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Edited Transcript of ADP.PA earnings conference call or presentation 26-Jul-19 8:30am GMT

Half Year 2019 Aeroports de Paris SA Earnings Call

Paris Cedex 14 Jul 31, 2019 (Thomson StreetEvents) -- Edited Transcript of Aeroports de Paris SA earnings conference call or presentation Friday, July 26, 2019 at 8:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Augustin Pascal Pierre Louis Marie de Romanet de Beaune

Aéroports de Paris SA - Chairman & CEO

* Philippe Pascal

Aéroports de Paris SA - Executive Director of Finance, Strategy & Administration

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Presentation

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Augustin Pascal Pierre Louis Marie de Romanet de Beaune, Aéroports de Paris SA - Chairman & CEO [1]

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(foreign language) [Interpreted] Hello, everyone. Hello to those who are seeing us over video. With Philippe Pascal, we are here to present to you the Half Yearly Results of the ADP Group for 2019. I will start the presentation with a few notable events, and then I'll hand over to Philippe, who will be going over the figures more precisely.

So events of note, in the first half year of 2019. First of all, globally, the traffic in the group is up 3.1% including plus 4.8% in Paris. We're neutralizing the fact that [Ataturk] closed on the 6th of April. So if we take that into account, which was planned, the traffic of Europe was down by 10.3% in the first half year.

The second factor, the commissioning of the Orly junction building with a new layout of a single terminal instead of 2. The third factor is the publication of the public inquiry document and beginning of negotiations for the next regular economic regulatory agreement. As you recall, 2nd of April, we presented a document; 5th of April, publication and our investors day and group forecast up to 2025. Then we also had a public inquiry on the development project for Terminal 4 and the development of Charles de Gaulle airport. I'd like to pay tribute to all of the teams, headed by Edward Arkwright, who ran these inquiries in more than 500 townships, with some of 100 meetings, most of which late in the evening to explain to all of our stakeholders what this means in terms of noise levels, increased jobs, improved access and the creation of these new infrastructures.

With respect to CDG Express, I have some good news for everybody who thought it was going to be threatened. The threat is no longer -- the leadership was taken over by the government. The Prime Minister and the Minister of Transport have signed the concession agreement, and they've also signed the contract with the real operator so that this project is irreversible. A new calendar was assigned for commissioning at the end of 2025. But at least, we are certain that the project, which is capital for us, will be happening.

And last, the PACTE law has been published. And other events of note, there are 1 or 2 articles in the press about the RIP, referendum of shared initiatives. If we believe the number of pages about it in the press, it was a notable event, and I will certainly respond to any questions you may have about that.

Now with respect to global figures and indicators. We are going with Philippe Pascal to attempt to give you all of the details what depends on the consolidation with AIG and the disappearance of Ataturk, and we have SDA, which is an affiliate -- a duty-free affiliate with Lagardère and ADP joint venture for sales of convenience stores and -- with Relay, so -- and also that we have global integration which does modify the presentation and these actual structure of our total sales, EBITDA and so forth.

So globally, what can be said is that the performance is good. Philippe Pascal will enjoy presenting this to you. They are not only scope effects but also organic growth, which fundamentally continues to be positive. So sales, revenue is up 17% from 15.5%. If you neutralize, that was 15.3%. The figures are small there. If you don't take into account the fact that we're consolidating AIG in the half year, because last year, it was a quarter only. EBITDA, plus 10.9% and plus 7.5% [other than TAV in] AIG, OIFOA, 13.3%, and net result attributable to the group, 22.7%. So some things are down, which you can see in the EBITDA graph, the total gross margin is down to 35.5%. Now this is linked to 2 things. It's linked for roughly 25% to the fact that from now on, well, actually, we are -- where we do have new taxes, because the government will no longer reimburse 100% of security expenditures but only 94%. As you recall, this was an amendment to the finance law for 2019, which was voted between Christmas and New Year's and which they basically increased EBIT -- it removed EUR 23 million in EBITDA. So that's one of the reasons we have a lower margin. Also, the global integration of SDA and Relay@ADP will increase the denominator in the margin because the numerator hasn't changed because we're limiting EBITDA from ADP SA. So this is to reassure you about the fact of the lowering of the margin is due both -- which is totally, maybe totally explained and which is linked to an accounting effect, at least in part.

With respect to current events, I think we should go back over the closure of Istanbul Ataturk airport at the 6th of April, which is a bit later than what President Erdogan had announced. So they started operating for passengers. It is continuing up until February 21, the cargo and business activity, so -- but it's quite residual. As of the 1st of April, all of the teams have left Atatürk. And for many of these teams, it wound up at the new Istanbul airport because we have 12,000 staff in TAV which is a service affiliate of ours [Avash], and they provide ground services and duty free, but the TAV teams deserted the Atatürk Airport.

There's a bit of a delay in the taking -- because DHMI, the Turkish Civil Aviation Authority, recently reaffirmed its intention to compensate TAV airports on the future loss of profit. So the quorum has been reached, and then in the upcoming days, we will have the amount of that indemnity. And we have every hope that it will lead in our accounts, at the worst, to a neutral accounts; and at the best, to have some kind of a capital gain linked to the fact that we will be doing the difference between the indemnity we're going to be receiving from the Turkish authorities and the goodwill linked to Atatürk in our accounts. So we're going to match those together, and I think there'll be a slight positive effect. TAV airport is continuing to develop, developing services. We acquired a Spanish company called GIS. And TAV airport is continuing to prospect for new concessions, notably in its zone of influence, I'm thinking specifically of the former Soviet Union countries.

