of our outlook, 37 basis points. Equity free cash flow is difficult to look at the first quarter because low season, no Easter, but if we take into consideration the seasonal effects, it’s negative €104,000,000 but is in line with what you see on first quarter. Does not change our outlook for the year. Capital allocation, we will go on that a little bit later, but we confirm that our capital allocation remains unchanged, focus on deleveraging and we continue to deleverage.

If we compare the leverage of quarter one twenty twenty five versus the first quarter of last year, we went from 2.6 to 2.2x net debt to leverage. We remain with a very strong liquidity and we keep committed to the share buyback and the dividend distribution. Yesterday in the General Assembly, it was approved a distribution of CHF1 per share. This is an increase of 43% year on year on the dividend. And of the CHF200 million share buyback we announced, we already bought CHF49 million in shares on the first quarter.

I’ll explain a little bit more that in detail, but we continue with the transformation of our shops, our restaurants and also on the digital transformation. And we have robust business development in all the regions, Europe, Middle East, Africa, North America, Latin America and Asia Pacific. If we now go now to the next slide, we can see one of the strength of Abolta, our diversification. Geographical diversification, business lines diversification with onethree duty free, onethree to duty paid, onethree in food and beverage, and we can also see a good balance on channels and category mix. Thanks to this diversification, we have been able to report a very strong organic growth, like for like growth, and a strong growth despite one of the regions performing a little bit weaker.

We all know that due to the general economic and financial situation in The U. S, the number of passengers in that part of the world are being flat during this year until April. With that flat passengers, we also report flattish sales, slightly positive if you take into consideration the change of scope, but largely flat. But despite that, and thanks to our strong diversification, we have shown well in the outlook, the total performance. And we have received some questions over the last few hours like we received.

I mean, a few months back, people were worried about the Chinese consumption. Prior to that, the Ukraine Russia war, also some concerns on The Middle East. And over and over, we keep reporting, and I think this is the ninth consecutive quarter where we report higher sales. We always, with a group as diverse and big as us, we will have different performance in different parts of the world. The important thing is that on the overall, we see a good strength.

The combination of March and April, it shows a performance that is in line with year to date. And therefore, we believe that the year to date is the best example in April on how we are performing as a group. If we move to the next slide, we can see that this performance is extremely strong in EMEA and LatAm is strong in Asia Pacific and as I just said, a little bit weaker in North America. If we look at the like for like, we have 8% in EMEA, plus 1.3% in North America, plus 3.4% in APAC and 5.5% in Latin America. If we go to the next slide, we continue with the commercial and digital transformation.

We have 32 new stores since our last reporting, including completely new concepts like premium tea in China, Hungry Club in Malaga. As you know, this is an F and B concept that we put inside the duty free stores, so it’s a hybrid concept. We continue with the cross promotion, so the combination on F and B and retail keeps yielding good results. We put also completely new concepts as part of this new focus on surprising the consumer and increasing the spend per passenger. We have, for example, two new Fragonard boutiques in Nice, Gourman in Barcelona.

We keep pushing very hard on the entertainment. We are every month more and more convinced that this combination of entertainment, new concepts, new shops, combination of food and beverage and retail is the way forward to consistently keep growing organically ahead of the passengers. Not forgetting also the digital and data transformation. Club of Volta continues to grow. We added another million members in quarter one.

All the data, recruiting, spend per ticket, importance of the loyalty sales in the total have accelerated in quarter one twenty twenty five versus quarter four twenty twenty four. So we continue going on the right direction. And we cannot underestimate the value we will have over time of this added intimacy with the loyal customers. We learn a lot about that and we can keep improving our offering, our pricing, our promotions, the way we interact with consumers, thanks to this increased number of data. Gaming.

Gaming is another aspect of the loyalty and in general of our interaction with passengers that is proving very interesting to increase the time we have relationship with those customers. If we move to the next slide in a second, I have a small video. You know we always have two constants in these presentations or three, consistent results, happiness for Football Club Barcelona, and a video. So I’m gonna go now to the video, and I’ll come back in a second.

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Across continents, our vision transcends borders. From Bali to LA, from Stockholm to Barcelona, Avolta redefines travel retail by fusing state of the art design with the heart of a global community. Behind every innovation stands an incredible team united worldwide by passion and expertise. As we chart a course for the future, we now also honor our loyal community through Club of Ulta, a global loyalty program uniting all of Ulta shops under one innovative umbrella. With exclusive rewards and personalized experiences, Club of Volta turns every purchase into a milestone celebrated.

