Avolta AG (AVOL) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Dufry's Q3 Results 2022 Conference Call and live webcast. I'm Alice, the Chorus Call operator. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Xavier Rossinyol, CEO of Dufry. Please go ahead, sir.

Good morning, good afternoon. Welcome to this video call of presentation of the 9-month results of Dufry. I'm here in New York with our CFO, Yves Gerster, and we will go through the presentation together. Let me start in Page 4 with a business update. Revenues for the first 9 months of the year have reached a little bit more than CHF 5 billion, which is 24% less than 2019, but with a very strong third quarter with more than CHF 2.1 billion sales, which is only 16% below the levels of 2019. Compared to 2021, the organic growth is close to 100% for the first 9 months of the year. The 9 months EBITDA has reached a little bit less than CHF 464 million, which is EBITDA margin for the first 9 months of 9.2% compared to 7.8% in the first half and compared to 9.6% in the first 9 months of 2019. So only 40 basis points lower than the year 2019. Equity free cash flow has reached CHF 337 million for the first 9 months compared to negative cash flow last year. So the quarter and the first 9 months have been very strong in revenues, core EBITDA, EBITDA margin and equity free cash flow. Also, on the first 9 months, we kept with the business development, and we have opened 9,400 square meters of new space. Moving to Page #5. Some of the supportive impacts we have seen year-to-date and some of the challenges we also see. With the numbers we present, it's very clear that despite the geopolitical challenges, the macroeconomical challenges, the lack of some of the key nationalities in travel retail, despite airport disruptions in many locations, the quarter has been very strong. And not only that, the strength of the performance continue for the full month of October, so the quarter 4 also started ahead of expectations. The pent-up demand remains strong, and we are convinced that the travel retail and the F&B at airports are a key essential part of the travel experience. What is evident on the numbers we are publishing today, we keep very strict cost discipline, and we focus a lot on cash flow generation, despite the level of sales being still below 2019. We are, like any other company, facing general challenges, macroeconomical challenges, inflation, in particular, which has had a limited effect so far, but it's still something we are continuing monitoring and being very vigilant. Still there are some travel restrictions across the board, mostly in Asia-Pacific. Energy cost, of course, is something we monitor carefully even if for us, it's relatively low with utilities representing less than 1% of the turnover. Supply chain is improving, but still remains a challenge we need to be vigilant. Moving to Page #6. We can see that the organic growth has been extraordinary on the first 9 months, as I said, close to 100% growth. And looking at 2019 levels, we are right now in the first 9 months to an 81% level of sales of 2019 on organic basis, meaning at the same exchange rate, with the third quarter being close to 90% and October being slightly ahead of that at 92% of 2019 levels. So October has not seen a slowdown but a slight acceleration to 2022 quarter 3. Looking at the performance by region. We see the strength of the performance, both in EMEA and the Americas with 101% and 94%, respectively, of 2019 level of sales at the same exchange rate. And even if Asia is far behind that with 36%, you can clearly see that also in the last few months, there has been an acceleration of the revenues there, along with the release of some of the travel limitation in the region. Leisure has continued to be one of the key drivers. The best performing areas of our portfolio are the Caribbean, are Mexico, are parts of South America and the Mediterranean region. But still, we had a good performance on other locations where it depend more on less leisure at travels. In the U.S., we are seeing a pretty strong comeback of the business travel. Moving to the next slide. The business development, as I said, has continued to be strong with 9,400 square meters of new space. We have refurbished shy of 27,000. The combination of the 2 is about 6% of the total surface, which is still a little bit behind the normalized ratio, but that makes sense because we are, as I said earlier, very vigilant on how we deploy the CapEx to make sure that it goes along with the recovery of revenues. We keep opening the stores. We keep extending the opening hours as long -- along the recovery of the traffic, but we still are slightly below the full normalized opening of stores. Before Yves explains the details of the results, just 1 slide, Slide #9 to emphasize the strategic focus we have on ESG. You have an update here. We keep introducing more and more sustainable products. We keep advancing on the Diversity & Inclusion programs. We have just launched the second group-wise survey covering close to 75% of all the employees. We keep with another wave of D&I training. We keep pushing for science-based targets on our environmental impact. And as we disclosed during the strategic plan, our focus on developing programs that are meaningful for the communities where we are present. I'll come back in a few minutes to update on the strategy of the group. But now I hand over Yves for the 9 months results details. Thank you.