The commissioning of Orly 3 junction building in Paris-Orly, which happened on the 18th of April in the presence of the Prime Minister Edward Philippe, this was very successful. I'm saying it was successful to pay tribute to all of the teams that worked so hard at this, so that overnight, more than 1,000 signs have been changed in 1 night. It just required a huge mobilization, so that from 1 day to the next, Orly Western, Orly Sud became Orly 1, 2, 3, 4, a single terminal with 1, 2, 3 parking lots as well. And it is something that seemed as simple as possible, and it was a very ambitious project: 80,000 square meters, 250 meters [alongside] and 9 meters high, 5,000 square meters of retail floor space and services for EUR 325 million for a building that was the biggest work site -- civil engineering work site in France.

Naturally, the development of Orly will continue in the framework of the regulation agreement with 250 movements a year with a curfew of 11:30 to 6 a.m. And the building is rated HQE Excellent. Now in this chart, you see the view from the sky. The Orly today, Orly Sud and Orly West used to be separated. And now the ex Orly West is now called Orly 1 for the northern part and Orly 2 for the southern part; and the junction is Orly 3 and the ex Orly Sud is Orly 4. So we are setting up a continuum between Orly 3 and Orly 4 with a travel leader, which will be inaugurated probably in the month of October, so we can have a perfectly contiguous communication between those 2 areas.

That's all I can say about the events of note in the first half year. And I will now hand over to Philippe Pascal, who will be presenting the figures to you.

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Philippe Pascal, Aéroports de Paris SA - Executive Director of Finance, Strategy & Administration [2]

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[Interpreted] Good morning, everybody. I'll try and present to you the accounts that this half year are a bit complex indeed because of several reasons really. In April 2018, we had a different situation to April 2019 because on the 6th of April 2019, Atatürk Airport in Istanbul was closed, so the full consolidation of AIG in Jordan was in April 2018. The full consolidation of SDA and, really, at ADP took place on the 1st of April of 2019. We also set up user fees, leading us -- to us being reimbursed only 94% for security cost as opposed to 100% previously. That was on the 1st of April 2019, another change. And also there were some one-offs. One-offs, especially tax one-offs or cyclical effects because of Charles De Gaulle Express and the Grand Paris project. So all of these things taken together make the reading of our accounts rather complex this time, and that tends to conceal some organic growth that is quite strong, about 7% actually.

Now if you look at the EBITDA, you'll see in the bridge table in a minute that we see growth of 10.9% of the EBITDA, excluding the Atatürk effect. If we cancel out the effects of TAV and AIG, we would have had organic growth of 7.5%. And if we cancel out the full consolidation of SDA and Relay@ADP, the growth in the EBITDA is at 7% still.

Now the restatement of the one-offs in 2018 and in 2019 also leads to growth of 7%. So it's all of these items taken together that we look at in some more detail with a few first slides on the traffic. The first -- the main driver of the group's business activity, the group traffic. When you weight it to take account of our stakes, you have 117 million passenger. If it is not weighted, 129.7 million. That's the figure that enables us to do a proper comparison, really, with peer groups -- competing groups. The variation in Paris in traffic is in our favor, plus 4.8%. And you will see, all told, the group traffic growing by 3.1%.

If you look at the different platforms operated by TAV, the figures are going up quite a lot, sometimes going down. All told, the drop is due to the Turkish domestic traffic. The upswing is international traffic in Turkey. And the contrast between these 2 items is actually -- comes out -- is something that comes out as positive in our accounts as a whole.

So if you zoom particularly on the traffic in Paris, as I was saying, plus 4.8% in the Charles de Gaulle and Orly platforms. If you cancel out the effects of the strikes in 2018, the growth is 3.1%.

Very strong at Charles de Gaulle, 7.1% up, more or less flat in Orly because, in particular, of the anticipation done by certain airlines with respect to the runway works that is runway 3 in Orly. That will start next Sunday and will bring us up to December. So some airlines have actually moved some of their flights up to Roissy, up to Charles de Gaulle, as of April when the season opened. So the traffic mix, the international traffic mix is excellent, growth of 6.3% when compared to the growth of 4.8% in the total traffic.

Our traffic is more and more international, therefore, local traffic traditionally, up by 10%. For the first time, for several half years, it's up by only 5.5% now particularly because of the slowdown in Transavia. The connecting rate is very good at 1.3%.

In terms of destinations, still to do with the Paris airports here again, you see the way international traffic is trending: growth in North American traffic, plus 10.4%, but also South America, plus 10.1%; strong growth in Asian traffic, plus 9.4% in Asia; and the other destinations, particularly Africa, holding their own pretty well, with plus 4.9%.

If we you take a look at an important aspect for us in the first half year, which is the full consolidation of the SDA company and Relay@ADP as well, full consolidation of those entities, which will cancel out some effects. Therefore, to give you the details, we have put together this slide. But before that, I should give you a bit more color on all of this perhaps.

The retail and services segment, retail in particular, is a major pillar of our group strategy and our growth strategy, of course. So we need to always have better control over that segment of our business activity and secure what we do there. That's what has led us to take full control of these 2 joint ventures, not by increasing our stake, but by bolstering our governance rights. And by strengthening our governance rights, we now, accounting-wise, can do full consolidation of the income of those joint ventures.

Now the full consolidation means that we take onboard all the accounts of the joint venture in terms of revenues, EBITDA and OIFOA, but there are 3 other phenomena that come into play as well. Firstly, the denomination of flows between the 2 companies and the group. And in terms of fees for ADP, it was a charge for our joint ventures. Now it's canceled out. And the second effect of that is the revaluation, mechanically speaking, of the shared securities previously detained at a fair value at the takeover date. And it's plus EUR 43 million, sometimes EUR 42 million, sometimes EUR 43 million depending on how you round it up. The amortization of intangible assets recognized through the PPA, negative impact on our operating income from ordinary activities and on our net result attributable to the group. That's a cyclical effect, of course.

