Groupe ADP (NASDAQ:ADP) (Aéroports de Paris SA), the French airport operator with the ticker symbol ADP.PA, reported a positive performance in the first half of 2024, with traffic meeting expectations and EBITDA increasing by 9% to €943 million. The company confirmed its EBITDA growth guidance of at least 4% for the second half of the year.
Significant developments include the preparation for the Paris Olympic Games, the finalization of the merger between GIL and GAL in India, and the upcoming acquisition of Paris Experience Group. TAV Airport contributed notably to revenue growth, while Amman Airport's performance remained stable amidst geopolitical tensions.
ADP anticipates an increase in operating expenses, mainly due to higher staff, electricity, and subcontracting costs, and expects net debt to be €7.8 billion, excluding FCCB-related derivatives.
Key Takeaways
- Traffic at Paris and international airports aligned with expectations.
- EBITDA rose to €943 million, marking a 9% year-over-year increase.
- EBITDA growth of at least 4% anticipated for the second half of 2024.
- Successful steps towards the Paris Olympic Games and merger completion in India.
- Paris Experience Group acquisition underway, with the price remaining confidential.
- Net debt stands at €7.8 billion, excluding FCCB-related derivatives.
- No current plans to sell stake in GMR Airports, focusing on long-term investment.
Company Outlook
- ADP expects to spend around €900 million annually between 2024 and 2025 for maintenance and new projects.
- Traffic growth in Paris projected between 3.5% and 5% for the year.
- Retail spend per passenger aligns with guidance, despite potential second-half impacts.
- CEO appointment process set to conclude by early 2025.
Bearish Highlights
- Increase in operating expenses due to higher staff, electricity, and subcontracting costs.
- Load factors have slightly declined, although pricing strategies are being employed to manage demand.
- Retail EBITDA may face headwinds due to lower energy sales.
Bullish Highlights
- TAV Airport's strong growth significantly boosts revenue.
- The merger of GIL and GAL expected to enhance the company's position in India.
- The company's infrastructure is ready for the upcoming Paris Olympic Games.
Misses
- The company has seen higher personnel costs at TAV Airport and increased operating expenses in Paris.
- A global IT outage affected 30,000 passengers, attributed partly to not purchasing antivirus software for the year.
Q&A Highlights
- The slight decline in load factor is not a major concern, with efforts to stabilize it underway.
- Political situation in France unlikely to affect the company in the short term.
- Discussions with the regulator on tariffs ongoing, with the merger's non-cash expense significant but not yet quantified.
- Infrastructure tax manageable, with the ability to pass it on to airlines.
Groupe ADP remains cautious about international mergers and acquisitions, prioritizing markets with robust traffic dynamics such as India, the Middle East, and Central Asia. The company is open to new opportunities but currently has no projects in the pipeline.
Dividend payments from TAV and GMR are anticipated in 2026 and the end of this decade, respectively. The company reassured stakeholders of its long-term investment strategy, particularly in GMR Airports, and highlighted the minimal impact of the recent global IT outage on its operations.
Full transcript - Groupe ADP (PARP) Q2 2024:
Operator: Hello, and welcome to the Groupe ADP 2024 Half Year Results Call. Please note this conference is being recorded. And for the duration of the call, your lines will be on listen-only. However, you will have the opportunity to ask questions. [Operator Instructions]. I will now hand you over to your host, Cecile Combeau, Head of Investor Relations, to begin today's conference. Thank you.
Cecile Combeau: Thank you, Francois, and good evening, everyone. Thank you for being with us tonight for our half year results presentation. Today with me are Augustin de Romanet, Chairman and CEO; Edward Arkwright, Deputy CEO; and Philippe Pascal, CFO. We will start the session with some prepared remarks from the management before the Q&A session. As a reminder, certain information to be discussed on today's call is forward-looking and is subject to risks and uncertainties that could cause actual results to differ materially. For these, I refer you to the disclaimer statement included in our press release and on Slide 48 of our presentation. And with that, let me hand it over to our Chairman and CEO, Augustin de Romanet.