Join us on a journey where every moment is an experience, and every destination writes a new chapter of possibility. Because your journey deserves to be elevated. Evolta. Journey on.

Xavier Rocignon, CEO, Avolta: Now our CFO is going to explain a little bit more detailed quarter one results. Thank you, Yves.

Yves Gester, CFO, Avolta: Thank you very much, Cavi, and good morning and good afternoon to everybody on the line. In the first quarter twenty twenty five, turnover came in at CHF 3,050,000,000.00. That represents an organic growth of 5.3%. If you leave away the leap year effect of 2024, organic growth would have been 6.5%. That’s basically at the upper end of our medium term guidance of 5% to 7% growth on organic growth for the group.

For EBITDA and also equity free cash flow, our other two main KPIs, I would like to go directly to the next slide, Slide 11. Core EBITDA came in at 196,000,000. That represents 6.4% EBITDA margin, an improvement of 37 basis points compared to previous year. Also that represents the upper end of the guidance of 20 to 40 basis points of our medium term guidance. Equity free cash flow came in at minus €104,000,000 in the first quarter this year versus the €80,000,000 last year.

It’s a little bit softer, but there are two reasons for that. Number one, it’s the typical seasonality we see with a negative first quarter in every single year. And number two, it’s the Easter effect, which this year, Easter happened in April versus last year, where Easter happened already in Q1. So basically, we build up inventory, buy ahead of the Easter effect when Easter only happens and we collect the money in April this year, so it’s a certain delay. But those are just movements between the quarter.

Overall, we have no implications in our expectations for the cash flow for this year and also not for our medium term guidance. If I move on to the next slide, Slide 12, with the typical leverage and also the maturity profile. The company has deleveraged nicely year on year, coming from 2.55% the first quarter at the end of the first quarter twenty twenty four to 2.18 in the first quarter at the end of the first quarter of this year. So an improvement of close to 0.4x year on year. If you’re looking at the maturity profile, there is nothing specific new.

It’s a very diversified profile when you look at the different currencies, maturities and also the fixed to floating rate debt mix we observed there. To the maturities in 2026, in the first and second quarter, the €500,000,000 convertible and the €300,000,000 bond. There, we do plan to refinance them ahead. We will do that opportunistically. As you know, we have access to more than €2,000,000,000 of liquidity at the moment.

So there’s actually no requirement strictly to refinance that. Nevertheless, we are looking into that as we speak, and we plan to refinance it with a combination of cash on the balance sheet and potentially a new bond. So stay tuned for news there anytime soon. Having said that, I hand over back to Cavi.

Xavier Rocignon, CEO, Avolta: If we go now to Page 14, just to repeat once more, another quarter where we confirm our confidence in the full year outlook and on the outlook for the next few years. As we stated several times, we believe this company should be growing to between 57% organic growth, expanding EBITDA margin between twenty and forty basis points and expanding the equity free cash flow conversion between one hundred and one hundred and fifty basis points for every year. And we confirm that with the data we have so far, we believe that would also be the case for 2025. If we move to the next slide, again, it’s exactly the same slide we have put in the last few quarters, but I think it’s important to reconfirm once more our capital allocation policy. Number one is to keep investing in the growth.

We see a lot of opportunities in the commercial and digital transformation and on the business development. And from time to time, we might be addressing some bolt on M and A to complement this growth only on an accretive manner and using Second, to keep a very strong discipline on the balance sheet, targeting a leverage of 1.5 times to two times, potentially going to 2.5 times from time to time if that is needed. And last but not least, to focus on the return on shareholders in a combination of a progressive dividend, onethree of our equity free cash flow on a yearly basis and when needed, when there is excess cash, share buyback. We did one last year. We are doing one this year.

And I think what is important, if you look at our quarterly trading update is that everything that is in this page and everything that it was in the previous page is happening once more. If we go now to the last page, the conclusion, it’s just to reconfirm what we keep saying. We are a diversified company. We see strength quarter over quarter on our focused strategy, and we are delivering in all the key financial and commercial metrics. We are increasing sales.

We are transforming the company digitally and physically, and we are delivering on the expansion of margins. And the strength of our diversified portfolio is seen for the last three years in a very strong manner. We always have something performing below expectations, but other things more than compensate for that. And our commitment as management team and also on the Board of Directors is to focus on value creation for the shareholders. And on that also, we are delivering.