Thank you, Xavi, and welcome to everybody also from my side here from New York. And thank you very much for joining us today on the quarterly update. As you know, for Q1 and also for Q3, we are providing a trading update. However, as Xavier has already explained, for this quarter due to the current environment, we thought it would be good also to provide you with the EBITDA and the EBITDA margin. Looking at Slide #11. The third quarter historically shows the strongest performance, given summertime as high season. We have seen this pattern also in the current year in 2022. EBITDA reached CHF 237 million for the quarter, a similar amount as for the first half of the year 2022. EBITDA margin stood at strong 11.7% for Q3 and at 9.2% year-to-date. We performed above target despite a challenging macroeconomic environment, driven by robust travel and continued pent-up demand, as Xavier has mentioned before, which is reflected in the sales for the quarter. What is important to keep in mind, however, the fourth quarter will see a lower margin. This is in line with our typical seasonable pattern and nothing unusual. We have seen that in all the years before the pandemic. Moving on to Slide #12 with the equity free cash flow. Normally, equity free cash flow also follows the typical seasonal pattern with Q1 and Q4 being the weakest quarters and Q3 typically being the strongest one. As you can see, the second quarter saw this year the highest cash flow generation with CHF 283 million. As discussed already at our half year results call in August, the second quarter was supported by some CapEx and net working capital phasing. Year-to-date, we generated CHF 337 million. What is important here for the full year outlook, typically, the fourth quarter sees a negative cash flow. In addition, we still expect CapEx to catch up to a certain degree. Also here is in line with our normal seasonality, nothing unusual. Moving on to the next slide, Slide #13. Our net debt position further decreased and stands at below CHF 2.7 billion as of the end of September. This is the lowest position since March 2015 and shows the progress we have made over the last quarters. The combination with Autogrill will further reduce our net debt position while we will continue to focus on deleveraging. Moving on to Slide #14 with the covenants. Related to the net debt we just have discussed, we are also progressing well on the covenants. As a reminder, the covenant holiday is in place until and including June 2023 with the first Covenant testing to happen only in September 2023 with a leverage threshold of 5x. However, as of September this year, we already stand at 5.1%, so well ahead of initial expected levels and feeling confident that we will be below the target threshold by September next year. Having said that, I move back -- hand over back to Xavi.