Augustin de Romanet: Hello, guys. Thank you, Cecile, and good evening, ladies and gentlemen. Thank you for joining us to discuss our half year results 2024. So let's move directly to Slide 3. We've delivered a consistent set of good operating and financial results in the first half of 2024. First, traffic is developing in line with our expectations, both in Paris and in our international assets. Second, after two years of preparation, this semester, we finalized the rehearsals and welcomed the arrival of passengers taking part in the Paris Olympic Games. The special summer has now started. Third, on the international side, we are in the final steps of the GIL and GAL merger in India, checking that all conditions precedent to the merger are completed. Closing of this very important transaction is expected shortly. It's now hopefully a matter of days. Fourth, we are posting €943 million EBITDA. That is 9% above last year driven notably by an outstanding performance at TAV Airports. And fifth, we're expecting that this over-performance will likely soften in the second half, and our EBITDA growth guidance of at least plus 4% is fully confirmed as are our traffic assumptions and other financial objectives. On Slide 4, you can see overall traffic evolution in line with our assumptions for Paris and at Group level. Philippe Pascal will come back on this data in a few minutes. Let's move to Slide 5 to talk about our operations. In Paris, our news is marked by the 2024 Olympic and Paralympic Games, which will kick off this Friday. It's a fantastic hospitality challenge for which all teams have been preparing for a long time now. We've already started to welcome many delegations in good conditions. Arrivals are intensifying this week with now only three days to go before the opening ceremony and the start of the competition. The second major operational challenge will take place on August 12 when most of the athletes will set up. While peak day traffic is expected to be higher than the usual peaks in a normal summer, overall for July and August, we anticipate a substitution effect between Olympic-related traffic and seasonal tourism. It was the same in London, Athens, Tokyo. Let's move on Slide 6. Our infrastructures are ready with a revolution of the access to Orly, thanks to the commissioning of the metro station built by ADP and the opening of Metro (TSX:MRU) Line 14 a month ago. Now Orly is related to the network of Paris Metro in very good conditions. You can reach the center of Paris in less than 25 minutes from Orly. And for the first time since 2018, all Parisian terminals are now open, the last two in CDG where Terminal 2C reopened since May 23 and Terminal A since July 2. Now moving on to Slide 7. Our teams are mobilized and have rehearsed to welcome tourists and delegations. In such events, there is no room for running period. We rehearsed and now here we are. To avoid baggage and passenger jams at departure time, we relocated athlete check-in to the Olympic Village. They will load their bikes, their canoes and other vaulting poles, which will be transported directly by special truck to the airport, where security checks will be carried out in a dedicated plant. Athletes will also benefit from a dedicated terminal for their departure from Paris. Now let's talk about our international operations on Slide 8. Among the highlights of this half year, I would like to mention the opening of the new international terminal at Almaty Airport at the beginning of June. Part of TAV Airports portfolio, Almaty in Kazakhstan is experiencing rapid traffic growth and we are delighted to see its capacity increase to 14 million passengers with new retail facilities, giving an outlook for announced profitability. Continuing with our international portfolio, I will now move to Slide 9 about our 51% owned Jordan subsidiary, whose name is AIG (NYSE:AIG). Following COVID-19 disruption, we've negotiated together with our partners and obtained from the lenders and from the government of Jordan global restructuring agreement, leading to the extension of the concession held by AIG to manage Amman Airport for an additional seven years until November 2039. This renegotiation support AIG's financial and operational stability, which has been shaken during COVID as well as its ability to accompany future traffic growth in Jordan. This positive outlook is reflected in the reversal of an impairment, which Philippe Pascal will comment in a few seconds. Now let's move on the progress made with our strategic roadmap. Actions contributing to the achievement of the 2025 Pioneers objectives are continuing. You see on the slide the key progresses contributing notably to the decarbonization of our operations. Besides four out of the 20 objectives of the roadmap have been adjusted to take into account certain external limiting factors such as, first, the speed of change in regulatory frameworks; second, some operational constraints linked to air navigation traffic control; third, the speed of renewal of airline fleets; and last, the absence of market opportunities. In the light of the above context, the adjusted objectives set demanding targets and reaffirm the determination of Groupe ADP and its commitment to achieve ambitious results. Now getting back to our half year results on Slide 11. You see here our key figures highlighting our strong performance, and I will now hand it over to Philippe Pascal, who will comment further our operating and financial numbers figures.