So with that, I thank all the audience, especially the ones that are not only listening to the calls, but they are also nice customers of AVOLTA in any shop or restaurant around the world. I particularly thank the loyal members that have club Avolta, and I cannot finish without thanking once more all the employees, all the team members across all our 5,200 points of sales. Thanks to you, we keep delivering strong results quarter after quarter, so you have my full appreciation. Thank you very much. Now we can open Q and A.

Moira, Chorus Call Operator: We will now begin the question and answer session. Session. The first question comes from Dara Manjari from RBC. Please go ahead.

Dara Manjari, Analyst, RBC: Good afternoon. It’s Manjari Dahr at RBC. I just had two questions, if I may, both around The U. S. Chubby, I wondered if you could give some color about how you guys are thinking about the need to bring in more labor across peak in The U.

S. Now? And I suppose if the situation in North America does improve, how quickly can you sort of bring or ramp up additional labor as needed? And then secondly, just on net new concessions. I just wondered when we should expect the JFK wins to start to contribute positively to that and how we should think about this line for the rest of the year?

Thank you.

Xavier Rocignon, CEO, Avolta: Thank you very much. If I understood well, the first question is if the recovery in The U. S. Comes, how can we get back the people we need to serve? If that’s a question, I’m going to answer that question.

If the question was another one, look, to be clear, the first thing you do if you have a peak up in the sales is to try to use more hours of the existing labor force. That is something you can do fast. It comes with a small premium, but perfectly affordable. To onboard new people, it’s always a little bit takes a little bit longer. But if the sales will recover in The U.

S. In the second half of the year, that will be a nice problem to have and we will find the way to manage it. We also have been doing over the last couple of years an important investment on self checkouts, which, of course, gives you extra flexibility and the self ordering in our restaurants. So on that sense, if the recovery comes faster than some people anticipate, we should be prepared for that. On the net new concessions, the GFK, as you know, we have won many concessions.

They start in different spaces. Some of them start at the end of this year. But realistically, you could only you will see an impact in 2026, ’20 ’20 ’7 on a more material way.

Dara Manjari, Analyst, RBC: Great. That’s all very clear. Thank you.

Moira, Chorus Call Operator: Your next question comes from Jon Cox from Kepler. Please go ahead.

Jon Cox, Analyst, Kepler Cheuvreux: Yes. Good afternoon, guys. Jon with Kepler Cheuvreux. Couple of questions for you, if I can. One of which is the first one on North America.

I’m just wondering what you’re planning with regard to North America this year, I. E, if we do have flat sales all year in The U. S, can you get your minimum 5% growth? So some sort of comment on that would be useful. The second one is on sort of spend per passenger.

I’m looking at The U. S. And it’s the figure that you’ve printed. Basically though, the passengers are more or less in line and actually look a little bit better than your figures. I wonder if you can talk about maybe the fact that you seem to have maybe less spend per passenger in The U.

S, I wonder if there’s some sort of deflation or what that could be. In contrast as well on the Europe side, you’re growing almost 10% in the first quarter, but passengers probably on average somewhere around mid single digit. I wonder if you can also comment on why you’re doing so well in Europe at the moment compared to The U. S? And then final question, just on the CVC reports and the Benetons, maybe be interested in doing something or changing something with regard to you guys takeover or whatever it may be, if you have any comment on that at all.

Thanks very much.

Xavier Rocignon, CEO, Avolta: Thank you. Look, on your first question, yes, we think that would not be easy, but if North America or The U. S. Is flat, we should also be able to be in our guidance or in our outlook for the year, because we see very strong underlying demand on the rest of the regions. I’m not sure on the spend per passenger on the North America how you calculate it.

It’s not easy because we are in many airports, but not in all the airports. But if you look at the like for like of quarter ’1 in North America was plus 1.3. Passengers in North America have been lower than that. So there is not a major improvement on the spend per passenger in North America. Also, it’s difficult to measure there more than in other regions because it’s largely domestic.

But in general, you don’t see a massive slowdown. You don’t see a massive improvement either. So I think it’s flattish passenger, flattish spend per passenger in North America. Yes, we are doing very well on spend per passenger in the rest of the regions. We see very strong demand and we see that the actions we’ve been taking over the last two years to transform the company to be more focused on the customer experience, the new shops, the hybrids, entertainment, the Club of Volta, all that is supporting an increase on the spend per passenger.