Thank you very much, Yves. Now moving to Page 16. We keep our focus on developing Destination 2027, which is our new 5-year strategy. As a reminder, is based on 4 key pillars: The first one based on the travel experience revolution, being absolutely traveler-centric. And that is affecting our physical retail, our stores. And we think the combination with Autogrill is absolutely strategic to get not only travel retail, but also F&B at the airport and being able to be a truly travel experience company and also to develop a stronger digital engagement and to win. Second pillar is dedicated geographical strategy. We focus on the U.S., and again, the combination with Autogrill will give us leadership in that market, a dedicated strategy for Asia-Pacific and the Chinese passenger and keep developing our stronger markets for the rest of the world, EMEA, Latin America, Africa and Middle East. The third pillar is focused on continuous improvement culture. We want to be able to generate consistent improvements on our efficiencies. And as we are showing in this quarter 3 to adapt the cost basis and to adapt the cash flow profile to the level of sales wherever that sales might be. And the last pillar, ESG. ESG is not something we do on top of our day-to-day, but it's an essential part of our daily work. And everything powered by our people, and we have already introduced some changes on our team. I'm very happy to welcome Kristin -- sorry, Katrin Volery as our new Chief People Officer. The HR and people management function will report to me going forward, and she will join our group Executive Committee as of beginning next year. I wish her all the luck, and I think it's a clear example on how organization follows a strategy and a clear example that we mean what we say and we put people management, our team and the culture at the center of what we do. Moving to the next page, an update on the merger with Autogrill. As you know, at the beginning of August, we had all the approvals we require from our general assembly, and we were able to move to all the regulatory approvals. In all of them, so far, we are going according to plan or ahead of plan, having achieved already the okay from the antitrust authorities in the U.S. that, as you know, was the most complex and the larger antitrust approval we require. On that basis, we expect the transactions to be completed as we announced in July. The first part, the acquisition of the 50.3% of Edizione in Autogrill will happen on the first quarter of next year, and that will allow us to do the mandatory tender offer for the remaining 49% in the second quarter of the year. So everything so far is going according to plan, and I confirm again, with all due respect to the regulatory approvals, that we do not expect at this stage any surprises and we will be closing as expected. Moving to the next page. We decided this time to give a little bit of visibility on what are our expectations for the year-end. The different forecast for the traffic are showing to finish the year 2022 with minus 22% to minus 33% of 2019 volumes and full recovery of the levels of traffic of 2019 in 2024. Again, and as I said in previous calls and in previous conferences, just reaching the same levels doesn't mean going back to the same profile of passengers. The geographies have changed. The type of traveling purpose have changed. So we focus more than the level of passengers, but we also focus on the profile of passengers. Said that, our expectations as Dufry, and I'm moving now to Page 20, are as we present in this slide: We expect to finish the year between CHF 6.6 billion and CHF 6.7 billion of revenues with an EBITDA between CHF 560 million and CHF 580 million, which will be a margin between 8.4% and 8.8%. As Yves explained, the contribution of the last quarter is lower than the contribution of the third quarter on a typical year, and we are more and more going to a typical year. Equity free cash flow, we expect to be in the range of CHF 250 million and CHF 270 million. So in all the measures, a very strong performance for 2022. Of course, we remain vigilant, as I said, to any change on the current trends that are positive, and we will apply the same that we have done in the last quarter. We will adapt the cost structure, and we will adapt the cash flow profile to the level of turnover that we see this quarter and also next year. To finalize, as a conclusion, very strong performance with almost 100% organic growth between 2022 and 2021, very strong quarter results in EBITDA and also on equity free cash flow. Net debt position lower than any time on the last 6 or 7 years, faster deleveraging than anticipated, strong commitment to this long-term vision of Destination 2027, but to be very clear, to have a long-term commitment to the strategy is equally important for us to our uncompromised commitment to the daily delivery and the daily performance. And that's what we have seen in the quarter 3 of 2022. Thank you very much. Now we will start the Q&A.

[Operator Instructions] The first question comes from the line of Edouard Aubin from Morgan Stanley.

So 2 questions for me. The first one on 2023 sales may be a little bit premature, but I'll just try to get a sense from you. So looking at your guidance, it looks to me like your sales in 2022 on an organic basis are going to be down 15% versus 2019. Kind of triangulating what the international agencies are predicting for next year, would it be fair to assume a flat to high single-digit versus 2019 in terms of sales on an organic basis? So that's question #1. And then question #2, equity free cash flow better -- coming in better than expected in Q3, so congratulations. If I look at the guidance for this year, so I think you're implying CHF 80 million negative in Q4, if you can just come back on the moving part on the seasonality elements. And more importantly, again, may be a little bit premature, but what do you have in mind in terms of 2023 for Dufry standalone? Is the base case to assume that the equity free cash flow should be flat to up next year versus 2022?

Look it's always very difficult to answer what you expect is going to happen in the future, especially in the current world. 2023, of course, remains a challenging year, not so much linked to Dufry specific matters, but more linked to macroeconomic and geopolitical matter. The good news is that we start with a much stronger base than we had anticipated, not only quarter 3, but also the beginning of quarter 4 showing a strength, both on passengers and spend per head much stronger and much unaffected by macroeconomical effects than anybody anticipate. But we remain vigilant. I think to expect full recovery of sales of 2019 already next year, taking into consideration that we don't know what is going to happen with some of the geopolitical effects on passenger profile in Europe or what is going to happen with the opening of Asia, particularly the Chinese restrictions that even if they are lifted, nobody expects that will be lifted overnight. So I don't think it's realistic to expect that next year, we will be at the levels of 2019, but is more maybe, as I said, the traffic expectations is more for a year later. Said that, and I remind everybody, we will stop talking about 2019 very soon because even if the level of passengers might reach that level, there are going to be a different type of passengers, a different profile of passengers, a different nationality, a different destination, a different purpose of travel. So I think what we are going to look going forward is year-on-year. So do we expect '23 to be better than 22? Yes. Do we expect to be at the level of 2019 in absolute values? Probably not yet. On the cash flow, Yves will take the question.