Philippe Pascal: Thank you, Augustin, and good afternoon, everyone. Let's first cycle back to traffic, focusing on Paris on Slide 13. As highlighted by Augustin, profit is growing in line with our expectations, both in Paris and in our international assets. Traffic with mainland France shows a decline of 6%, reflecting the impact of the 4-flight air traffic management system in January and February, estimating to 1 million passengers. Domestic traffic is structurally growing slower compared to international traffic notably due to the pressure of several domestic rules compared to pre-COVID situation. International traffic, the most contributor for ADP is growing by 8.5%. Among these traffic, you can see that traffic with North America continue to see strong momentum. It is up 7.8% overall driven by traffic with Canada, in particular, which is up 13.4% compared to last year. Also, traffic with the Middle East is down 3.1% due to the geopolitical conflict. And the traffic with Asia Pacific is up 35.3% notably driven by traffic with China, which is 4x higher than in H1 2023. There are currently around 48 frequency per week between Paris and China, which is around half the capacity of the pre-COVID situation in 2019. We do not expect capacity on the road to increase in the seasonal future. Let's now move on to Slide 14 with a focus on Extime Paris performance. The performance remained very strong to €51.7, up €2.1 around 7% increase. We continue to see strong performance in fashion luxury, which is the greatest contributor to sell in airside shop. This growth is notably driven by international traffic included the gradual recovery of Chinese traffic in our flagship terminals, Terminal 1 and Terminal 2E. Media and advertising is performing well with a strong contribution to the SPP in the first semester driven by advertising campaigns ahead of the Olympics. Going forward, we expect the reopening of Terminal 2A and 2C in May and works in Terminal 2E or K, but will materialize in H2 to affect the short-term dynamism of SPP. Despite this, we anticipate the continued rollout of Extime to drive performance and more than offset the headwinds I mentioned with SPP expected to continue to rose by 2025, but at a lower base. Finally, I will highlight the most recent development in Extime, this projected acquisition of Paris Experience Group as approved today by the Board of Directors. The company is positioned in a dynamic market and benefits from fully position in the tourist reception sector in the Paris region. The projected connection aims at expanding Extime value proposition to tourist throughout their stay in Paris. We hope to close the deal towards the end of the year or by Q1 '25. Moving on to Slide 15, we will focus on our international airports, which overall show a solid growth of 12% driven by our two main international assets, TAV and GMR. As you can see on the left side traffic growth of TAV airport is strong, up 17.3% overall. TAV's international network of airports is the strongest growth with traffic up 22.7% and notably a solid contribution from Almaty, where traffic is up 25.5%. The opening of the new international terminal at Almaty Airport in June, as mentioned previously by Augustin will increase capacity to 14 million passengers and enable further growth. Turkish Airport record solid grows with 14.1% in profit with international traffic being the most dynamic, up 17.2%. On to the right side of the slide, GMR Airport traffic growth is solid, up 8.9%. Here as well, international traffic in India is seeing the strongest growth. Moving on to Slide 16 for our consolidated revenue, revenue reached close to €2.9 billion in H1 of '24, up 13.4% versus last year. Aviation revenue is up €50 million or 5.4%, reflecting traffic growth in Paris and the tariff increased by 4.5% on that rate applied since April '24. The Retail and Services segment is up 13% versus H1 '23 helped by the stronger sales per pax in addition to profit. Real Estate revenue segment is up 7% and world with TAV Airport, TAV is up 31% against last year, bringing the biggest contribution to revenue growth this semester supported both by a strong profit growth and strong momentum in services companies. For Amman Airport, Amman still impacted by the geopolitical conflict on Jordan and globally is stable. Moving on to Slide 17 on EBITDA, CapEx stands at €2 billion, up 15.9% and out of the €275 million increase in OpEx, you can see the €64 million for the new infrastructure packs in Paris, which impact the 3 Parisian segment. As a result, EBITDA growth this semester is mainly driven by international and shown on the right side of the slide. As expected and previously commented, we are seeing OpEx increase in Paris driven by staff costs, roughly the impact of incremental recruitment made as well as salary increases implemented in January '24 in ADP mother company, but also driven by higher electricity costs for about €10 million compared to last year and also driven by higher subcontracting costs, reflecting efforts on quality of service, but also the effect of inflation on some contracts. At TAV, we also see higher personnel costs to enable the higher activity. We expect this FX to continue in the second half of this year and while EBITDA is up 9.3% in H1 to reach €943 million, we expect this over-performance to soften in the second half due to OpEx increase written. Moving to Slide 18 to see EBITDA trend excluding the one-off and you see the slide excluding one-off, H1 '24 EBITDA is up 12% against H1 '23. As you can see on the graph in the middle of the slide, the list of one-off excluded is detailed in the appendix and is the financial report. Below is the Slide 19. There are two items to highlight. So first, the amortization and impairment, up €134 million mainly due to the reversal of an impairment of €152 million relating to the expansion of the Amman Airport position until 2039, which rebalance the concession. The impairment reversal being a one-off contribution to the net income group share of €61 million and the second item that I want to highlight is the financial results of €60 million mainly due to the gains of financial investments. Given this and the solid underlying EBITDA performance, the net reserve group share stands at for €347 million, up 64% compared to last year. Slide 20. Slide 20 shows an analysis of the main results