So if we go into some more details on the revenue I'll go fairly quickly over this. But pro memoria, our revenues, like the rest of our accounts, meeting the requirements of IFRS 5 for the income of the few months of operation of Atatürk in 2019, led us to a pro forma for 2018 and canceling out in respect of our revenues and EBITDA for 2019. It's got to be put there for a specific line item for discontinued operations. Now that, of course, is all in the accounts. Here in the bridge table, you see aviation activities going well, driven by the traffic figures. Also the 3 BRICs for the full consolidation of SDA and Relay@ADP with the elimination to do with the fees. Also, retail activities doing well, EUR [19 million] growth. Revenues per passenger, trending well, too. Positive traffic, impact there as well.

Now on the real estate segment, there is growth as well, as you can see, largely driven by new contracts and authorized strategy to do with the hotel and catering segment. Now internationally speaking, the international segment, as you see here, growth of EUR 14 million, it's impacted by the full consolidation of SDA Zagreb, about EUR 4 million worth out of the EUR 14 million figure. And otherwise, the growth in the revenue is driven by contracts by ADP engineering, in particular.

TAV then and AIG. TAV growth is good, plus 8.2%, excluding Atatürk with international traffic, that's substantial in Turkey. And for AIG, EUR 63 million broken down into the full consolidation effect for the full half year compared with just a quarter last year, covering EUR 53 million, and the remaining EUR 10 million being the incremental amount of revenues compared with the second quarter of 2018. So it's rather complicated to read this concept. I apologize, but everything is in there.

The EBITDA then. EBITDA, in the same way, you will see some items here, which explain pretty well the good organic growth with a particular zoom on our operating expenses. Especially the effects I mentioned in my introduction, the CDG Express and the Grand Paris project, you see the effects of those items here, neutral in terms of the EBITDA, but at the same time, with an important effect in terms of our percentage of operating expenses, 7.9% of operating expenses, all told, for ADP SA. If you cancel that out, take account -- to take account of the presence of Charles de Gaulle Express and the Grand Paris project, it's of course a lesser amount. And if you cancel out the positive fiscal effects for 2018 for we had a tax relief of EUR 18 million and increase in operating expenses on the connection with business activities, at plus 2.6%. So 2.6% comparatively large-ish increase compared to the performance of the last 5 years, that's connected mainly to cyclical items. The replacement of our uniforms, for example, communication activities concerning the new [taphonomy] in Orly. Also, we have to provide more support because of new requirements by the Home Affairs ministry and also the fact of setting up a new taxi facility in Orly. And so all told, these items are to do with our business activities, are to bring us forward and won't have an impact on our strategy to keep a close control over operating expenses.

Then the other item in the bridge table, the effects of the full consolidation of SDA in our expense at Relay as well. So as to come out with an EBITDA positive growth at 10.9%, pure organic growth then would be 7%, if we cancel out all of the effects I mentioned.

So regarding TAV airports. TAV airports, a few comments here, 4 main things: the revenues, plus 8.2%, driven by the international traffic, as I mentioned already; growth in our OpEx, our operating expenses; and concession fees; and revenues too, mainly connected with the full consolidation of GIS, which is the new subsidiary acquired by TAV. Managing VIP lounges, plus EUR 13 million positive on our revenues and EUR 13 million negative then on our operating expenses. That's what mainly explains the increase in the operating expenses of TAV.

Third main feature here in the TAV account is the financial income, up by 52.3%, because the base effect for 2018 EUR 14 million worth there; ForEx effects; and also some catching up in terms of depreciation and amortization; some corrections on the account, EUR 13 million worth. But these are one-off effects.

The net result from continuing activities and noncontinuing activities. We've talked about the closure of Atatürk. You see compared with last year shows that there were EUR 26 million in the first half year of [2019] terms of net result from noncontinuing activities as per IFRS 5. Regarding the net result for the group, I won't go into the details, but we have depreciation and amortization because we've sped up our amortization policy and also we've done the full consolidation of AIG, the capital gains of SDA and Relay, EUR 43 million worth, and the financial results, mainly financial income, mainly one-off effects on the TAV side.

All told, organic growth, that's satisfactory. It's even positive, plus 7%. And the financial situation, that remains sound with a schedule for the debt that you see here. But also, average maturity of our debt, that is getting lengthier. And average cost of debt, that's under control at group level if you look at TAV and AIG, giving us a rating, which is A+ and stable outlook. Thank you.

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Augustin Pascal Pierre Louis Marie de Romanet de Beaune, Aéroports de Paris SA - Chairman & CEO [3]

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[Interpreted] Thank you, Philippe. To conclude and before taking your questions, just a few things about our outlooks. The commitment of the group in favor of the environment in the Parisian platform. We know and you know that from now on, Sunday afternoon dinners are complicated because if you want to plan your vacation [Mauritius], kids don't want to go because they've already used up their CO2 quota, they don't want to go on vacation with you. So collectively, we have to face up to this new general awareness and of heat waves as well to fight against greenhouse gases emissions. And air transport throughout the world corresponds on the order of 3% of all emissions worldwide, and emissions of the airports within that is roughly 5%. In other words, our emissions as airports is 0.5%. That's not -- there's no reason -- that's not a reason to not take care of it. We reduced emissions by 69% per passenger since 2009, between 2009 and 2018. In Paris-Orly, Paris-CDG, the objective is to have 80% of green electricity by 2020. And as you know, our objective is 0 emissions, net emissions in 2050 and 0 emissions in 2030 with compensation. So at this point, we have 3 airports in the ADP Group that are carbon-neutral, Ankara, Izmir and [Amman.] So we're taking many initiatives to ensure our carbon neutrality with using geothermal energy. We're using wood for boilers. We're using LED lights for lighting. And we are working together with the Airlines -- European Airlines Association to work on a road map to divide CO2 emissions in air transport by 2050.