So look on the cash flow it's relatively simple. I mean you mentioned the minus CHF 80 million for the fourth quarter and how this is split into the different components. So look, we are not providing detailed guidance there, but to keep it relatively simple, what you can assume is that roughly half of it is coming from the normal operational performance in the fourth quarter and the other half is roughly coming from the catch-up of the CapEx we have mentioned previously, where we are lacking a little bit behind the usual schedule.

On next year as well, if you can give us your sense of what we should expect?

So I think Xavi was clear in that regard. This is, from today's perspective, difficult to provide detailed guidance on cash flow levels as well as Xavi has mentioned before, on the revenue. So from today's perspective, we are not going to the details, yes.

But so -- sorry to push you on that, but without giving a figure should we expect flat, up or down, in terms of your sense?

Look, I think what we are trying to communicate is that, as a company and as a management team, we have lapped as much as possible, the cost base, the projects, the CapEx, the way we approach working capital to the level of turnover. I think expecting or discussing absolute terms figures being that cost, cash flow, EBITDAs for a longer period than the next few months, I don't think it's the right approach. But what we are saying is we will keep the discipline, we will keep adapting cost and CapEx, especially at the level of revenues. And at this stage, we don't think we should go more on 2023 figures.

The next question…

Can you hear me?

Yes, Gian.

Sorry, I was not sure if the line was open. The first one would be please on your preparation for the 2023 potential macro crisis and incremental consumer weakness. Are you preparing a change in the prior portfolio? Are you preparing more promotions? How do you also manage your personal cost base, temps versus full-time employees where do we stand here? And maybe if you can provide us with some more color on this topic. And the second question would be, please, a technical one. I think your Q4 guidance would indicate your sales versus 2019 are incrementally 10 percentage points lower in Q4 versus Q3. I mean, to what extent is it FX? Do we expect weakening trends in November and December? Just maybe you can clarify this would also be helpful.

So our approach, both to the retail concepts, pricing, promotions, changes on assortment, changes on layout, it is done very much based on the expected customer base location by location. So of course, we have some general guidance, but what we try to adapt is our assortment and our pricing and our commercial offer to whatever are the profile of customers we expect. And I think what -- it's a proof of 2022 is that the company is able to do that. We expect to increase the number of full-time equivalents in 2023. Yes, for several reasons, we expect a stronger sales, we expect, therefore, to open more shops. Also some of the opening hours that were limited, particularly in the first half of this year are keeping extending. So the more the normalized level of passengers or sales come back, the more FTEs we will have to have. And also, we need to consider that there are inflationary pressures on the cost. Said that, we will try to keep doing that in line with increase of sales and therefore, keeping efficiencies where needed. And the second question, I forgot.

The second one was around the Q4 expectation in respect to turnover.

Look when you give a guidance, you need to take into consideration as you very well pointed out, things that are not under your control. For example, you know we report in Swiss francs, and there is a translation effect. Swiss franc has strengthened a lot, in particular, against the pound and again, the euro. So that might have and might continue having an effect on the last quarter, and that's why we are also taking some possibilities of that to affect our last quarter sales.

Okay. Just to clarify, I think your Q4 guidance implies around 75% of 2019 Q4, Q3 was 85% fully got, of course, the FX impact, but then it's just more also a concept of prudence you apply for then November, December. I would understand that even the like-for-like recovery you are implying in your guidance for the total sales has some prudent character? Is it fair to say?

Yes I mean, look, the October we had was not expected, has been stronger than not only market expectations, but our own expectations. We would like to see it to continue, but I don't think, as you said, it's a prudent approach because there is something very important. If we are too bullish on the sales and you have the risk of people being too bullish on the cost side. So I'd rather have conservative approach to sales and making sure that our teams across the regions monitor costs accordingly. And then if we have higher sales, of course, we are going to be all very happy. But we keep prudent because, look, the world is very volatile. We don't know what is going to happen. We have a war in the middle of Europe. I mean Chinese passengers are still completely locked down, and we don't know how things will go in one way or the other. So I think being conservative and prudent is the right approach in today's world.

The next question comes from the line of Jon Cox with Kepler.