for share excluding one-off, a very solid underlying results in H1 '24. In H1 '24, the largest one-off impact was the impairment reversal from Amman Airport that I mentioned just previously. In the bottom part of this slide, you see a reminder, regarding the noncash accounting item, but we expect to book in the net result of full year 2024 relating to the upcoming merger of GIL and GAL in India. As you know, it is an accounting item and it has no impact in our cash flow and whatever the amount of our net income group share will be for 2024, our distribution policy provide for dividend payout with a 60% dividend payout with a protective threshold of €3 per share. As mentioned by Augustin, we expect the transaction to close in the coming days and we are very excited about it because it will rebalance the value of our assets, which are significantly increased compared to 2020. Moving on Slide 21, you can see on the bridge the main items explaining the evolution of -- in our net debt. I will first highlight that after applicable accounting rules, the derivative instruments related to the FCCB convertible bonds issued by GMR and subscribed by ADP in March '23 as part of the GIL and GAL merger project, this issue are included in our net debt at fair value. The fair value of this derivative instrument totaled €709 million in June 30, up €177 million compared to the end of '23. The handling of these instruments will coincide with the settlement of the FCCB and does not be a commitment to cash outflows because of this, we wish to focus the analysis of our net debt evolution excluding this instrument with the following few things. The first, the usual cash flow outflows of the dividend payment for €377 million and from CapEx spend, which amounted to €471 million. And the second point is the €500 million bond repayment on June 11, offset by the €500 million bond issuance of mail and with a 7-year maturity, which allowed to smoothen our debt profile. In total, net debt stand at 8.5 billion, 4.2x EBITDA. Excluding FCCB-related derivatives, the adjusted net debt amounts 7.8 billion or 3.9x EBITDA. Moving on to Slide 22 about our investment trajectory, which remains unchanged. After several years of subdued CapEx spending at ADP SA mother company, we expect to spend around €900 million on average between '24 and '25 to meet our maintenance needs and new projects. On group level, CapEx trajectory stays at around €1.3 billion per year on average on top of ADP SA CapEx, Group CapEx includes investments in subsidiaries in Paris, mostly in real estate and retail to a smaller degree for which we slightly lower our forecast and investments in international assets, notably at TAV Airport. We expect an increase amount of investments and updated its own guidance just yesterday. Let move on to Slide 23 to talk about the over '24-'25 targets. Our traffic assumption and financial guidance for '24 and '25 are confirmed. Most especially, we continue to expect traffic in Paris to grow with this year between 3.5% to 5% and was above 8% at Group level. Our target to deliver at least 4% growth in EBITDA is also confirmed. Our EBITDA is strong for the H1 '24, even notably by outstanding performance at TAV Airport. But with this, other performance should soften in the second half driven by the continued pressure from OpEx notably. And then we confirm our EBITDA guidance with absolutely no change. Investments are expected to ramp up slightly this year in Paris. All over, our other '24-'25 targets are confirmed. And with that, I will hand it over to Augustin de Romanet to conclude.
Augustin de Romanet: Thank you, Philippe, for your brilliant presentation for these brilliant figures. So, to close this presentation, I would like to invite you look forward with confidence to the road ahead of us with two slides. Our teams with the entire airport community have worked tirelessly to make the Paris Olympic and Paralympic Games a memorable success and a source of pride. The games have helped accelerating the transformation initiated with our 2025 Pioneers road map and they will leave a tremendous legacy for Groupe ADP on our passengers. I will mention three items. First one, hospitality for all with greater accessibility for people with disabilities. The determining change is, for example, that passengers are now able to keep their own wheelchairs until boarding and have them available on arrival, exactly the time they leave the plane. Second, better access to Paris-Orly Airport with the opening of Metro Line 14. And third, the most important perhaps, team cohesion and sense of purpose, which are an essential comment to continue to deliver our objectives. In conclusion, we look to the future with confidence as we have already begun to pivot our business model with aim to combine sustainability and long-term value creation. We built up a Group with three complementary platforms enabling us to balance our value creation profile and find new sources of growth. Hospitality and quality of service are our compass. They make a fundamental contribution to the attractiveness of our airports for airlines and passengers alike and are a source of pride for our teams. We've turned the corner on sustainability with a climate strategy fully embedded into all our operations and the way we conceive the future of our platforms. I'm convinced that this strength will help us reconcile decarbonization, which is our license to grow further and economic value. Saying that, with Philippe, Edward Arkwright and myself, we're happy to answer to you if you have any questions.
Operator: Thank you. [Operator Instructions]. The first question comes from the line of Dario Maglione from BNP Paribas (OTC:BNPQY). Please go ahead.
Dario Maglione: Hi, good afternoon and congratulations for the good results. Two questions for me, one on retail. I see spend per passenger was healthy in Q2. What are you seeing in June and July after the reopening of the terminals? What is the impact, you think, so far from the opening of the terminal? And are you seeing any weakness due to consumer being weak in Europe or maybe traffic mix or less traffic from the U.S.? And the second question status on traffic. We've seen on Monday, Ryanair (NASDAQ:RYAAY) commenting on kind of the pricing outlook in Europe for tickets. What are you seeing in terms of traffic? And what are the airlines saying? Thanks.