This morning, we just published on the consultation site on T4, 29 additional commitments with respect to those that had been initially taken by the concession on T4. Many of these consider the fight against global warming. The actions, for example, for reforestation of a certain number of forests around Paris. I'm thinking about the Montmorency Forest. And the general objective for T4 is 0 waste.

We are also going to be taking care of the noise issue. We are running a study -- a ballot study to restrict the use of noisy airplanes at night, and we're also participating in research with a view to improving our knowledge of the impact of noise on health. So as a summary, we know that air transports cannot develop if we do not pay particular attention to being responsible in these various areas.

With respect to business, what can be said, bets are open. When we opened our joint Paris in 2012, we had 2013 and 2014, which were very enthusiastic figures. And since 2015, it was a bit more gloomy. But now it's back to great results, thanks to the work of Matthew Baird and his teams to improve the quality of our offering and the material aspects of our offering.

We are up -- the spend per passenger is up, stands at 18.8 in H1 compared to -- up 5.1 compared to 2018, very good traffic mix. The luxury good shops are up 60%, and many will be open at the end of -- I'm sorry, 75% are already open, and others will soon be effective. We have Fendi, Moncler, Gucci and so forth. And by the end of the year, we will have Dior, Hermès and Chanel shops. Orly 3, the commercial offering is ramping up, as you've seen. And by the end of the year, we will have finished installing all of the first floor, a new restaurant is opening at the end of 2019, or in February 2019. The only shadow is what indicated at the bottom of the page, one of our providers is possibly in default, and they're building the junction with Terminal 1. So this failure could cause a delay of a few months in re-realizing our objectives in terms of spend per passenger.

With respect to CDG Express, I'd like to confirm that the project is now secured, thanks to the confirmation of the Minister of Transport to engage, to commit to the CDG Express project. CDG Express is indispensable for Paris and the Greater Paris area, and it will be completed. So we don't need any other comments. Certainly, at the end of 2023, the opening delay is delayed until the end of 2023 to the end of 2025 because the authorities were afraid that the mandatory close -- 3-week closure of RER B, which is necessary, might happen at a time when substitution solutions might not be convenient. So in 2025, we will have Line 17, which will reach the airport at that time, but it won't be available in 2023. So if you want to close the Line B for 3 weeks, the promoter of that solution would be in '24 or 2025 would be better because that time will have RER -- Line 17 will make it possible to offload to -- from the RER B when it's closed. That's the main justification for that delay, which technically was not necessarily indispensable, but that's what's decided. So an amendment to the works concession agreement between the government and CDG Express with ADP, SNCF Réseau and Caisse des Dépôts with no finance -- expected financial consequences for ADP. There was no contest about that this was financially -- the financial neutrality had to be assured. So nothing has changed in our ambition for accessibility. Note that accessibility is one of our battles. And this time, I'd like to take advantage to pay tribute to Marc [Orlak] who took the bull by the horns in terms of access and who set up an alert system so that today, in our control, we have a red alert, which is implemented, which is triggered as soon as traffic -- it takes more than 10 minutes between the Hyatt hotel and the Terminal 2. If it's more than 10 minutes, we have an army of service providers -- it's kind of like a rugby game. They're along that whole trajectory, so that drivers have responsible behavior, so they don't block the traffic, so the issue of access for quality of service is capital.

Now what's on the calendar? Well, from a regulatory point of view, as you know, we published the public consultations documents. We're continuing those consultations with the airlines now. The next step is in the hands of the government. We'll be convening the airport consultative commission in autumn of 2019, the airport advisory committee. So the regulatory authorities will be -- we have ASI, and if the transfer of ASI to RFA enters into force, that will be regulatory authority for the railways that will also have control over the airport. So our objective is to sign a regulatory agreement in the summer of 2020 so that we can have some visibility for the new tariffs that will start to be applicable in April 2021. So much for the regulatory agreement.

With respect to Terminal 4, the public consultation last February finished in May, more than 100 public events, 6,000 people attended. And during that period, the guarantors handed over their report, and we handed our response to the report yesterday. It was published on the Internet site of the consultation starting at 10 a.m. this morning. If everything goes as planned, the authorization for the environment and the building of Terminal 4 should be submitted in the autumn. The public inquiry for that will be between June and July of 2020, which should make it possible to start work at the end of 2020 or the beginning of 2021.

With respect now to our objectives. Globally, we've maintained our guidance with 3 changes. The first change is in the traffic growth assumptions for 2019. As you know, the tradition of ADP is to be prudent. We always wanted to preserve the impact of social movements and also the possible impact of snow and freezing, so our traffic assumptions are now between 3% and 3.5%. It was 2.5% to 3%. And this new forecast, it is on the rise, but it is continuing. And there's a bit of a margin in there should we have any strike activities or climatic incidents at the end of the year.

With respect to the airports, we're not modifying the traffic guidance for TAV. In terms of the EBITDA, for consolidated EBITDA, other than full consolidation of TAV and AIG, we've increased our guidance to between 2% and 3% in 2019. We stood between plus 1% and plus 2% previously. And this has been re-treated for the consolidation of Atatürk. It's between 3% and 6% where it used to be between 1% and 5%. We have no reason to modify the dividend projections of 60% of that result, net income. Even if you've seen the net result in 2019, there would be noncash effects due mainly to the inter-global integration of AIG with Relay, but we still maintain a 60% of all net results.