Yes. Congratulations guys on the guidance, at least, maybe the sales looked a bit light of expectations. But just on the guidance, and like the last time around, we had a presentation, you were sort of putting asterisks everywhere on the free cash flow saying there's MAG reliefs as this and the other. Now you don't seem so concerned. It looks like you're going to have a free cash flow conversion from EBITDA close to 50% this year. At the Capital Markets Day, you were saying it will be maybe a little bit over 20% as you integrate Autogrill. I'm just wondering, should we just rip up what you told us at the Capital Markets Day in terms of all that guidance, you just feel that confident? That's the first question. Secondly, I wonder if you could just give us an idea of the MAG relief in that free cash flow because I saw Aena's presentation for the 9 months, and they had a couple of hundred million down, which I guess you probably got the bulk of on the MAG release. Maybe you can just give us a little bit on that. And then the last one on the margin, of course, the margin is much better than expected. Again, do we rip up the guidance you gave us on the EBITDA margin for next year, basically a baseline of 9% for the combined entity may be moving towards 10% over the period. So 3 questions, really, one on the free cash flow, do we rip up that conversion figure given what's happened? The second one, how much do you think are one-offs in your free cash flow in the year? And then the third one, just on the EBITDA guidance you gave us at that Capital Markets Day, do we rip that up as well?

It's always challenging to cope with your very high expectation, Jon. Look, I think there is a concept of normalized cash flow and the one-offs. And I think that's 2 completely different things. So this cash flow does not include one-offs in the sense that we have an income that was not expected or a cost release that it is not correct to include in the accounts. What happens on the MAG relief is a very good example. We don't get MAG relief because they like us, we get MAG release because the level of passengers and the level of sales are far from the ones that were used to establish the market. So if you want, it's normal that if you have lower passengers and lower sales as a consequence of it, you have lower MAG. MAGs will come back. But MAGs, if they come back, but also the passengers come back, the effect could be there, but it shouldn't be due massively on one side on the other side. What I think is important to know when you talk about cash flow conversion, is that one thing that is clear in 2022, we have adapted particularly the CapEx to the level of sales. And I think we were very clear that the first half specifically had much lower CapEx than a normalized year. So it is not realistic to expect a cash flow conversion EBITDA to equity free cash flow of 50%. That has never been the case of Dufry, and that will not be the case of Dufry, standalone or combined with Autogrill. On the guidance we gave in the Capital Markets Day, and it was for the combined entity. And I recognize that maybe we put the 2 entities together too soon and there was too much information to process. When the market still didn't understand, Dufry standalone, we included the Autogrill. The guidance we gave or the guidance, the outlook or the expectations were based on the information we had at that time. It's true that today, we start already with a stronger position than we had with the half year results. The recovery of quarter 3 has been stronger than any of us expected. Cash flow conversion will not be at the levels we have seen this year because you have probably CHF 50 million, CHF 70 million, CHF 80 million of CapEx that we haven't done this year that in a normalized year, we would have done. The Aena relief, that's an interesting one. But again, also the passengers and the volume of sales in Spain have been much lower. So the normalized concession fee on sales we have in Spain today is not different from the one we had in the past. The only thing that instead of applying the MAG, it applies the variable. So there might be some small effect, but it's not a massive effect, and therefore, not the one that you mentioned.

So just in terms of the cash flow conversion next year because the guidance originally was for over 20%. I'm guessing now we should maybe assume that's going to be more likely over 30%. And then maybe your long-term guidance for this above 30% 2025 onwards, maybe potentially the conversion is going to be closer to 40% than the sort of above 30% guidance you gave. Because literally at the moment, you know, Xavi, we're just throwing darts at the Board. It's very difficult for us to get a handle on what's happening. When we had a very constructive Capital Markets Day, and then it looks like the whole tone and guidance is changing a little bit.