Everywhere all the time, no. We’re also learning, but the more parts of the network we have with a new way of doing business, the stronger we see the performance. On CVC, you might be surprised, I’m going to say exactly what we’ve been consistently saying. We do not comment on market rumors and we are not going to comment on this one. Thank you, John, for your questions.

Jon Cox, Analyst, Kepler Cheuvreux: I wonder if I could just to follow-up. So basically, you’re planning internally for a flat North American market this year. If it gets better, yes, that’s great, but you’re not assuming any improvement in North America this year?

Xavier Rocignon, CEO, Avolta: The problem with your question is you always have a follow-up. Look, so let me state our target is to be between the 5% and the 7%. On this, if The U. S. Doesn’t recover or it doesn’t recover in a substantial manner, we should be in one side of the range and if it recovers on the other side of the range.

Makes sense?

Jon Cox, Analyst, Kepler Cheuvreux: Thank you. Yes.

Moira, Chorus Call Operator: The next question comes from Tim Barrett from Deutsche Bank. Please go ahead.

Tim Barrett, Analyst, Deutsche Bank: Hi. Thanks, both of you. I had two things as well. Just picking up on the geographically, you talked about having areas that are performing better to offset North America. It looks mostly like that’s Latin America.

So can you give us a bit more color on LatAm and how that is managing to produce such good growth? And then my second question, I take the point about North American passengers being flat in the first quarter, but international passengers were down a lot. Is that impacting certain categories, I suppose, free versus food and beverage? Thanks very much.

Xavier Rocignon, CEO, Avolta: Thank you. Just to make sure, I mean, we have a strong performance not only in Latin America, but also in EMEA, that is our number one region in size. And in Europe, we are performing well across the board with a few exceptions like the Nordics that you know they are affected by the restrictions on the Russian aerospace, very good performance in the South Of Europe and good performance in the Central, U. K, etcetera, very strong performance across Middle East and Africa also. Latin America, very strong performance across all region all the parts of the region, maybe a few exceptions on those destinations that are more heavy on green cardholders that might be going back home two, three times a year normally and now they might be restricting that for the reasons you know.

But as you can see, that does not have a major impact on the overall performance of Latin America that you were asking. International passengers, it’s very interesting. It’s there is a clear change in North America on the profile. You have, for example, to give two extreme cases, much less Canadian, many more Argentinians. So it’s the profile is changing, but you need to remember also that 80 plus percent of our business in North America is domestic business, is food and beverage and convenience duty paid.

And the international traffic affects the duty free and is much smaller than in other regions in North America. And also, you have international traffic out of Canada, a much smaller market, but our duty free in Canada is more important.

Tim Barrett, Analyst, Deutsche Bank: Okay. Thanks. So basically, duty free is likely to be one of the weaker performers this year. You agree with that?

Xavier Rocignon, CEO, Avolta: No. So look, what is affecting us in North America, look, the people when travel international, first, we have strong numbers in Canada that duty free wise is bigger or almost as big as North America as U. S. When people travel internationally, they are already spending a significant amount of money, so they are much more resilient on consumption. So duty free is holding quite well.

Where we see weakness is in domestic traffic. I mean Americans adapt very fast to the good news and the bad news. There are some forecast of weak economy for the remaining of the year and that prevents consumption. More on the decision to travel or not to travel, more than spending when they travel. As you see the forecast of the big American banks, they are a little bit more optimistic now than they were two months ago.

That could change again. The likelihood of a recession today is regarded as a little bit lower than before. Any good news that incentivizes the consumption, it will be reflected in our numbers. For first time over the last almost three years, we see a slow decrease over the last couple of weeks on the airfares. So airlines make no secret that they are adapting a little bit their prices to try to boost demand.

That could also be positive. So if you ask me personally, I think we’re going to see a little bit of recovery on the second part of the year. But as people don’t give you credibility for macroeconomic forecast now, I rather say what I said earlier on. The overall performance will be in our outlook, but North America could give us potentially some good news in the later part of the year, but we are not factoring that because it’s uncertain what is going to happen. Is that clear now?

Tim Barrett, Analyst, Deutsche Bank: Yes. That’s really helpful. Thank you, both.

Xavier Rocignon, CEO, Avolta: Thank you.

Moira, Chorus Call Operator: The next question comes from Jorn Ifert from UBS. Please go ahead.

