Alimentation Couche-Tard's (ANCUF) CEO Alain Bouchard on Q1 2015 Results - Earnings Call Transcript

Alimentation Couche-Tard Inc. (OTCPK:ANCUF) Q1 2015 Earnings Conference Call September 3, 2014 2:30 PM ET

Executives

Alain Bouchard - President and CEO

Raymond Pare - VP and CFO

Brian P. Hannasch - COO

Analysts

Operator

Good afternoon, ladies and gentlemen. Thank you for listening in on this webcast regarding Couche-Tard's first quarter of fiscal 2015. Following the presentation, we will be answering questions that were forwarded to us beforehand by the analysts via e-mail. We would like to remind you that this webcast presentation will be available on our website at http://corpo.couche-tard.com for 90 day period.

Also, please remember that some of the issues discussed during this webcast might include forward-looking statements which are provided by the Corporation with the usual caveat. These caveats or risks and uncertainties are outlined in our financial reporting. Therefore our future results could differ from the information discussed today.

I will now turn this presentation over to Mr. Alain Bouchard, President and Chief Executive Officer; Mr. Raymond Pare, Vice President and Chief Financial Officer; as well as Mr. Brian Hannasch, Chief Operating Officer. Gentlemen, please go ahead.

Alain Bouchard

Thank you. Good afternoon, ladies and gentlemen. Thank you for listening in on this webcast regarding Couche-Tard first quarter of fiscal 2015. As usual, we will briefly run through the results and after some background information, before answering questions you submitted earlier today.

We are very delighted to present the results of the first quarter of fiscal 2015 which represents strong organic growth on every front. This quarter's performance demonstrates the effective work done by our teams and their efforts to continuously improve the profitability of our network.

Adjusted for nonrecurring items, our net earnings increased by 25.5%, which is a very nice performance. The results of our European network continue to be positive. Same-store sales and volumes have grown and margins have increased. Many strategies implemented in previous years are now part of daily business, contributing to this steady growth. We are still on track to materialize the expected synergies as per our plan.

In North America, we continue to show good results with improved margins in the U.S. for merchandise and services. Our road transportation fuel margins remained strong in all of our markets, which contributed to the solid earnings in the first quarter of fiscal 2015. As demonstrated in previous years, although road transportation fuel margins can be volatile from one quarter to another, it tends to normalize on an annual basis. Improved supply condition also helped maintain strong margins.

As in previous quarter, our still improving leverage ratios and solid balance sheet put us in a good position to materialize potential opportunities. As for network extension, during and subsequent to the first quarter of fiscal 2015, we acquired or reached an agreement to acquire 73 company-operated stores in the United States. We have also built or rebuilt 11 stores since the beginning of the fiscal year. For this fiscal year 2015, we will accelerate materially the pace of new constructions planning to build or rebuild a total of between 80 and 100 stores.

In terms of acquisitions, as always, we cannot say much considering the confidential nature of the subject, but we are actively looking at opportunities of different sizes. Believe me, we were busy during the summer. However, our discipline has served us well in the past and we will stick to that. We don't feel that we need to overpay to continue creating significant value for our stakeholders.

Our continuous work to improve the quality and performance of our network, the performance of food in our stores, our nice pipeline of new sites and the realization of synergies during the current fiscal year will continue to add value. As you saw this morning as part of the perpetual process of reviewing our assets, we sold our aviation business. We think that this deal would be good for all the parties involved including the employees.

Now I will let Raymond go over our numbers in more detail. Raymond?

Raymond Pare

Thank you, Alain. Good afternoon everyone. This is a great first quarter to start fiscal year 2015. We had very positive indicator and strong organic growth. We have posted net earnings of $269.5 million for the first quarter of fiscal 2015. Some items affected the results of this quarter and they are described in our MD&A. Once adjusted for these items, adjusted net earnings stood at $276 million for the first quarter of fiscal 2015, a great increase of 25.5%.