Look I understand what you're saying, but I think -- and you need to understand that for us as management and for me, in particular, what is important is the results we are going to generate, not necessarily the guidance. And for me, it's very important to have the whole team motivated on being very disciplined on cost and cash flow generation. And for that, we need to be realistic. And we need to anticipate that things might go better than expected, but there could also be things that could go worse than expected, and that I have everybody focused on cost discipline, on vigilante CapEx expenditure, et cetera, et cetera. So now to start giving all kind of fantastic projections, I don't think makes any sense. I keep vigilant, I keep prudent. We have a war in the middle of Europe, and we don't know what is going to happen. There is expected a very tough winter in the across Europe. We don't know how that is going to affect consumer sentiment, how it's going to expect next year. So looking at the last quarter, we should be very optimistic, but I think it would not be the right approach. We need to be prudent. We need to be vigilant. And therefore, I think, hopefully, we will do better than we expected. But I would not be comfortable at this stage, taking any of the figures you started throwing because this is a business that you need to generate that cash flow daily, weekly, monthly. It's a tough business. It depends on so many considerations. So very good basis, very good last 4 months, but we still keep a vigilant and prudent approach going forward.

Okay. Maybe just some nuts and bolts on the minorities and potentially paying for that. It looks like with interest rates going up, it's more likely to be potentially equity issues rather than debt issue despite the good free cash flow you're guiding for this year. Would that be a fair assumption? The first question. Second one, just on the, I think, you said EUR 800 million, you've got 2024. Just wondering when that refinancing would come. It looks like you'd be paying maybe 2%, 3%, 4% more than you currently do on that debt. And do you have any thoughts on that, generally, for interest rates for your balance sheet in an environment where clearly the interest rates have moved up a fair amount?

So look, on the refinancing, let's start with that first. So look, as we have mentioned previously, we typically refinance any maturity at least 12 to 18 months ahead of maturity. So the maturity you mentioned is in October 2024. So it's still 2 years to go. Having said that, as I have mentioned today, our leverage has decreased substantially. We currently have CHF 2.7 billion net debt, which is the lowest level since 2020 -- 2015. We also have a substantial amount of liquidity of more than CHF 2.3 billion. And in respect to the interest levels you have mentioned, the group historically have, on one hand side, access to a number of different products in the capital market. So we feel fairly relaxed about the refinancing risk and the execution. And on top of that, the group currently have, after all the initiatives we have taken before the crisis, but also during the pandemic, around 80% of fixed interest coupon at very attractive terms and especially the ones who have a low coupon have an above average remaining lifetime. So yes, depending on the execution of the refinancing, it potentially comes at slightly lower or worse terms than the current bond potentially. But on the other hand, if you consider the overall volume, it's also not impacting the financial expenses of the group materially. And look, I mean, you have seen it. We have generated some cash already this year, a substantial amount. We also are in a position potentially not be required to refinance the full amount of those facilities. But look, it's something we will decide and communicate in the next quarters.

The other question, look, yes, interest rates might be higher, but nothing that we have not anticipated more or less at the closing of the transaction. So we keep the same expectations right now, 60-40, 40-60, 50-50 between equity and debt to finance the minorities, the mandatory tender offer of Autogrill. So we remain committed to the same expectations of what we said.

The next question comes from the line of Ali Naqvi with HSBC.

Could you just highlight which markets you've got approval for all transactions and then they don't include the U.S., when do you expect to get the U.S. regulatory approval? And then could you also give us the sensitivities on FX, please for your major currencies on revenue and earnings and cash?

Thank you for your questions. So we got the U.S. antitrust approval. We got the U.K. also, there are some other pending, which are not less important, but less volume. So the most important and you all know was the U.S., and that was already achieved and that was a very smooth process. That's why we believe being absolutely respectful to the antitrust authorities that if it was not an issue in the U.S. shouldn't be an issue on the rest. On the currency?

So on the currency exposure we have, and I'm talking about top line now is around 40% for the 9 months is coming from the U.S. -- our U.S. dollar exposure around -- sorry, not from the U.S., U.S. dollar exposure, around 30% is euro exposure, around 15% sterling and the rest is various others. We actually have it in the annex of the presentation.

I just meant for a percentage movement in dollar or euro, what the impacts in terms of revenue or costs, please?

So on the third quarter is minus 1.9% overall, over all currencies.

The next question comes from the line of [indiscernible].

Hopefully, you can hear me. Just one question on margins. From my side, I think we provided those in slide, I believe it was Slide 5, Slide 6. I just wanted to ask how those merchants compare to pre-COVID levels? So that's Slide 11, sorry, Slide 11, you show quarter 3 at 11.7%. How does that compare to Q3 2019?