Jorn Ifert, Analyst, UBS: Hello, everybody. Thanks for taking my questions. I would have three, please. We’ll take them one by one, if this is okay. The first question, just to double check, you mentioned March and April together was

Xavier Rocignon, CEO, Avolta: more or

Jorn Ifert, Analyst, UBS: less in line with the year to date performance on organic growth. But just to double check, are there any factors you identified in April incrementally if you exclude the Easter benefit, which is varying you a little bit? Or is it even vice versa going into May and June?

Xavier Rocignon, CEO, Avolta: Well, I mean, you have all kind of effects month to month. I mean, you have the number of weekends, number of local holidays from Carnival to Ramadan to you name it. The major one on the consolidated group, the major effect between March and April, as we previously disclosed, is that Easter is in April this year and it was in March year. If you it’s not that rocket science I mean, it’s not mathematical that if you have Easter, it depends if Easter is a little bit earlier, a little bit later, depends also on other school holiday, etcetera. But overall, when we consider the year to date data, we are happy what we are seeing.

Easter in April was as expected for us across the board. So we are seeing a strong first four months of the year. I think that was your question.

Jorn Ifert, Analyst, UBS: Yes. Is there in April, any signs which are worrying you or even making you more confident if you would exclude the Easter effect from the April data?

Xavier Rocignon, CEO, Avolta: Think not more, not less. I mean, it’s consistent. There is not a major negative or a major positive in April. We see similar trends.

Jorn Ifert, Analyst, UBS: Okay. Thank you. And then on the strong performance in EMEA of plus 9% organic, what would you say is the contribution of your initiatives, the self help initiatives, self checkout, the app, etcetera? Is it 2%, three %? Is it 12%?

Just to have a rough feeling, what is your best guess here?

Xavier Rocignon, CEO, Avolta: Look, I think I have said a few times in earlier calls that our target would be to have a like for like growth that is two thirds coming from passengers and one third from our initiatives, roughly. And I think that’s more or less what we are seeing, maybe a little bit more on these first few months on the some of the initiatives. But I think as a rule of thumb, if we think about the longer term, that’s the type of metrics I’d like to use also internally to discuss with the team.

Jorn Ifert, Analyst, UBS: Good. Thanks. And the last question if I may. The acquisition in China and the three percentage points contribution, is this margin accretive? And how sustainable do you think this concession will be in the future?

Xavier Rocignon, CEO, Avolta: Well, everything we do, we target to be margin accretive. Of course, that is related to Chinese consumers, and I think we have made no secret of that, We are not at historical levels and Chinese consume less than it used to do, not only on the travel, you can see that on the macroeconomic data, but we believe that was a great opportunity to enter a very good market at very good terms and conditions. We are happy with what we’re seeing. It’s in line with our expectations. And on I don’t know what you mean sustainable.

Of course, everything we do, we try to be sustainable on the long term. So we hope that what we are seeing, it will continue to be the case in the future. And of course, it will be much more accretive if on top of what we are seeing there will be a certain recovery on the consumption of the Chinese. But everything we do in Asia Pacific or anywhere else that involves Chinese travelers, we are doing it assuming current levels of expenditure. We are not betting on going back to pre COVID.

That’s not the way we do our business plans and our investment decisions. If there is a massive recovery, all that will be extra. We are assuming a reasonable growth on current levels.

Jorn Ifert, Analyst, UBS: And sorry, when I was not clear about sustainability, it was about that the transaction price seems very low for the revenues you have bought in. And I wanted to check if this deal is margin accretive and if this concession, for example, is expiring in two years and you don’t know if you can prolong it or not. This was on sustainability I was asking for.

Xavier Rocignon, CEO, Avolta: Okay. Well, look, we as you know, we don’t go into the detail of a specific concession renewals because that will be very difficult to manage. In general, we are having a renewal rate of 90%. I think we have disclosed that. We are starting seeing a slightly positive net contribution of new concessions.

As you know, the first couple of years after the presentation of the new strategy, we were cleaning up a little bit the portfolio. Now we are starting seeing some positive and we believe that this net contribution, it should be increasing a little bit more over the next few years looking at the balance we are seeing of wins and losses step by step. Our focus on accretion or return on investment continues being paramount. We made very clear that we have 0.2% of new concessions, 0.5, one percent. We are equally happy because our focus is making sure that any number we add is adding new cash flow and it is a profitable and a good return on investment.

We don’t talk about market shares. We don’t talk about specific targets on this because the discipline on the financial side and the accretion on the equity free cash flow is what really matters to us. Then of course, we might make mistakes like everybody else, but never intentionally.