That's all we have to say about the first half year results. And now we're available to you for any questions you might like to ask.

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Questions and Answers

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Augustin Pascal Pierre Louis Marie de Romanet de Beaune, Aéroports de Paris SA - Chairman & CEO [1]

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[Interpreted] So we have a question here in the room.

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Unidentified Analyst, [2]

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[Interpreted] I'm from JPMorgan myself. My first question has to do with the highlight you mentioned. Very briefly, the RIP, this shared initiative referendum and the signature that will need to be gathered for that to take place, are not progressing very fast. What do you think about possible privatization or not when this RIP process would be completed probably next year? Then on the ERA #4, you talked about the time line for that. You confirmed that, but any more color on the ERA -- the future ERA? Your talks with the airlines, possible pushback on the WACC, anything like that, that you could tell us regarding the future ERA? And on Atatürk, similarly, you received compensation in the very near future, but would it be in cash? And secondly, would it be in euro currency?

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Augustin Pascal Pierre Louis Marie de Romanet de Beaune, Aéroports de Paris SA - Chairman & CEO [3]

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[Interpreted] Thank you for your questions. Regarding the shared initiative referendum, the RIP as we call it in French, I think we've got to let democratic processes kick in and be completed. And I have no further comments on this shared initiative referendum. It's going forward now. On privatization, what we're trying to demonstrate with the ADP teams and all the executive committee with us here today too, is what makes a company is to have a project and great value for all the stakeholders. So if one of our stakeholders wants to leave us, well, it doesn't really make a huge difference if you have to be private to be highly performing. Well, the French economy wouldn't be what it is. If you're public, and you shouldn't be highly performing because you're a public sector entity, it's not very encouraging, is it? So I've always tried to disconnect totally what makes a company do business daily and the shareholder base. You can't criticize your shareholders if you've -- public sector shareholders. You can't say they're bad shareholders. They've got to leave us just because they're public. You can sometimes blame for this or that, they're not agile enough or whatever. The fact is that if you have necessarily a shareholder that (inaudible) more than 50%, it does necessarily enable you to do share swaps and do external growth the way you might do so. Our objective, our primary objective is to do business development for this company with a plan for this company to create a global network for hospitality for passengers. I think we are at the start of the writing of the airport story, the 21st century will develop on the basis of platforms, hubs, networks. What our clients need is visibility in controlling what's going to happen over time, visibility over the services they can expect to have available to them and their baggage handling as well. We made the announcement with Air France. [Mark] and the Air France team have been working on the rolling out of RFID, means to identify baggage with Air France. And for passengers, the fact of being in an ADP Group airport in 10 years’ time, be it in Asia, be it in America, be it in the Middle East or in Europe, they've got to feel secure, they've had an additional service compared with clients who are not going through an ADP Group airport. So we want to create a company of the 21st century that provide the best possible service, a peerless service to our clients. Their growing anxiety will be that there'll be bottlenecks in the airports overloaded with people and unforeseeable lines, queues. So if you have good private shareholders, I'd say welcome to the club to these new private shareholders. If we don't have them, well, we'll get by, too. So I hope that answers your question somewhat. Regarding ERA #4, I give the floor to Philippe on that.

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Philippe Pascal, Aéroports de Paris SA - Executive Director of Finance, Strategy & Administration [4]

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[Interpreted] Thank you, on the ERA #4, the economic regulation agreement, there's only one driver -- well, there's not only 1 driver of WACC, there are 6. Traffic, tariffs, our regulated expenses, our investment level and our accounting -- cost accounting. And the aviation -- Civil Aviation Authority talked to us about our investment plan, our CapEx plan, our cost accounting key and so on. So this debate is going on. Concerning the weighted average cost of capital, the WACC, as such, we provided -- there was a public consultation process, and there were responses provided. Of course, I'm talking about the airlines here. Obviously, they think the WACC is too high. But we didn't technically get into the hard talks on that question yet. But this will no doubt be revisited by our new regulator who will have to respect the act requirement as promulgated as entered into force that sets down the appraisal means for this in a way that will secure us going forward. Now as the Chairman and CEO has said, it's the states that now is entity in charge of the time line, and of course, there is the Advisory Committee, airports committee that will, of course, play its role. Now on Atatürk Airport, the request made by TAV is a request for cash compensation in the euro currency. That, I can confirm. And the debate is underway. And we have to wait another few days or even weeks maybe before we have announced it, but we're quite confident on that score.

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Augustin Pascal Pierre Louis Marie de Romanet de Beaune, Aéroports de Paris SA - Chairman & CEO [5]

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[Interpreted] We've got question from the Internet, Philippe. So will I let you answer this question that has come up, number one, and then I'll take the other ones. Maybe the second one first. In the past, you mentioned a target of EUR 19 to EUR 20 of revenue sales per passenger in 2019. Does this hold true still for 2019, is the question. 2018, the person says, we had 2.4 for food and beverage for passengers SPP, but what you expect for 2019 is the question.

Well, yes, the 2 figures are still valid. And they're turning to [corporates] actually as we speak. Philippe, I'll let you answer maybe on question #1 and perhaps the other ones.