Adjusted diluted earnings per share stood at approximately $0.48 compared to the $0.39 for the corresponding prior quarter, an increase of 23.1%. The strong growth in net earnings derived mainly from our organic growth in both merchandise and services and in road transportation fuel. Same-store sales and volume as well as consolidated gross margins, all showed positive results. This nice growth was also supported by the contribution from our recent acquisition.

These items which contributed to the growth and net earnings were partially offset by the negative net impact of the conversion of our sales and expenses from our Canadian and European operations into U.S. dollars. These results are solid are prove that our business model doesn't rely solely on acquisitions.

Instead of repeating the MD&A, I will quickly highlight some of the key indicators. For the first quarter, our same-store merchandise sales increased by 2.8% in the United States, by 1.2% in Europe and by 3.3% in Canada. Specifically in the United States, this growth is particularly impressive considering we were once again able to grow store traffic at the same time that we increased our gross margins.

The consolidated merchandise and services gross margin grew by $26.9 million when excluding the negative impact from the currency translation. In the United States the gross margin increased by 0.6 to 39.8%, in Europe the gross margin increased by 1.3% to 41.9%, while in Canada it decreased by 0.7% to 33.3%. The merchandise and services gross margin for the first quarter on a consolidated grew by 0.3% to 34.1%. The decrease in Canada stems from increased cigarette sales and pricing strategies aimed at boosting store traffic.

For the fuel during the first quarter, same-store volumes increased by 1.8% in the United States, by 1.7% in Europe and by 0.3% in Canada. Our fuel brand 'miles' in Europe is, as we have previously described, a good contributor to our results and continues to help us grow in the markets where it has been launched. This performance is solid compared to any public benchmarks. This results from our focus on execution and from the quality of our people and our network.

During the first quarter of fiscal 2015, we posted road transportation fuel gross margins in the U.S. of $0.2308 per gallon, or of $0.1167 per litre in Europe and CA$0.0644 per litre in Canada. These great margins are the results of favorable market conditions together with improved supply terms.

As usual, we continued our good work in controlling expenses. Although our organic growth had a significant increase in our operational expenses, it's less than inflation. We're really proud of that achievement. The materialization of synergies should accelerate and are up now that we completed the implementation of our new ERP solution and summer is behind us.

The first quarter of fiscal 2015 shows an income tax rate of 20.7% compared to an income tax rate of 18.9% for the corresponding quarter of the previous year. The increase in the income tax rate stems mainly from the effect of our higher overall taxable income, especially in the United States where we have our IAS statutory tax rate as well as from the decrease in our financial fees following the significant repayment we have made on our long-term debt. The bottom line is, this is a good news.

Since the beginning of the fiscal year and up to date, we have repaid $440 million of our long-term debt using cash generated from our operations. With a portion of those repayments, we completed the reimbursement of the $3.2 billion facility used for the acquisition of Statoil Fuel & Retail in June 2012.

As at July 20, 2014, our adjusted net interest-bearing debt-to-adjusted EBITDAR ratio of 2.23x is still showing rapid improvement. This gives us great flexibility in taking advantage of investment opportunities. Our return on capital employed also improved, reaching 14% for the first quarter of fiscal 2015. The disposal of our aviation business should have also a positive impact on this indicator going forward.

Finally, we have again increased our quarterly dividend to CA$0.045 which this time correspond to a 12.5% increase. Yet we are happy to share the results of the growth of our solid and diversified free cash flow with our shareholders, as we have done regularly over years. This may not be much but we believe we will continue to generate solid earnings [internally] (ph) considering the opportunity in front of us in the future years.

We are also very happy that Moody's has recognized the quality of our credit profile by improving the credit-rating of our Canadian dollars denominated unsecured notes to Baa2. We believe that this improvement results from the quality and the sustainability of our free cash flow, our solid balance sheet and our commitment to managing it properly even with acquisition opportunities. We have also demonstrated since the acquisition of Statoil Fuel & Retail and as we have in the past, our focus and capacity to reduce our leverage quickly, which was done earlier than expected. And that concludes my part. Alain?