Jorn Ifert, Analyst, UBS: Thank you very much.

Moira, Chorus Call Operator: The next question comes from Jaafar Mestari from BNP Paribas. Please go ahead.

Jaafar Mestari, Analyst, BNP Paribas: Hi, good afternoon. I’ve got three, if that’s okay. Firstly, I’m sorry to be doing some live simplistic math, but on your commentary that March and April trends are consistent, just want to go back on the Easter impact. So last year, your Q1 organic growth was 8.6, but that was boosted by Easter. And your four months organic growth was 7%.

So simplistically, this would have led me to believe that the Easter impact is about 1.5% positive or 1.5% negative on the four months basis. This year, your Q1 is 5.3%. When you take the four months, it’s improving. It’s only improving to 5.7%. So I guess my question here is, is the impact of Easter not as simple as that?

We should look at it in a more complex way? Or is the impact of Easter about that, but then there’s been some underlying deceleration into April? I know many people have asked the question in different ways, but just want to make sure 8.6% to 7% and then 5.3% to 5.7, we’re looking at the right numbers.

Xavier Rocignon, CEO, Avolta: Well, it’s much more complex than

Jaafar Mestari, Analyst, BNP Paribas: Sorry. I’m sure it is. Sorry.

Xavier Rocignon, CEO, Avolta: No, no, no. Ask all the questions if you prefer.

Jaafar Mestari, Analyst, BNP Paribas: Well, as you prefer. Second question, just can you remind us please conceptually in your business what sort of indicators you have looking into the next months? What sort of visibility? You obviously have no material advanced sales, maybe just a little bit of preordering. So when you talk about North America staying flattish or improving, when you sound very confident about EMEA staying at those very strong levels, what are some of the inputs please in your reasoning?

And just lastly, very open ended, EMEA is very strong. There are some comments on new concepts, talked about Spain a little bit, but just a bit more detail on passenger behavior you’re seeing, which origins are you seeing performing very well, which product categories, British tourists into Spain, any of those trends please behind the strong EMEA?

Xavier Rocignon, CEO, Avolta: Good. For good and for bad, otherwise everybody could do the math, the Easter effect is much more complex than you described. It unfortunately, you cannot go through as we do airport by airport. You need to see the weighted average of the different airports, the behavior also weather wise, depending of the different countries. You have the leap year last year.

You also have some increase last year first quarter that was motivated by works on the previous year in Spain, for example. So the calculation you did to just take the quarter one difference and then apply it to April does not work this way. I can tell you that what we have seen in Easter and what we have seen in April is positive, is in line with our expectations, actually slightly ahead of our internal forecast. So April has been strong. The first four months of the year have been strong.

KPIs we look at. Look, we talk to all our airports. We gather any public forecasting. We see the bookings in airlines. We also look at hotels when it’s relevant.

We have our own forecasting model. We have a pretty sophisticated way because we look at sales per location, per store, per day. And through historical performance, we have a pretty good forecasting system. So our team gives us forecasted weekly sales and we monitor those. And of course, with machine learning, you keep learning on the mistakes.

It considers weather, it considers weekends, considers local holidays, it considers all that. So we have a lot of data. It doesn’t mean we are always perfect on forecasting. The longer you try to forecast, the more difficult it is. And sometimes, it’s easy to forecast the full year than to forecast one specific week because of the law of the big numbers.

Look, I would love to answer your last question, but I realize that we have more and better data on consumer behavior in more places than any of our competitors, but we are the only ones we keep explaining. So I’m going to be just giving some examples, but I’m not going to go into the detail. As I said, we see very strong performance on all the touristic destination despite not being a touristic holiday. We see strong performance in the South Of Europe. We see strong performance in Africa and Middle East.

We see strong performance across Europe, not all the markets the same. U. K. Is not the same than Finland that is affected by the Russian aerospace. EMEA is very strong, but not only EMEA, also we have very strong in Latin America as we discussed earlier on.

And in Asia Pacific, we have some locations more affected by the Chinese consumptions, but all other spaces will also have very strong growth. So with a few exceptions, we see a general strong growth on the first four months of the year.

Moira, Chorus Call Operator: The next question comes from Ali Nakshi from HSBC. Please go ahead.

Ali Nakshi, Analyst, HSBC: Hi, thanks for taking the questions. Yves, one for you please. On The U. S. Market and cost management, if The U.