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Philippe Pascal, Aéroports de Paris SA - Executive Director of Finance, Strategy & Administration [6]

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[Interpreted] Yes. There's a question here on the EBITDA of the aviation segment, which has 0 growth in the first half and the person asked what are the operational drivers. Now the answer is fairly simple actually. On the aviation segment, as I mentioned earlier, it's the setting up of user fees for our security expenses. Since the 1st of April 2019, we are not reimbursed 100% for our security cost but only 94%. So that will have an impact then -- a structural impact, I mean, of EUR 30 million as full year impact, not in 2019 because it started on the 1st of April only in 2019, this user fee principal. And then the other diluting items in the aviation segment is what I mentioned earlier to do with our operating expenses, mainly cyclical effects, and partly at this stage, marginal, structural. But as of the second half 2019 and in the coming months and years, the new infrastructures open, especially Orly, will mechanically -- we're a bit more heavy on our OpEx. And the growth in OpEx was expected and was modeled up in the ERA and in our commitments in our strategic plan called Connect 2020. Now the second question, that has to do with the retail segment. EBITDA posted growth of 3.4, excluding SDA. Once again, these are the figures that Stephanie D'Ath, asking the question, is highlighting here. So why, she asked, is the growth lower than the passenger growth?

Okay. To answer that question, we've got to be careful here because these are not retail figures. These are retail and services figures. And in the segment of retail and services, there are other items to be taken into account, car parks, for example, that are not going up. They're flat, but they are not posting a huge amount of momentum, let's say.

Now also regarding ForEx and tax refund, there has been a change in the model. In the first half of the year, there was less income for ForEx and tax refund services. The strategy is clear there. The idea is to have the tax refunds in cash and euro currency as a service delivery, so as to give new momentum to our retail revenue figure. There's a temporary period in the interim, and the strategic move for making we hope will come out positive. Now Stephanie D'Ath also asked about real estate EBITDA going up EUR 7 million worth of sale of land. It's a one-off, or will you be selling more land? It's a one-off is the answer to that. We sold some land, one, to the Societe de Grand Paris and another piece of land to a borough where we have a civil aviation facility. I don't know if I should say the name. So it's [Sancia] the Chairman and CEO. Well, that's the name. You have it. You know where it is. So [Sancia D'Ecole] near Versailles Chateau, social housing near the Palace of Versailles, why not? And there's a very last question. Who'd like to take it? I'll continue.

The first question is a positive and negative effects or one-off effects of EBITDA in the first half year. What would be the model in the future for the second half year, notably about IFRS impact on the selling off of land and CDG Express. First of all, the IFRS standards, I'd like to invite you to read the first line in the detailed portion of the press release that will give -- outline those impacts, which are quite minor and that will remain minor in the second half year. About the land, I've answered. And about CDG Express and the reimbursable, this was taken -- profit was taken in the first half year, it will be canceled in the second half year, so there should be no effect on the full year. About -- my iPad is moving. I answered about the first question. About TAV in AIG, the adjustments and one-off SDA, that means there will be no increase in EBITDA in 2019. There is an organic upside that I spoke about in the EBITDA, which was already visible and which will also be visible in a full year effect. And that's modular of the increasing expenditures due to the opening of the junction building and perhaps a tax effect, a catch-up effect as it were in the real estate tax base. That's the only possibly one-off effect in the second half year. That's worthy of note, but otherwise, everything is already in the presentation and online with the first half year accounts. I think I've answered everything. There someone in the room -- in the floor.

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Unidentified Analyst, [7]

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[Interpreted] Ian [Dorack] I'd like to get back, sorry about that, but about the aviation side of things, because when I look at the exceptional effects, I have a decrease of margin. For whole year, I had a slight increase. I'd like to know if my slight increase in terms of margin and EBITDA on the aviation side is still correct throughout the whole year? And last, the question, you mentioned inorganic growth of 7% in EBITDA, does that include any upside in Charles de Gaulle in the Greater Paris company? Or is that just organic, or not? And also questions that are broader having to do with your M&A. Where do we stand when the different things ongoing in Vietnam and whatever? About the second half year or in the winter, if there are quite a few adjustments in capacity that are downwards in the European companies and American companies, what visibility do you have today about the second half of the year and about the first half year of 2020? In that respect, and to be totally sure, have you picked up provisions of any kind?

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Augustin Pascal Pierre Louis Marie de Romanet de Beaune, Aéroports de Paris SA - Chairman & CEO [8]

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[Interpreted] Let us start with the international and M&A and I'll let Philippe prepare his response about the margin. We haven't picked up any provisions for the first half year, but these can only be favorable because our situation is improving, notably in Chile. But Vietnam, this is a case with respect to the acquisition, a part of the capital of the Vietnamese airport from the national company. This is kind of on the back burner because we didn't get finalized. But our engineering is there to build the Ho Chi Minh Airport, which is called Long Thanh, but that's more engineering service, providing service. About M&A in general and international development, first of all, you have to go back for a second to failures in Bulgaria notably. Our consortium was #1 by far in our financial proposal, but in our technical note was 52 out of 100, where one of the consortiums directed by [Escarbag with Meridium] they had 100 for 100. That situation is surprising, so the Bulgarian press expressed surprise that one of the competitors decided to actually appeal and we decided to do the same thing. As you recall, in 2006, a call for tender gave Copenhagen as winner. Frankfurt appealed and Frankfurt won. So for Sophia, we have no doubt about the fact that our team had worked well, and we have doubts about the fact that process was not parasited at the last minute by some effect or other. With respect to Japan, there are only 2 still in the running. It's 100% consortium -- 100% Japanese consortium that won out. I don't know the real reason that we didn't win out, that we were -- came in second. What's possible is that our offer was perhaps a bit more innovative, and we took less into account the local, specific nature of local effects and there are 7 airports and 6 in small cities. And we were told that when -- we didn't take the local communities enough into account. And France is a bit less popular in Japan since the Nissan affair and France was taken -- it was a bit of a scapegoat. Because in the Kansai airport, there are a lot of criticism because after the tsunami, we saw that the communication was too slow by the operators in that airport, and they're French. So these 2 calls for tender slipped through our fingers, and we learned a lot. And we have a lot of projects in the pipeline that I obviously cannot reveal to you. But whether it be TAV in Asia or ADP, we are continuing to seek out growth to create a network of airports that we wish to create.