Alain Bouchard

Thank you, Raymond. I would like to take the opportunity to remind you that this was my last webcast as President and CEO of Couche-Tard. I want to thank you all and I will now let Brian conclude this presentation before we move forward with the questions submitted. Brian and Raymond will answer all the questions.

Brian P. Hannasch

Alright, thank you, Alain, and good afternoon everyone. Like Alain and Raymond, I'm very happy with the results for the first quarter of fiscal 2015. It's a strong start for what I believe will be a very good year. The strong results show the knowledge and skills of the teams who are continuously improving our offers to our customers. The success of our strategy is clearly reflected in this quarter's organic growth both in North America and Europe. We're dedicated to continuing on this path and we expect to continue delivering value for our shareholders and our stakeholders. So again with that introduction, we'll now go to questions.

Question-and-Answer Session

Operator

First question is submitted by Patricia Baker of Scotia Capital. We have seen some nice improvement in the leverage ratio as you paid down a significant portion of the acquisition debt and it is nice to see this has resulted in an upgrade in the debt ratings. Can you review for us what should we see in the coming year and where you expect to be by the end of the year with your leverage ratio?

Raymond Pare

What I can say is that we will continue to deliver it and regain particularly more and more flexibility in our balance sheet. At the same time, as we did mention I think in our presentation, we'll continue to look at opportunities to use properly our cash flow generated. As you know, last year we did generate I think over $860 million free cash flow and it's very solid. Hopefully we'll improve it this year and we'll use this money basically properly in order to generate value for the shareholders.

Operator

The second question from Patricia Baker, the press release refer to an accelerated pace of openings and renovations for the coming year and it notes that a total of 8,200 stores new and renovated for fiscal 2015. Can you update us on the capital allocated and the scope of these projects, and in which markets will we see the new openings and modernization efforts?

Brian P. Hannasch

We're very pleased with the results of the new-to-industry sites we have developed over the last few years, so very excited about the opportunity to accelerate that initiative. At the same time, we don't expect any material change in net CapEx. We certainly will be spending less on IT than we have in Europe in the last two years and reallocating that more towards growth. We also are sitting on probably our best portfolio of land banks that we've had in our history as we committed to repay the debt as Raymond talked about in the last question.

In terms of where, Europe will be the smallest participant in this, as we haven't had time to ramp up our land banks and opportunities there. So today, the largest focus would be in the southern and western U.S., with the Midwest U.S. and Canada being second.

Operator

The next question is from Derek Dley, Canaccord Genuity. Can you discuss the acquisition environment in Europe, Canada and the United States in terms of transaction multiples and availability of assets along with your current balance sheet capacity to pursue larger acquisitions?

Raymond Pare

As I mentioned basically, our balance sheet – I will say our balance sheet is already basically pretty solid and we'll continue to improve, and could allow us to materialize sizable acquisition without going close to deleverage following the SFR acquisition.

In terms of acquisition environment, I will say the environment is pretty solid, as we described I think previously in our comments, on both sides of the ocean and we continue to – I will say with the same discipline that we always have basically to look at these opportunities and to work on these opportunities. As you saw recently, we can close transaction [acquisitible] (ph) multiples even in the U.S., and I will say our goal is still the same and we're pretty busy and active. I will say it's pretty much what I can say [indiscernible].

Operator

Second question, can you provide some examples of new merchandising strategies being employed in Europe and the benefits they appear to have on same-store sales?

Brian P. Hannasch

The changed agenda in Europe has been largely really on all fronts. Specifically on merchandise, really affect attacking all aspects of the in-store operation, food being our main focus. Great results, we're seeing double-digit growth as the teams introduced new products, enhanced menu boards for better communication, new coffee program rolling out in Europe.