So look, if you look at the number year-to-date, as Xavier has mentioned before, I think it was in his speech, is around 40 basis points different to 2019 level.

40 basis points below?

40 basis points below year-to-date to 2019 levels.

Yes, so…

And what about…

2019 9 months, 9.6% EBITDA margin, and now we have 9.2% EBITDA margin year-to-date.

Okay. And what about Q3 specifically?

So Q3 specifically, we have been basically 20 basis points worse than the same quarter 2019. 2019 had some -- when you look at the quarter, the seasonality and sometimes expenses go from one place to the other. So you normalize that, we have been basically at the same level of 2019. But again, before anybody comes with crazy expectations, as I said, we -- in some cases, we don't have the full employees that back because not all the shops are open. And so there are a few considerations to take before we project already 2019 margins.

Okay. And if we -- I understand there is so many challenges in the short term and so much uncertainty. But if we go beyond the next few quarters, is expectation or the aspiration of management that in the medium term, you can get back to those levels of profitability that you had pre-COVID. In other words, do you see any structural changes that will in the medium, longer term prevent you from going back to those levels?

Thank you for the question. This is a very difficult question because 2019 -- we might go back to 2019 level of passengers, but we will never, never, never, never go back to 2019 exact profile of passengers. There are new generations traveling. There is new nationalities traveling. There is new lines also our scope of business have changed. So the categories are evolving. Pricing is evolving. If we are more or less successful with the travel experience revolution also -- and I think we were clear on the Capital Markets Day. Nobody knows how -- even if you improve spend per head and maybe margin, maybe then part of that has to be reinvested in concession fees to keep renewing and extending the portfolio. So it's many, many moving pieces. That's why I don't like to talk about 2019 as a proxy of anything because that 2019 is gone. The world has changed. Dufry has changed, travel has changed. We feel more comfortable on guiding or expecting or at least explaining what we are going to try to do. And what we are going to try to do is with all these moving parts, combining them in such a way that year-on-year, we improved our EBITDA margin. And depending on the period, if it's more recovery or stable, we mentioned 30 to 40 basis points of improvement on the EBITDA margin year-on-year. And that's, I think, the approach I like and that's, I think, a realistic approach. Talking about something that happened 3, 4, 5 years ago, it is not really reflecting the world where we are today anywhere.

The next question comes from the line of Rebecca McClellan with Santander CIB.

Yes. Can you hear me?

Very well.

I've got 4 really easy questions for you. Firstly, what is the number of opening hours over the 9-month period or the percentage of opening hours in comparison to 2019? Secondly, in October, was there any sort of bulkiness in terms of the traffic? Was it sort of driven by perhaps a really a stronger-than-anticipated half term? Or was it more evenly spread across the months, perhaps because of currencies or I don't know? And then my other question is on staffing. I think you talked earlier as in pet the Capital Markets event about this still being a block of about 2,500 staff across the business. How is that evolving? And finally, can you mention -- I think you said earlier that the passenger is evolving positively still. Can you give us any idea as to sort of where it is year-on-year versus 2019?

Thank you for your questions, Rebecca. I'm not sure they are easy to answer, but we will try our best. Look, I think the opening hours and the number of stores, I think if we use information that is in Page 8, which talks about the number of stores, you should apply a little bit additional to that on number of hours. So it's -- on average, we have opened between 80% and 90% of the stores. So probably on opening hours, you need to add another 5% that is still not fully open.

So like 75 to 85.