Philippe Pascal: So, thank you for your questions. So, your first question about the SPP target. So, as a strong performance in this first half there and we are also in line with our guidance. But we think that it's fair to include some prudence in our expectation to factor the potential negative impact. Nevertheless, we choose to keep for ourselves the details of our assumption and also other detailed margin. We expect to see the effect of the reopening of Terminal 2A and 2C Maternal reality from the third quarter of '24. This terminal was closed to guide the security system of the luggage system and the retail offering in the terminal being less powerful compared to Terminal 1 international. The reallocation of a portion of the international traffic to this terminal is expected to create downward realizing of SPP. The work in Terminal T2E-K, we will intensify towards the end of Q3, Q4 this year with the relocation of temporary shops for some luxury brands with ultimate goal to enlarge them. Despite this element, we expect the continued rollout of Extime to drive performance and more than offset the negative effect I mentioned. But -- so I can confirm the guidance. But at the same time, I can also confirm the negative impact that we have in this second half. Your question, second question about the traffic and the traffic outlook. So as Augustin said, we expect a neutral effect of the Olympics Games on traffic with substitution effect between traffic linked to Olympic Games and the Seasonal Tourism. And we see this phenomenon in London in 2012 and in Rio in 2016. But in fact, we have some elements that we are very cautious. But when you see our guidance, we expect Paris traffic to grow this year between 3.5% and 5% compared to '23. And we can confirm that in this guidance, we monitor all the potential effect including for flights, including the fact that airlines can see some slight impact. Airlines including Air France can try to improve load factor by stimulating demand from pricing with the yield management. We will be monitoring this strategy and their impact on passenger load factor over the coming months. But for the moment, I confirm the guidance without issue. Thank you for your two questions.
Dario Maglione: Thank you.
Operator: The next question comes from a line of Cristian Nedelcu from UBS. Please go ahead.
Cristian Nedelcu: Hi, thank you very much. Can I ask you the load factor you had in June showed a sequential deterioration versus the prior months which was a larger deterioration than we were seeing in the other airports reporting the load factor. So I was wondering if you can comment if there was anything there because usually when I guess you also said it earlier when you see a lower load factor that may mean demand is slowing down a bit. So that's the first question. I guess the second question the OpEx performance in aviation was better than I thought at least. So I guess, and I think you made some comments that the OpEx in the second half should be higher than the first half, but could you elaborate a little bit on this? I know recently you had also this bonus payment for the employees and other moving parts just to get a feel of how much larger the OpEx should be in the second half in Paris versus the first half. And apologies just a technical one you mentioned in retail you have this 38 million headwind to EBITDA in the first half which relates to lower energy sales and the infra tax [ph]. Just for the second half should it be another 40 million headwind or is it a bit less or more or any color that you could help us with?
Philippe Pascal: So thank you for your question. So about the load factor, in fact, we can see a slight decline. In fact, usually we can see that it's a testimony of a demand slowdown, but all in all when I tried to answer the question just before we can see that all the airlines try to improve this load factor by stabilizing demand through pricing. And for us one passenger has the same impact in our P&L than another passenger. All in all, at the end of the day we can stabilize the load factor and we have to monitor that and the key element for us is the fact that we have an international passenger or a domestic passenger, but all-in-all we don't expect a huge impact due to that. The improvement of load factor is not a huge issue for us. For your second question about the OpEx clearly, in fact, we try to monitor our OpEx in Paris, but also in TAV. We have both in our accounts. In Paris, the main part of the increase due to the OpEx is infra tax for €64 million for the first half for a total of €120 million for this year. But we have also besides the tax we are expected experiencing OpEx increase in ADP Motor Company for around €60 million. This is driven notably by staff costs for €30 million due to recruitment and salary increase, but also electricity costs for €10 million and subcontracting costs for €16 million. We expect this effect to continue in the second half in line with our guidance with its confirm as I said and our EBITDA growing at least first half this year. So in terms of OpEx we are in line with our expectation. With infra tax so remember that for the infra tax we have for the month a claim with a constitutional court. We have a specific hearing at the beginning of July with all the [indiscernible] taxpayers of this time, tax included us. Our arguments are perfectly aligned and we now wait for September 12 which is the deadline for the decision of the constitutional court. The constitutional court is a supreme authority. There will be no further recourse to its decision to infra tax. Remember that we have an impact in the regulated revenue, but also in the non-regulated revenue the part of the impact of the regulated revenues specifically for the aeronautical field are offset by a tariff increase this year and we try to offset the overpass the next year in 2025-26. Thank you very much.
Cristian Nedelcu: Just to confirm the electricity sales in retail you mentioned this was a headwind year-over-year. You had less electricity sales a headwind to EBITDA in retail. Would this repeat also in the second half I would guess or would you have a similar this 40 million headwind to your retail EBITDA year-over-year in the second half?
Philippe Pascal: No, it's a specific one-off.
Cristian Nedelcu: Thank you very much.
Philippe Pascal: But we have the same impact for this year and for the second half.
Cristian Nedelcu: So 80 million in total the headwind year-over-year in the bridge in retail EBITDA 80 million lower year-over-year?
Philippe Pascal: Globally, yes. We check and we come back. Thank you.
Operator: The next question comes from a line of Elodie Rall from JPMorgan (NYSE:JPM). Please go ahead.