About the Internet, what explains the lack of traffic growth in Orly in the first half year? What's -- is it due to a lack of capacity? What's true, if you look at the figures in detail in growth in traffic in 2019, they're fascinating. Orly is almost flat. Even a bit negative and CDG is exploding. Why is that? Well, since we're going to be working on a runway called -- in Orly, Runway 3, at the beginning of August and the end of October, so we're going to run Orly on one single runway. We have restricted capacity in Orly for a long time because we're going to do this, so we offloaded Orly to CDG for those flights. So more than ever in 2019, we'll have to look at the overall progress of Paris airport because we have traffic in Orly that is penalized due to the work on the runway and which is offloaded to CDG. So you need to take that into account. Philippe, do you want to answer about the margin?

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Philippe Pascal, Aéroports de Paris SA - Executive Director of Finance, Strategy & Administration [9]

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[Interpreted] Yes. About the margin, I do confirm that the margin is broken down. But as a total in ADP and EBITDA, stands at 10.9% stand-alone according to IFRS 5 and neutralizing Atatürk in 2018 and 2019 and 2.8%, excluding TAV and AIG and without global integration of [ADP] When you take out the, what French call (foreign language) the margin would be 8.2%. So once this is re-processed for all of the one-offs effects in ADP, for example, the EUR 6 million of the IFRS standard and certain other factors such as the sale of land and especially the CET reduction on taxes for 2018 on the order of EUR 18 million, we reach a margin in the order of 7%. So there's all those factors which are reflected in these segments. Especially in that particular segment, we received all of the impact of the (foreign language) and all the expenditures that I mentioned earlier in the first half year, and in the second half year, the expected expenditures in opening the junction building. The first driver of expenditures of ADP SA in Paris is the number of square feet, the maintenance of the cost of security, and opening a new infrastructure also increases expenditures. And we wish obviously to control that and compensate through other things, other effects. So at this point in time, we don't have any particular alert about margin in aeronautic other than the things I mentioned. So much for that question.

About the second question about the adjustments of our capacity downwards and forecast for the second half year 2020 and the winter, what can be said, which explains at least partly our prudence here is that our traffic is up 4.8% in Paris. It would have been up by 3.1% without the strikes last year, 3.1%. In addition to that, there are some trends -- low-cost trends, which tend to change the whole global picture. So globally, the mix is very positive, and it's impacting on our accounts as such. So in terms of traffic scenarios, we are globally aligned with what happened in the first half year, the first quarter. If we re-read the guidance between 3% and 3.5%, that means that the organic growth of 3% in the first half year is expected similarly in the second half year, not stronger, not weaker, not stronger even though, usually, it would be higher traffic. So this is the legendary prudential approach that the Chairman was speaking about earlier.

(inaudible) a few questions, who's a French speaker who's asking 3 questions in English. First of all, should we extrapolate the increase in expenditures per passenger in the first half year, plus 5.1 to the second year? Or can we expect a stronger growth in that figure?

The only thing I can say is that our hope is that the opening of the shops, the retail areas and the increased offering will produce increased growth in the second half year. I can't quantify that however.

Secondly, can you quantify the impact of the deadline of the impact of the opening of T1 based on the guidance of expenditures per passenger for 20 -- the end of 2020? We gave 30 -- EUR 23 per passenger. The answer is no. We are calculating that currently. I'd just like to remind you what the guidance was. It was EUR 23 at full year effect after delivery of the infrastructures. So an example of that is that we would open infrastructures at October 2020. So we would have October, November, December, which would bring was up to full year to simulate a kind of something -- overgrowth of 2021. So the offset of a few months means that these openings could, in fact, occur for nothing. They could happen in 2021. So the guidance of EUR 23 was already a guidance of 2021 in a certain way. So we will have an impact on sales, very clearly. But after the impact per passenger, we'll also, perhaps this is in the conditional tense, it could be negative. But it's difficult today to have an accurate model about what the sales will be in 2021 because we don't know the number, precise months of delay, potential delay the project could incur.

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Unidentified Analyst, [10]

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[Interpreted] Mr. [Travitik]. Yes, I'm from [Les Ecole]. A couple of questions, if I may. I'd like to know about the positive and negative consequences that we might expect to see when ACI moves over to [RF Air]. And what about border controls and the new and the PARAFE, the new security measures?

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Augustin Pascal Pierre Louis Marie de Romanet de Beaune, Aéroports de Paris SA - Chairman & CEO [11]

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[Interpreted] With [RF Air] this is a public service of the public service works.