And then probably the biggest effort we've had is the merchandising, we call it a merchandising step-up, where we had our teams from Europe come and learn about kind of basic convenience/category management skills and came away with plans to really change plan-o-gram SKUs, adjacencies, point of purchase material and promotional schemes. And so over the last six months, we're wrapping up with a rollout of that with Norway being the last country. So we're seeing traction with the consumer as we finish those tactics and are optimistic that that will continue.

Operator

Next question is from Irene Nattel, RBC Capital Markets. Although you have made it clear that you are not participating in the [indiscernible] process, I think [indiscernible] of Couche-Tard will increasingly be presented with opportunities in new regions. Your partnership in Asia continues to expand. Can you talk about how your approach to an acquisition in these regions might differ from U.S., Canada and Europe, your view on control versus partner's magnitude of investments, et cetera?

Raymond Pare

I can say that our approach in any part of the world is flexible and we could adjust it to different opportunities. We did it even in North America basically with two joint ventures. And based on the reality of each countries where we could be interested to see our brands or basically use our expertise, we will kind of adjust based on the kind of opportunity that will be in front of us. Our disciplined approach will be also a factor that will maintain basically in any markets and with any kind of structure we can think that we could have.

Operator

Can you provide some color around relative performance within your operating region?

Brian P. Hannasch

If I break it down into, don't know if you asked in Canada, as Ray mentioned we're very pleased with Europe, so a solid fuel growth in what we believe is a flat to slightly declining market, and positive traffic in same-store merchandise sales and margins. So really on all fronts there we think we're taking market share and performing well.

U.S., relatively strong merch and very solid fuel, as Raymond mentioned. By all the metrics we look at, whether that'd be talking to major suppliers or looking at government data, we believe we're outperforming the market on the fuel side.

Canada is tougher, the western part performing very solid and we think we're performing very well versus the general market, but consumer sentiment and spending continue to be a challenge in particularly the eastern half of Canada.

Operator

Next question from Martin Landry, GMP Securities. Fuel margins in Europe at US$0.1167 per litre were the strongest reported to date. What explains this strength in profitability and should we consider it to be a one-time event or a more enduring shift to higher margin levels?

Brian P. Hannasch

There's been no structural changes in any of our core markets. At the same time, we continue to try to optimize our pricing practices, and then certainly the launch of 'miles' and 'miles PLUS' now in some markets which is a premium product that we're seeing some very good conversion rates, will help bolster overall fuel gross margin going forward. That being said, toward the end of the first quarter, we did benefit from some falling product prices which did bolster margins in the quarter, and as we've always said, we believe long-term that margins will be relatively stable.

Operator

Has the ERP system been fully implemented in Europe, and if so, have the synergies associated with that implementation been fully realized?

Brian P. Hannasch

The ERP was fully implemented since May 1. Our last division was Poland. We are in this stabilization phase, some synergy related to it are done, ROCE did start to show up, but I will say most of the synergies related or following the ERP will be materialized going forward.

Operator

Next question is from Peter Sklar, BMO Capital Markets. Can you provide us with an update on the fresh food program in the United States? You had indicated the program was being piloted by two business units. Can you provide a timetable for the national rollout of the program? Can you provide us with some measures as to how the fresh food program performed in this pilot?

Brian P. Hannasch

Just as a refresher on that, we initially launched third-party sourcing in Arizona and the Great Lakes three years ago which has led to more recent pilots in four additional markets, so in Southeast, our Southwest market or West Coast which is Southern California, and then Midwest move of Kentucky. So we now have that up and operational in approximately 500 locations in the U.S.

Our overall, if you look at the U.S., I think food is about 17.5% of total merchandise gross margin dollars, but if you look at the initial two markets that we have launched being Arizona and the Great Lakes three years ago, those are closer to 25% of total margin out in food. So we believe we can continue to move the rest of the market toward those numbers.