S. Is running at flat, what levers can you pull to manage your costs? And at what point can you manage this so it doesn’t impact your 20 to 40 bps EBITDA margin guidance? And what will get you to the low and the top end of the range please? Secondly, Savi, just in terms of the bid environment that you’re seeing, especially in The U.

S, is there any notable changes to the bidding environment as a result of the tariffs trade negotiations and then just The U. S. Macro? And yes, I’ll just start with those, please.

Yves Gester, CFO, Avolta: So look, The U. S. Thank you very much for the question, Ali. So look, on The U. S.

Cost structure. There, as you know, in our business model, we have already, by definition, a very flexible cost structure. So most of the lines are flexible flexible and linked to the turnover of the organization. Now if I look at COGS, this is purely variable. If I look at concession fee, this is more variable or tends to be over proportionally variable in North America due to the specific focus we have there on food and beverage, where minimum annual guarantee are typically much lower than in duty free proportionally, and the same applies for convenience stores.

So already there also from one of the key lines, which is a little bit more sticky in the cost structure for North America, it’s more flexible than in average. And the same applies for personnel expenses. Chavey has mentioned it before. There is flexibility in the working hours, etcetera, and also on the general expenses. So already from that perspective, a very good starting point.

On top of that, with the slowdown, we have obviously taken some actions, some plans to adapt and which we can take from the shelf in case there is a further slowdown in North America to make sure we protect and safeguard the profitability, but also the cash flow of the organization in that regard.

Xavier Rocignon, CEO, Avolta: Your question your second question on the bidding environment, particularly in The U. S, maybe it’s not extremely noticeable yet, but of course, as a member of our executive team says, miss the opportunity of a good crisis. So I think historically, let me put it this way, if there is a slowdown, it could increase the opportunities on business development. It’s not that we see it massively yet, but I think it could be a positive add on the behavior of the market.

Ali Nakshi, Analyst, HSBC: Understood. Thank you. And then just finally, I know you’ve commented on all of your initiatives that you’d like to do. We could hope to make one third of your like for like sales. I suppose just specifically on the digital initiatives, how much of that would you say has been started to be implemented versus how much more run rate there is to Carre and applying over the years?

Are you at the start of the journey or towards the end of the journey?

Xavier Rocignon, CEO, Avolta: I think we are in the early start of the journey. I think if I look at in relative terms, what we have done over the last couple of years on digital transformation, I think it’s pretty amazing. But if I look in absolute terms, what where we are on versus what we could be, I think the journey ahead of us is massive. And part of it is because only when we do that journey, we realize how much more potential they are. For every new initiative we complete, there is a ratio on the digital transformation of three:one, three new doors that open to keep exploring.

Right now, one of our challenges and we are pushing ahead strongly with that is for example hiring more data scientists and reinforcing our data team, because with the success of Club of Ulta, we realized we are not taking full advantage of it because we lack certain resources. So the opportunity in that sense and I’m not talking about the opportunity only in the next few months, I’m talking about the opportunity on the next five years at least of keep transforming and improving the company, thanks to the data and digital transformation.

Moira, Chorus Call Operator: Great.

Xavier Rocignon, CEO, Avolta: Thanks. Thank you.

Moira, Chorus Call Operator: The next question comes from Gian Marco Werro from ZKB. Please go ahead.

Xavier Rocignon, CEO, Avolta0: Good afternoon, Yves and Xavier. I have just one question remaining for your initiatives in The U. S. And also in relation to your growth variables. So if you mentioned in The U.

S. Passenger growth is nearly flat. On the other side, spending per passenger is nearly flat. So is it then also fair to assume that also your progress to increase the store visits and the conversion ratio is so far still in the early stage? Can you a little bit elaborate about your experiences there?

Thank you.

Xavier Rocignon, CEO, Avolta: No. Look, the conversion rate and the spend per passenger is improving across the group. What happens in The U. S. Is that the American consumer is expecting a recession and they behave as such.

And so I don’t think it’s easy to have a comparable basis. I’m sure that you’re going to see much more in The U. S. Like we are seeing in the rest of the world when the situation, the financial and economic macroeconomic situation improves a little bit. We are

Xavier Rocignon, CEO, Avolta1: stronger

Xavier Rocignon, CEO, Avolta: on consumption in the travel environment than in the local market, and that’s very clear. If you look at some of the retail data in The U. S, it’s much worse than what we are seeing in the travel space. It still proves that when people travel, they consume on a more normalized basis, but we are not 100% immune. If you go to The U.