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Philippe Pascal, Aéroports de Paris SA - Executive Director of Finance, Strategy & Administration [12]

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[Interpreted] Well, it shouldn't have any consequences, should it? Well, we know that they've already prepared, have been preparing for many months for this change. This is work they started a long time ago. I don't know exactly what the government decision would be, but they're ready. They're ready. Well, the thing is it's -- with on regulatory authority, another [ASI] worked well. I don't think we should have any qualms about it. A change in the name because it will still be the state's servant. Now regarding border control, the situation is getting better. We now have 104 border control agents as opposed to 32 the year before. Now the situation has got markedly better in Charles de Gaulle and in Orly, the occurrences of exceeding the waiting time compared with the objective set by the Prime Minister, 30 minutes for Schengen passengers and 45 for international passengers. You can count on the fingers of one hand the number of times we exceed our objectives. In bad weeks, it is 6 or 8 in Charles de Gaulle. In good weeks, it's 0. Every single hour, I get a report on this, by the way. And the Executive Committee in ADP, we always are kept posted on the waiting time of all of the border control areas and to tell you the live information here at 11:00 in Terminal 2, we have 5 out of 5 border control desks open, 16 minutes for passport checking in 2E, 11:00, 16 open out of 21, 7 out of 13 border control agents and 2 minutes late. When people arrive, they don't have to wait 0 minutes. And for module P, 0 minutes waiting time because there are 5 PARAFE areas opened out of 5. That basically tells you that we're on their backs. It's not lucky for them maybe, but we're monitoring what they're doing the whole time and the waiting time of passengers. The Home Affairs Minister has put in a lot of efforts. There's hundreds of extra police people on the spot. The state has allocated resources to this. DPF and ADP agents work hand-in-hand to make sure we alleviate the problem that occurred in the past, but you're racing against the traffic rise all the time. You should never be satisfied because the traffic numbers are going up the whole time, 3% to 4% per annum. So you've got to allocate more resources. You need 3% or more 4% more police people per annum, you can't do that. We've nearly 2,000 police people. So you can't create 80 police posts per annum just to maintain the waiting time. So the solution is not to keep on creating public jobs, the solution resides in automating the process, the border control process. So we're working with the Home Affairs Ministry on prechecks. The fact that you can -- even before you get to the border control agent, that you can have had a precheck done by electronic means to the point you get to the control area, it will go very quickly. And we're working on new generation equipment and the PARAFE people always you can do better, but we've taken control of the system, and the Home Affairs Ministry is totally aware of the challenges here so as to make our country attractive. And they've totally bought into the idea that we've got to automate the system. It wasn't necessarily the case 5 or 6 years ago. You may recall where there's a lot of debate still on this kind of thing. Yes, sir, you have the floor. (inaudible)

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Unidentified Analyst, [13]

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[Interpreted] I have a question. I'd like to react something said earlier about the international network. There's some things that may happen in Germany, privatization of certain airports and in Brazil. I'm just wondering could you make any comments on those topics, please? Give us a few more details also about Brazil.

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Augustin Pascal Pierre Louis Marie de Romanet de Beaune, Aéroports de Paris SA - Chairman & CEO [14]

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Yes. Brazil, a couple of things there. We were a candidate for a small airport in Brazil a few months ago. We lost it. We didn't get the deal. Prices were very high. But anyway, we're still looking at Brazil though. We're still looking at Brazil because we think that with Asia -- along with Asia, it's the growth area in the world to look at. There are 2 main growth areas, and -- Asia and Latin America, apart from the Middle East where we already have a lot of positions we've adopted.

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Unidentified Analyst, [15]

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[Interpreted] And Germany, could you answer on that, please?

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Augustin Pascal Pierre Louis Marie de Romanet de Beaune, Aéroports de Paris SA - Chairman & CEO [16]

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[Interpreted] Germany has airport players who are premiere players, Frankfurt and Munich, so world-class players, so I don't think that Fraport is going to be privatized. I mean if there were to be share swaps, we might deal with Fraport, but it's not the time is right to do that. Munich or Bavaria is so proud of it, Munich City Hall Authority that own it, so I don't think that's going to change. But there is, nonetheless, a difficult situation on the failure on the opening of the airport because ADP engineering might be able to step in. We've offered our services, but obviously it just didn't match their needs. And it's still not open, I think. It won't open unless there is a competent engineering company involved. It's the failure of the German construction system, I think. Well, yes, just goes to show. Are there other questions in the room perhaps? Mr. [Travitik] do you have another question, I think?

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Unidentified Analyst, [17]

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[Interpreted] Similar topic, related topic. You have relations with Schiphol airport. There are talks between the French and the Dutch governments regarding the future of the relationship between Air France and KLM and the development of Amsterdam airport. Are you tied into those talks yourselves? And conversely, are you sidelined maybe? And do you think the Dutch might invest in ADP, like Air France and KLM got together?

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Augustin Pascal Pierre Louis Marie de Romanet de Beaune, Aéroports de Paris SA - Chairman & CEO [18]

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[Interpreted] Well, I'll try and answer your question, Bruno. Philippe Pascal just sent me a note here. That's why I don't react straight away to the question on Brazil. Philippe thought that when I answered your first question, Madame, it sounded like I was against privatization. Let's be clear on that. My position is, I'm not against privatization. I'm not in favor and I'm not against. Basically, my message is that -- I don't want to be that distorted, this message. We are happy no matter what's the identity of our shareholders. Technically, you can say it's better to have this with that kind of shareholder, but in the end of the day, no. I mean we're neither in favor nor against. Thank you, Philippe, for sending me a note because other people's perception of what I said may not be my perception. So your question about Schiphol is fairly relevant. The ADP Group is living alongside the Air France KLM group, within which there have been lots of agitation and turmoil because of the Franco-Dutch relationship. Now when it comes to ADP and Schiphol, it's a much quieter as a relationship. It's not in turmoil. There are cross shareholdings and so on. Now we have no reason to complain about our relationship with Schiphol and we have all the right reasons to believe that Schiphol is happy to be a shareholder of ours. Now would they like to up their stake in our equity base? Well, it's not totally ruled out, but we have no particular information, provision information on that ourselves.

I'm looking at the person here in the audience who's a member of the Supervisory Board of Schiphol, I hope he agrees with what I'm saying. Well, if there are no other questions then, ladies and gentlemen, I'd like to thank you all for coming along this morning, and we'll meet again in February of next year to talk about our annual results our full year results, thank you.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]