Very pleased with consumer reception, so we're seeing good sales growth in really all the key categories we have launched but we're also proceeding very cautiously understanding that we've got to get the culture in the stores right about controlling spoilage, understanding food safety and just a very different way of operating with fresh products in the stores.

So, our progress or rollout will be measured. Our next key decision point is actually next month, so our period sits halfway through our fiscal year, and at that point we'll make a decision on whether we will roll out in any additional markets, but we have no timetable for completing the North American market at this point.

Operator

In each of the last two quarters, Q1 of 2015 and Q4 of 2014, gross margin on U.S. merchandise was up 50 basis points year-over-year. Can you explain the factors underlying this improvement? Does it relate to an easing of promotional efforts or are there other factors?

Brian P. Hannasch

So I'll go through the main drivers. Excluding cigarettes, there was actually about 100 point improvement. Cigarettes were slightly down quarter over quarter while again the non-cigarette categories were up about 100 basis points. Our change in mix towards higher-margin products accounted for about 15 basis points and the test was broadly spread across the remaining categories, and to the question is spot on, really it's been less promotional activity to drive what we think is an acceptable level of traffic.

Operator

Next question from Michael Van Aelst, TD Securities. Can you provide us with your views on the state of the U.S. consumer? Couche-Tard's same-store sales trends showed solid growth but not as strong as Q4 of 2014. What can you see in your operations that may explain the sequential swings in growth rates and how do you see the consumers' health affecting industry performance going forward?

Brian P. Hannasch

We are still cautiously optimistic that consumer sentiment is, I don't know if I call it solid but certainly improving. At plus 2.8, certainly not as good as the previous quarter, reasonable we think given the different factors for the quarter. Traffic is positive in six of our eight divisions which is a core metric we look at, and if we look at the two that weren't, it was very slight and really tobacco driven. If you compare the prior quarter, we did have two divisions as I mentioned that were off significantly, driven by tobacco. So we are reassessing our pricing strategies in those markets and feel that we can get those corrected and feel that we are on track for a very solid year in the U.S. in terms of same-store merchandise.

Operator

On the acquisition front, despite indications from big oil suggesting that some want to exit fuel retail, there have been very few transactions in your target European markets in the past few years. Can you update us on where you believe the major fuel and convenience store operators are in the process of divesting assets and what may be holding up the process?

Raymond Pare

It's a good point. I think effectively [indiscernible] it was a little bit like publicly a little bit quiet or more quiet than basically what we saw in the U.S. That being said, some announcement were made basically in certain countries and certain assets are available in Denmark and Norway basically from some of these major fuel retailers, and some others' [files] (ph) were sold or were actively basically on the market in the northern part of Europe in the recent months, and I will say that as you know we are not giving any specific about any active files but what you have to have in mind is sometimes some of these sites would take some time like these process could be spread basically over many months and even basically sometimes going over a year, and I think it's active right now in Europe, some files are available, but we need to be patient to see the end results of that.

Brian P. Hannasch

And I'd add to that. Two factors that we are learning about in Europe that slowed the process and we really don't face in the U.S. are, typically networks are integrated or associated with a refinery, so the major seller if they are an integrated player has to find a dual solution. So we see that slowing some of the processes we've been involved in. And there's also a union process which just has to be followed in many of the countries. So the timetable for transactions is significantly longer.

Operator

Next question is from Keith Howlett, Desjardins Securities. Could you amplify on the steps and outcomes related to optimization of the ERP systems in Europe?

Raymond Pare

As previously mentioned, we are in the stabilization phase. This new system will for sure improve basically our capacity to get I will say better information quicker and will help us basically to perform basically on the operating side and to become more efficient, and it's a great system, as I said stabilization mode but already we are seeing some great output basically versus the previous system that was not necessarily designed for retailer.

Operator

In terms of new stores in North America, what is the typical contribution margin in each of the first three years?