ElodieRall: Hi, thank you for taking my question. Good afternoon. Maybe to start with if you could give us your views on the potential impact on ADP from the current political changes at the moment in France. If you have different scenarios in mind or if you think that there is no impact to expect whatsoever because the share price reacted a little bit since the snap election. So what could be the bear or bull case scenarios? Second, if you could give us if there is an update to give us with regard to discussions with the regulator on tariffs for next year and potential agreement on the regulated work and then potential era four and if I can squeeze in the last one it's technical, but the Gill and Gall non-cash expense, when do you think you'll give it to us?
Augustin de Romanet: Hello so Mr. Augustin de Romanet speaking. I'm not sure that the political situation will have a short-term big impact on the company. On the day-to-day life we have relationships with the Department of Minister of Finance who looks after public companies whose name is APE, Agence des participations de l'État. We have very, very good relationships with them and all our external projects for growth, all our transformation projects are discussed at the technical level. So I do not feel any problem with the political situation. To be frank, the alone problem perhaps could be for the government to choose a new CEO because as they've decided not to pursue with myself. And so my wish is that they will be in position to choose the good person for the 1st of January, 2025. But except that there is no fear to have with the political situation at all. Thank you. For the second question, I give the floor to Philippe.
Philippe Pascal: Sorry for the question of regulation. So in fact, for the moment in terms of regulation we have more clarification for the regulatory framework in terms of level of work. When you read the last decision we have some color about that and we can expect work at a minimum of 4.5% without an economic regulation agreement. Perhaps a little bit more when we have an incoming regulation agreement, but the calculation of this regulatory WACC it's globally in a good way to have a strong dynamic in the next few years. The second element of the regulatory framework is moderation of tariff. The law applicable for the appreciation of the moderation criteria in the regulated tariff increase was changed at the beginning of April. It's more flexible for us because it's possible now to appreciate when we have an economic regulation agreement, some moderation on average during the regulation period. Finally, in terms of cost allocation system, we are still reviewing the allocation key. We've changed until the end of the transitory period in 2025. So globally, we work also on our investment plan. We have some clarification in terms of -- and visibility in terms of traffic increase. So we can try to have all the elements, all the item, what we can have some good visibility to start as soon as possible to work for new economic regulation agreement. But be careful, when we start to work, we cannot sign an economic regulation agreement before 2 years after. So -- but it's a little bit early to work for the moment on an economic regulation agreement. However, we could be looking to start internal works on this topic possibly later this year or next year. Your second question about the merger between GIL and GAL, perhaps just to summarize and to clarify the impact. It's a noncash expense to -- and its expense to be booked at the merger correspond to 2 main elements. So first, it's the dilution in economic interest due to the repayment of -- the payment of liquidity premium and the offset of the hardship. And the second impact is the integration of the asset of new deal excluding GAL. Those net value is expected to be negative and strongly negative at the date of the merger. And this negative impact is driven by the FCCB fair value. So the amount will be estimated again on the effective merger date. This is why we cannot be more specific at this stage. It is likely to increase significantly, particularly in view of the deal stock market valuation. So be careful. We expect a strong impact due to good news that is the fees in terms of market valuation of the current company infrastructure limited, but mechanically it's a new company. This one-off will impact the net results with the basis of calculation of dividends. But nevertheless, our dividend policy also includes a floor of [ph] €3 per share to profit our shareholders from such one-offs impacting the net income. So to summarize, we have a strong -- probably a strong impact. We have to calculate this impact at the effective merger date. We -- it's a noncash impact and we don't have any issue for all our shareholders due to the floor of. But all in all, with this good operation, we can reveal a strong value and to -- this is the fact that 4 years before, we bought for €1.3 billion 49% of GMR airport. And we -- when you see the value for GMR Infrastructure Limited, we can see that we have a huge jump in this valuation. Thank you.
Operator: [Operator Instructions]. The next question comes from the line of Jose Manuel Arroyas from Santander (BME:SAN). Please go ahead.
Jose Manuel Arroyas: Thank you and good afternoon. I wanted to ask you about your willingness and ability to sell fully or partially a stake in GMR Airports when the merger is completed. And considering that ADP wants to keep Board representation and influence and governance over the company, what is the degree of flexibility that you have to sell partially your stake? That's question number one. Question number two is how much will you be paying for this new company, Paris Experience Group, that you have told us about today? And lastly, I'm sorry, 3 questions. It's about the infrastructure tax. Do you think there is any scenario where the French constitutional court could prevent airports like ADP to pass on the tax to the airlines and still the tax be maintained?
Augustin de Romanet: Thank you, sir, for your question. About our will to sell stake in GMR, I must say that we are a long-term investor aiming to have a confident link with the GMR family. It means that the transition to make a coup or to make a pre-value with this stake is there. It would be a lie not to reveal to you that all the investment banks or the planet are offering us to sell a part of our stake. But on the long term, we are sure that even if the level of the talk is quite high today, there is still room for improvement. And there is still also a need to build confidence with the family. So we want to stay at a very good level on GMR Airport company. And today, it's not on the table to go down in the capital of this company. But it can change for you for sure. But your question is for today. And for today, our intention is not to sell. Second question, Philippe?