Yes, I think that's a good proxy. Of course, yes. Then on passengers and spend per head that I think was your second question, you break up a little bit. I mean what we have seen in the third quarter is both increase of passengers and increase in spend per head. As I said in our last presentation, we look at that per key customer profile, for example, nationality and for key destination because a lot of the consolidated numbers are affected by a weighted average. But what we see in general is improvement on the number of passengers, but also improvement on the spend per head across the board, even if, of course, the average is affected, for example, by the lack of some of the higher expenditure nationalities. Hiding it remains a challenge. And the new Chief People Officer is already starting ideas, maybe with the support of technology to accelerate some of the openings we have. So we have less people that we used to have because we have less shops open. We have less hours, but also because there is people, we would like to hire that are not available. Retail like hospitality and other industries, in particular in the U.S., U.K. remains a very challenging market. That's why, for example, in particular in the U.S., we have accelerated the deployment of the self-checkout. It's helping sales, but it's also supporting some of the hiding needs. And the last question, I think, was on the passenger's evolution. Yes, we still see a recovery on the passengers. Probably in the last quarter, very strong on all the summer locations. I think I mentioned that. But maybe the biggest change is on some parts of South America that are -- they were lagging a little bit behind in the Americas than the rest of the Central and North America. And of course, even if it's on a very low basis, Asia Pacific is starting to recover, not mainline China, not other parts of northern -- or other parts very linked to Chinese passengers. But places like Australia and Indonesia are starting to pick up. But we are very aware that Asia Pacific will not go back to the levels we used to have and kill the Chinese passengers travel again. And this is very, very low visibility that could be next year, but we probably expect only to be meaningful in 2024 or maybe at the end of '23, but we do not expect to see big changes on the Chinese passengers for the next 6, 9 and maybe even at 12 months. At least that's our conservative approach on that.

I think as there was no bulkiness about the October performance that was fairly smooth across the month, was it?

So July and August were very similar. September was a little bit better. October is in line with September. But in general, if there is not like a crazy peak motivated by something special, et cetera. It's across the board, a few countries better than others. But what is clear is that the summer this year has been longer than usual. We cannot, of course, know if that's forever now or it was due to some travel restrictions of this year. Thank you.

[Operator Instructions] The next question from the telephone comes from the line of Dhar, Manjari with RBC.

I was just wondering what have you been seeing in terms of performance by category in Q3 and in October? Is it still duty paid that's been outperforming? And then secondly, what have you been seeing in terms of the tender market and the level of competition you're seeing here?

So the category and the channel evolution is reflecting a more normalized business. So duty free is growing again at the usual level. As you know, in 2021, duty-paid was having an overweight compared to historical patterns, but that was related to limitations on the international traffic and more on domestic traffic. Now that international is opening up, we probably will go very similar levels than we used to have in the coming months. And the second question, sorry, I didn't get it.

What are you seeing in the tender market and the level of competition that you're seeing here -- in terms of new tenders coming to the market?

Yes. I mean, nothing unusual. I mean it's the same players that have been over the last 5 years. So all great companies. And it's not something materially different from what we used to see. So I would not say everybody survived the crisis for the level of competition. So nothing particular to point out.

We had a follow-up question coming from the line of Ali Naqvi, HSBC.

Sorry, just a very quick follow-up. If we were to assume that the sales progression into the tail end of Q4 was to remain flat. What would the sort of drop through or impact be on EBITDA?

Well, it depends where those flat sales. I cannot answer in fairness that question. I mean this is speculation in which country would be, not every country has the same profitability, not the same customer line has the same. We sometimes pay different concession fee per category. It's too complicated. I feel comfortable with the guidance or the outlook we gave for the full year, and we stick to that. I think the rest is too complicated to speculation, if you allow me. Sorry for that.

There are no more questions from the telephone. Back to you to read the questions from the webcast.

Most of the questions have already been answered. So maybe one last question here from [ Michael Luisma ]. How does the -- you mentioned that the profile of travelers has changed. Could you explain how has it changed and how does it affect revenues?

Look, the changes are everywhere. One of the key elements of our new strategic plan and the customer centricity is to adapt to those changes. I think a true retailer tries to understand what passengers or potential customers want, and to change everything from the layout, the entertainment on the store, the assortment, a more dynamic pricing and very, very importantly, more flexible stores. It doesn't make sense to design a store expecting that will last the way it has been designed for 5, 7 or 10 years. Market changes rapidly, and we need to change with the market. If we do a good job, passengers are there, and we do a good job as a retailer, we should be able to keep benefiting wherever is a profile of the customers. As we said in the Capital Markets Day, we believe the opportunity is huge. We believe the combination with the F&B and Autogrill will give us an opportunity to become from a travel retailer, a travel experience to better understand the passenger to better manage the dwell time. And over time, and it's not something that's going to happen in month in 6 months, but over time to be more meaningful for passengers and more successful in converting passengers into customers. But it's our job to adapt to them, not the other way around. With a strong partnership with our brands and a strong partnership with our employee. So thank you very much for your attention, and we will talk soon at the beginning of next year for the full year results. Thank you very much.