Brian P. Hannasch

So as said in earlier question, we're very happy with the returns of our new-to-industry sites. We're not going to reference the specific return but I would say when you look at our overall ROCE, these are certainly accretive projects to that average. Year one, typically there is some pretty heavy startup cost, so EBIT contribution wouldn't be anywhere near target, but as you approach year two, go through year two you're coming very close to maturity. So we see typically pretty quick ramp-ups in our projects.

Operator

Next question is from David Hartley, Credit Suisse. The market appears to be building in a big premium of an acquisition. Can you update us on the outlook for acquisitions and the level of interest opportunities for further investments in Europe or in Asia?

Raymond Pare

We did give some color on I will say our level of activities and the environment in terms of acquisition. I hope that the market is also recognizing basically in our evaluation the great organic potential, I will say the great result that we have but also the great future potential that we have around the organic growth. Just we did talk about the synergy to come basically at the food growth in North America, the top line potential in general basically in the Company mainly are, and also they are up, the new-to-industry pipeline basically that we did mention basically in this call and in the MD&A, all these factors are clearly factors that will help us to continue to basically in terms of creating values going forward. And my strong belief is, as you know we're still also in the quarter but we also have on the other side of the Company, the organic side, we did demonstrate in the past with or without acquisition create our capacity to generate a lot of value basically despite any situation.

Operator

Trends for the business in Europe are certainly positive. Can you update us on the status of the ERP implementation in Europe and the expected contribution to or above the targeted $150 million to $200 million synergies?

Raymond Pare

We did give some colors about where we stand with the ERP and the fact that we are on the stabilization mode. I will approximately, as I mentioned before the acceleration of the synergy, you will start to see an acceleration of the synergy I will say impacted by the ERP implementation.

Operator

Next question from Christopher Li, Bank of America Merrill Lynch. What is your confidence level that the top end of the $200 million cost synergies target will be achieved, what needs to happen in order for this to be achieved?

Raymond Pare

Again, we're still [indiscernible] a range and I will comment on the range, we are still confident, as mentioned in our publicly declared documents, we will achieve clearly our range and you should see an acceleration in the second part of this year, fiscal year, and until the end of the next year, calendar year. That being said, you also need to have in mind that the improvement and continuously process of gain in terms of efficiency we'll also continue after that is done. This target basically is the target that we are confident to achieve but you have to have in mind that we'll continue to create values in the U.S. even after December 2015.

Operator

What are the main operating expense drivers for the next 12 months? In particular, can you please comment about the minimum wage, healthcare cost increases and electronic payment fees in both the United States and Canada?

Brian P. Hannasch

The largest single driver for Couche-Tard in the next 12 months will be the European synergies. We expect to, again as Ray said, accelerate those and achieve our planned results for the fiscal year. So that's by far the largest effect and a positive one.

Minimum wage, we typically pay above minimum wage but certainly if there is a federal or we see sporadic state increases, that will increase the overall wage complex of our employment pool. It's something we are anticipating, something quite honestly we feel needs to happen. Our core consumer is largely a part of the lower to middle income consumer base and we need them to have more money in their pockets. So we actually look forward to some of that.

In terms of healthcare, we've been proactive really for the last three years in mitigating those costs, management mix of full-time, part-time employees as well as the structure of our health plan, and we've also seen lower than initially anticipated enrolment. So we don't expect a material impact from healthcare to show up on our P&L.

And then finally on the payment fees, that's going to vary almost linearly with cost of finished product of fuel. First two months of the quarter we would have been above our budget or expectations. As product prices came down late in the quarter and continued down, we'll be under-planned on electronic fees. But again, over time we view those as much as a fuel tax if anything. We think that eventually either increases or decreases in payment fees just because of their magnitude flow through to consumer.

Operator

Next question is from Jim Durran, Barclays Capital. What were the primary contributors to the United States merchandise gross margin improvement this quarter, plus 51 basis points? What role did less promotion investment and tobacco margins play?