Philippe Pascal: Your second question is about the price of Paris experience Group, so regarding this price, we have agreed with the seller to keep it confidential. So we cannot disclose, but we can say that we have the capacity to create a strong value through this new asset if we close definitively this good opportunity to create some synergy with other activities at the same time. We have the marketing of VIP hospitality product and communication. We have also the capacity to improve our experience through premiumization and enrichment of the experiencing offering. All in all, we disclose all the details when we close the operation. Your last question is about the infrastructure tax and the constitutional court. So the constitutional court, it's about the tax. It's not about the capacity for ADP to rebalance the regulatory framework. So globally, the pass-through, it's a mechanic pass-through due to the fact that this tax is a regulated OpEx. So it's a regulation rules. And obviously, it's not an issue. And mechanically, we have the capacity to offset the -- this tax in the regulated part of the tax. That is the key. Thank you for your question.
Jose Manuel Arroyas: Thank you. Very clear.
Operator: The next question comes from the line of Nicolas Mora from Morgan Stanley (NYSE:MS). Please go ahead.
Nicolas Mora: Yes. Good evening, gentlemen. Just a couple of questions. So first one, can you please help us understand a little bit, I mean, the many, many, many one-offs that you report in the first half. Maybe starting with EBITDA down to the bottom line because I think I can find 5 or 6, but there seems to be coming from all sites from the G&A to provision release from the Olympics to FX to associates. So if you could help us citing the items one -- by line, that would be very helpful. And just point number two, on -- just to understand the net debt because it looks optically quite high, but it includes that call and put option on the FCCB. Is this going to continue? I mean can you just help us understand what's the core net debt excluding FCCB, just to understand a little bit where we stand at the end of H1. And I would leave you there. I have another one on retail if we have time afterwards.
Philippe Pascal: So thank you, Nicolas. So we don't have many, many one-offs. We have 2 main one-offs and on top of a slight one-off. These 2 main one-offs, first in EBITDA is currently the Olympics and the specific OpEx linked by this game. And it's around €30 million, €40 million. Perhaps a little bit more at the end of the day, but not so huge. And the second one-off, it's the -- Jordan concession, and we offset the depreciation for €152 million with an impact on net result just for 61 million for ADP. So it's not a huge impact. In the merger, so we have to detail all the elements of the merger and the impact of this element. So globally, we have a further impact linked by the merger, the impact of the dilution through the Ratchet [ph] and the payment of liquidity premium. Thank you, Augustin. The second impact is the fact that we have the FCCB, our FCCB in Gemma Infra. And the last thing that we can see now, the first and the second element, we can see when we have the merger. But the last, it's the question of the derivative liabilities that we can see now with a call option and a put option. So you remember that we granted a loan to deal last year as part of the preparation of this merger. And the loan was made under the form of convertible bonds, FCCB. We subscribed for a total of €331 million. Alongside the FCCB convertible bond, we granted to Gemma Infra, not to GIL, to Gemma Infra, an option allowing them to buy the FCCB from us at any time. This is a call option corresponding to a derivative liability. And we can see that in our net debt. And we also have a put option to Gemma Infra for a third party in five years, not now, but in five years, corresponding to a derivative asset. As per applicable accounting rules, these derivative instruments including the financial debt at their fair value, at their fair value totaled €709 million at the end of June 24, reflecting the underlying value of the FCCB itself driven by GIL's share price. So when the share price of GIL grows mechanically, we have an impact in the FCCB. However, since we will be annulled at the same time as the FCCB are repaid, we believe that the economic view of our net debt should be calculated by deducting the fair value of the derivative instrument from our net debt. The reason why we have this specific slide in our presentation. So thank you for your question. And if you want to ask your question about retail, don't hesitate.
Nicolas Mora: Yes, so just on retail. So in the second quarter, we haven't seen any slowdown really from the first quarter. Would you just put this on the back of still, very supportive traffic mix? Is it just a continuation of strong progress still on X time, still on Terminal 1 International on the luxury and the beauty products? What's continued to work well? And also I suspect advertising, which has picked up quite a lot ahead of the Olympics.
Philippe Pascal: So the main explanation of the strong performance is the performance of fashion luxury. So it's obviously the good traffic and the good mix traffic. But it's also the capacity to put in front this good traffic, a good offering like the fashion luxury. And we can see mechanically with this greatest contributor to sell in our air freight shop, the good performance for this element. This growth is driven by international traffic and mechanically in our flight ships, that is the flight ships terminal, Terminal 1, but also Terminal 2E Hall K. So globally, it's a good performance. It's fashion luxury with a good mix traffic and with a good X time implementation strategy in our two main flight ships in Paris. For the wings, we start now. We can see at the end of the first half and we see an increase in this impact in the second half to the works in Terminal 2E Hall K, but also the consequence of the reopening of Terminal 2A and 2C with a retail offering less powerful compared to Terminal 1 internationally. Thank you for your question.