S, there is certain worry general worry about the potential risk of a But if you discount that effect, actually you could claim, if you look at general retailing in The U. S. And you compare it to us that our spend per passenger on comparable basis post recession fears is actually super positive, because keeping consumption in current environment in The U. S. Today, I have to say, talking to some of our suppliers, for example, and what they are seeing on the local market with the same products we sell at the airports, they are super positively surprised on how well we are holding in the travel environment.

Jorn Ifert, Analyst, UBS: Thank you.

Moira, Chorus Call Operator: The next question comes from Manuel Lang from Vontobel. Please go ahead.

Xavier Rocignon, CEO, Avolta1: Hey, everyone. Manuel Lang from Vontobel. I have two questions. And the first one would be, I’m sure that you read about the discontinuation of the onboard duty free sale at Lufthansa. And I’m just wondering what’s your view on that?

Do you see more airlines going into that direction? And how big of an impact you think this will have on spend per passenger, especially in EMEA for airports? And then the second one is regarding product categories. I saw you managed there to increase the sales of wine and spirits and also tobacco products more than in other categories. And I’m just wondering what’s the drivers of this development, especially compared to Q1 in 2024?

Thank you.

Xavier Rocignon, CEO, Avolta: Look, the duty free onboard is not a massively large market. But of course, any discontinuation there, it would be a marginal positive for us or for the industry. So on that sense, that will be again a small potential upside. On product categories, it’s very difficult to look at product categories per quarter, because also depends on the performance of every region, every sub region. So there are no major conclusions I would like to point out based the quarter one.

But a small one that is easy to understand. The two categories you pointed out are more on the duty free side. And a market like The U. S, where it’s largely domestic food and beverage and convenience, those categories are less important. So just this effect, pure weighted average is already playing there.

And then there are other trends. But if you remember, we have proven over the last two, three years that when trends change on a category, on a specific talking about wine and spirits, it could be more popular, the vodka or it could be the whiskey or it could be the tequila. We have the capacity to adapt and sell any of those different products. If one brand becomes more popular, one of the things we are trying to do step by step is one of the pillars of our strategy, consumer focus, geographical diversification and operational improvements is to increase the speed to market. One of the things that help you to improve sales, if you’re faster in bringing the merchandise and adapting the offer to the trends that we are just discussing.

So that would be if that’s okay with you, the way I would like to frame it.

Xavier Rocignon, CEO, Avolta1: Yes. Thanks a lot.

Xavier Rocignon, CEO, Avolta: Thank you.

Moira, Chorus Call Operator: We have a question from the webcast from Thomas Helton from Diesat Bank AG asking, do you expect any effect on the ongoing tariff dispute triggered by The U. S?

Xavier Rocignon, CEO, Avolta: I mean, as you can see on our numbers, we don’t see any negative effect on our sales or profitability due to the ongoing discussions. Look, this company is in 70 countries. We particularly in the duty free, we manage at least 70 legislations, quite a few more because some countries are federal and they have different so hundreds of legislations. We have hundreds of interactions with different currency movements. We sell in hard currency, U.

S. Dollar, euro, British pound, but they affected the local currency. So we are very, very used over the last fifty years to manage legislation changes, tariff changes, currency changes, and we always try to be smart to spot the opportunities because some of the things we are seeing could be an opportunity, for example, on smart pricing, on flexible pricing, on proper promotions. So of course, we are monitoring and when it could produce a cost increase, we are addressing it, but it could also have some positives here and there on a smart management. These things, we try to identify how we can make those an opportunity to better serve our customers.

Moira, Chorus Call Operator: We have another question from the webcast from Thomas Bender from Aprademen asking, could you give us the timing of the issue of the bond? Thanks in advance for the clarification.

Yves Gester, CFO, Avolta: Thank you very much for the question. So look, as I have mentioned during the presentation, we do that opportunistically. We have enough liquidity. We have the RCF, which is largely unused. We have cash on the balance sheet.

So there is no requirement to refinance it with a bond. But if market conditions allow, can happen very soon. There

Moira, Chorus Call Operator: are no more questions at this time. I would now like to turn the conference back over to the speakers for any closing remarks.

Xavier Rocignon, CEO, Avolta: Just a big thanks for everybody that attended this call and all your questions and interest. As a Volta management and all the team members, we are committed to our strategy and delivering shareholder value every quarter. Thank you for your attention.

Moira, Chorus Call Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call and thank you for participating in the conference. You may now disconnect your lines. Goodbye.

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