Brian P. Hannasch

I think we went deep into that on a prior question, so we'll go to the next one.

Operator

Despite several increases in the quarterly dividend over the past year and a half, the dividend yield of 0.5% remains one of the lowest in the sector due to stock price appreciation. Do you feel the current dividend yield is enough?

Raymond Pare

I will say our policy and approach is more in line with the percentage of the free cash flow, and taking also in consideration that we are also a growing company than I don't know when you are comparing to the other basically retailers, if you're taking that also in consideration, but it's clearly the [declared] (ph) element, like in the recent quarters we did use the [indiscernible] money to deleverage our balance sheet. That being said, we review our targets and our basically approach and our policies in terms of dividend on a continuous basis, but for now we feel that we're having a right basically approach.

Operator

Next question is from Perry Caicco from CIBC. You have been connected to a possible Chinese acquisition. Regardless of whether that situation is real, can you tell us what your acquisition strategy is in Asian markets, how is the structure of an Asian c-store industry different from that of European or North American?

Raymond Pare

I will say I did cover a big portion of this question in the previous comments I made. I will say in terms of differences, again it depends on the country, in depends on the market. In Asian c-store industry, you have a lot of the key operators are operating without fuel, but again it will be a very long answer because for each country you have some specific reality. I will avoid to go through much into detail. So I think as the previous answer was basically in line with the question about the fact that we're very flexible, looking active, and as we mentioned in the past, Asia is part basically of the markets where we are actively basically working and looking on different forms of different approach.

Operator

There are lots of discussions about lowering credit card interchange fees in Canada. Would this have a material impact on your Canadian costs and what is the status of the interchange fees in the United States?

Raymond Pare

I will say if we are focusing on Canada, I will say in general the answer to that is, we always been actively basically or we took an active position about the fact that we would like to see the interchange fees going down. It's a discussion that we did entertain for many years now, and I think overall you need to understand that if hopefully eventually we could see something like that happening, it will be to the benefit of our customer because I think it will be passed through as it is today basically in the price of the different products that involves basically payments with credit card.

Then I will say in general in Canada, or even in the U.S., I think the pressure is still the same. I think the retailers in general are challenged with the size or the level of interchange fees and would like to see that basically changing, and some different measures are taken right now to try to influence the future of these fees and hopefully we'll be able to participate as we did in the past activity to find ways to promote that and also to find solution for the future.

Brian P. Hannasch

And just to maybe add, Ray, we're supporting both legislative and legal actions that would help control what we think are out of control rates particularly in the U.S. when compared to other countries that we deal with in the world. And then we're also looking actively and watching for technologies that will help break the duopoly that we think exist between Visa and MasterCard. So paying close attention and we'll jump on opportunities as technologies present themselves.

Operator

Last question is from Vishal Shreedhar from National Bank Financial. Does management continue to expect synergies related to the SFR transaction to accelerate through 2015? If so, can you outline the major drivers of synergy acceleration?

Raymond Pare

I think already we sort of [alluded] (ph) to the fact that we are anticipating an acceleration in the second part of the fiscal year and then also the calendar year next year. In terms of the major driver, we're not going so much into details but I could assure you that it's a pretty detailed plan and it's a plan that we follow on a regular basis to make sure that we're on track. And as you can appreciate, it's also basically a plan that moved through the times and we're adding basically new elements to it, and it's pretty active and pretty – we're very active with the progress on that, but our team basically, internal team in Europe are doing a great, great job. That was already started basically years ago and we continue to deliver great results and very confident, as I mentioned our [yield] (ph) basically above our targets and also above the future, not just basically the targets that we did publish but it will be basically a process that will follow or will continue through the time.

Operator

Ladies and gentlemen, this concludes the webcast presentation for today. We hope that we have answered all your questions. Thank you for your attention and your interest in Couche-Tard.

Brian P. Hannasch

Thank you very much.

Alain Bouchard

Thank you.

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