Operator: The next question comes from Marcin Wojtal from Bank of America (NYSE:BAC). Please go ahead.
Marcin Wojtal: The first one is actually on the appointment of a new CEO, if I may ask. Could you please remind us who actually makes that decision? Is it the President of the Republic or is it the Prime Minister? And when do you expect this decision to be made? And my second question is actually on the reopening of Terminal 2AC. How relevant is this terminal in terms of capacity? And do you expect this to actually benefit your traffic? Because presumably now you have more slots available for airlines. So is that really material for Charles de Gaulle? Thank you.
Augustin de Romanet: For the first question about the appointment of the CEO of the company, it is the privilege of the President of the Republic to propose to the Parliament the name of a person. And if this person is accepted by the Parliament, it means that there is less than two-thirds of the members of the dedicated commissions against this appointment. The President of the Republic can designate this person to be CEO of the company. That is for the procedure, for the delay. It is because I thought it was a good thing for the company to stabilize its governance that I have decided to explain that I will leave the company before the end of this year, helping the government to have the pressure to designate a person during the last quarter of this year. So I think we can expect that at the beginning of 2025, the company will have a new person to be CEO. That was for the first question. For the second one, Philippe.
Philippe Pascal: For the second question about the reopening of Terminal 2A and 2C, globally, the aeronautical capacity of this terminal is around 10 million international passengers compared to the full capacity of Charles de Gaulle that is around 180 million passengers. So it's a good part of this traffic. Globally, we have a good retail offering, but not so good compared to the best in class, that is Terminal 1. And the FPP is a little bit lower, around 40% lower than the Terminal 1 international. Thank you for your question.
Operator: The next question comes from a line of Graham Hunt from Jefferies. Please go ahead.
Graham Hunt: It will just be two short ones. Can you just get your perspectives on the current M&A environment at the moment, particularly in Europe and Latin America, so under the ADP mother company's perspective, given activity in this sector has been picking up year to date? And then second question, just coming back to that net debt. Should we consider the adjusted level is at 3.9 for the half year? Is that the level we should be comparing to your guidance? And is that the level that you would consider in terms of headroom to doing M&A? Or is it the 4.2? Thank you.
Philippe Pascal: So thank you for your question. For the second question, we confirm our guidance, but it's not for the adjusted figures but just for the traditional guidance of net debt of ADP. So we don't change our guidance for that. For the first question about the M&A strategy, we target to increase overall project going forward. And for that, we have to accelerate our M&A strategy. But first of all, for Extime to try to implement Extime around the world. And it's the case and we have this kind of acquisition like Paris Experience Group. But we try to develop this element to M&A. It's not a huge M&A like the acquisition of TAV and GMR, but it's a good M&A with a relative impact. For international development through the airport activity, we are very cautious. And when we go to the international business is to have a strong dynamic in terms of traffic and with a huge market. So that is not really the case in the major country like in Europe. It's more the case in India, in the Middle East, in Central Asia. So our target is not Europe. Our target to have dynamics higher than the Parisian dynamic. So -- and for the moment, we are open to new opportunities, but we don't have in line to a good project to go further at this stage.
Graham Hunt: Thank you.
Operator: The last question comes from the line of Eric Lemarie from CIC. Please go ahead.
Eric Lemarie: Yes, hi. Good afternoon. Thanks for taking my question. I have two. The first one, actually wondering about the financial impact related to the global IT outage of last Friday. Would you need, in particular, to invest to avoid to deal with this type of risk in the future? It's my first question. And the second question on TAV and GMR. Could you remind us when you do expect the return of the dividend payments from TAV and GMR? What would be the triggers for this dividend distribution?
Philippe Pascal: So, thank you. For your first question, we don't have a strong and material impact, just 30,000 passengers. So it's not material for us, 30,000 passenger in total.
Augustin de Romanet: And just if I add, we didn't bought the antivirus for this year, which failed. So we were secured for that because we did the choice not to buy this antivirus. So Philippe, the floor is yours.
Philippe Pascal: Thank you, Augustin. For your third question on dividend for TAV, we expect in '26 and for GMR, the end of this decade.
Eric Lemarie: Thank you.
Philippe Pascal: Thank you.
Augustin de Romanet: Thank you for being with us. I think we will find you back in a few days because I think you are keen to have details on the reverse merger, which could happen quite soon. So please be awake. And we will be happy to invite you to a new con call very soon, very soon. Cecile, do you want to have some final remarks?
Cecile Combeau: Well, it's confirmed that it's now time to close the presentation. So thank you very much. Thank you, Augustin. And yes, we hope to speak with you all very soon. And if you have any questions, obviously, feel free to get in touch with you. We will be happy to help. Keep well, everyone. Have a good evening. Thank you very much.
Operator: Thank you for joining today's call. You may now disconnect your lines.
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