INTERNATIONAL. In breaking news, Dufry today posted a +9.5% rise in turnover to CHF2,113.5 million (US$1,859 million) in 2008. At constant rates of exchange, sales rose by +18%. (This story will be updated throughout the morning with comment and analysis).
Organic sales growth for the full year was +4.5%, driven by passenger growth and productivity improvements, Dufry said.
The company’s results, described by Chief Executive Officer Julián Díaz as “a good year for Dufry”, were hit by currency factors, notably the strong Swiss Franc.
EBITDA (before other operational result) increased by +13.2% (+23% at constant rates) to CHF293.4 million (US$258 million) in 2008. But net earnings dropped by -6.6% year-on-year to CHF117.8 million (US$103.5 million). Guillaume Rascoussier , Financial Analyst (Hotels & Catering) at Oddo Securities, who tracks the sector, noted the “freefall” in earnings but said the group’s net debt was “far lower than we expected, which was excellent news”. He added: “The amount of cash on the balance sheet is striking.”
Those points were taken up by Díaz during an analysts’ briefing and conference call this morning. He said the global financial crisis had prompted a revamped, twin-pronged approach this year. “The business model remains unchanged but we are refocusing the target of that business model to generate cash and to reduce debt in 2009,” he said.
Díaz underlined the company’s major achievement in doubling its EBITDA margin from 7.1% in 2003 to 13.9% in 2008 (see chart below).
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In a mixed review, Rascoussier said Dufry’s earnings fell short of Oddo’s expectations “mainly due to plummeting organic growth in Q4 2008; Ebitda margins contracted marginally.” [More comment soon].
EBITDA margin improved by 0.5 percentage points to 13.9% in 2008 from 13.4% in 2007. Without the effect of the Hudson acquisition, EBITDA margin reached 14.1%.
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“2008 was an excellent year for Dufry as the 2008 figures illustrate – we achieved for the first time in our history a 14% EBITDA margin. Even in the challenging fourth quarter, the comparable margin was above 15%“ |
Julián Diaz Chief Executive Officer Dufry Group |
Growth from the Hudson acquisition, which was consolidated as from October 2008, contributed 9.0 percentage points and new concessions and expansions contributed 3.7 percentage points. The foreign exchange impact of translating into Swiss Francs was a negative -7.7%.
DEVELOPMENT BY REGION
– Europe’s turnover decreased by -7.4% to CHF394.0 million (US$346 million) in 2008. Italy experienced a double-digit decrease, mainly due to Alitalia’s de-hubbing from Milan airports as a consequence of its financial problems, which affected Dufry’s operations in Milan for the majority of the year, the company said.
Dufry’s new operations in Czech Republic contributed to the result as from March 2008.
– Africa increased its turnover by +11.9% to CHF205.4 million (US$180 million) in 2008. Morocco performed exceptionally well for another consecutive year due to strong organic growth, the ramp up of the previous year’s new operations as well as openings of new stores. Tunisia also posted an increase compared to the previous year. The growth of the region was further driven by the full year contribution of the Egyptian operations, which were started in the second half of 2007.
– Eurasia grew its turnover by +16.7% to CHF267.1 million (US$235 million) in 2008. In Russia, the build-up of operations in Moscow Sheremetyevo, which started in the second half of 2007, resulted in double-digit growth, followed by Sharjah (United Arab Emirates), where recent refurbishments supported a strong organic growth. In Singapore, the new shops opened in 2008 more than compensated for the expiry of some concessions, Dufry said. Also, the continued development of Serbia contributed positively to the region’s performance.
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HUDSON DEAL PROMPTS REPORTING RESHUFFLE
Following the acquisition of Hudson, Dufry said it has proceeded with a reshuffling of the operations in North America and Caribbean to reflect the geographical presence of the Group more accurately. The new regions formed are presented below along with comparisons of the previous year’s figures.
– Central America and Caribbean, which comprises all the business of the former Region North America & Caribbean except the US business, posted a pro forma turnover of CHF370.5 million (US$325.5 million) in 2008, a decrease of -13.7% year-on-year. Apart from the negative foreign exchange impact, which accounted roughly for half of the decrease, the sales reduction was mainly due to the weaker performance of several operations in the British Caribbean as well as the Puerto Rican and Mexican operations, the latter due to the reorganisation of the airport in Mexico City. The rest of the operations performed very well with some of them achieving double digit growth, said Dufry.
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– South America performed well with turnover reaching CHF656.6 million (US$576.9 million) in 2008, an increase of +6.8%. Excluding the exchange rate impact, South America grew by +15.7%. All operations had double-digit sales growth when measured in US Dollars. Whereas most of Brazil’s growth was organic, the cruise lines business was mainly driven by new shops.
– North America comprises Hudson as well as Dufry’s original US business. Turnover in this region increased by +358.7% to CHF219.8 million (US$193.1 million), due to the contribution of CHF173.8 million (US$152.7 million) from the consolidation of Hudson since October 2008.
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Source: Dufry |
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“As the economic slowdown goes on, we are certain that it will create opportunities for further consolidation in the industry, most likely towards 2010“ |
Julián Diaz Chief Executive Officer Dufry Group |
Gross profit increased by +12% to CHF1,151.9 million (US$1,012 million) in the year. Gross margin increased by 1.2 percentage points to 54.5% in 2008 from 53.3% in 2007. The improvement in gross margin was mainly based on “centralised negotiations with suppliers as well as the targeted selection of the product mix in the shops towards higher margin products”, the group said.
As of December 31, 2008, Dufry’s net debt amounted to CHF824.2 million (US$724.2 million) compared to CHF370.4 million (US$325.4 million) by the end of 2007. The increase was mainly due to the refinancing of Hudson’s debt at the time of the acquisition.
Julián Díaz commented: “2008 was an excellent year for Dufry as the 2008 figures illustrate – we achieved for the first time in our history a 14% EBITDA margin.
“Even in the challenging fourth quarter, the comparable margin was above 15%. Furthermore, the acquisition of Hudson has broadened Dufry’s travel retail expertise and provides more opportunities on the development of commercial areas at airports.
“By combining Dufry’s global duty free expertise with Hudson’s duty paid concepts, Dufry can now target all passengers at airports irrespective of whether they are domestic or international travellers.
“As for 2009, we expect it to be a challenging year for Dufry – passenger numbers in the first months of 2009 have decreased and current forecasts expect a negative number also for the full year.
“With the implementation of our Efficiency Plan, we minimise the negative effects of the current economic environment and retain our operational flexibility, focusing on cash management, debt reduction and maintaining past profitability levels.
“As the economic slowdown goes on, we are certain that it will create opportunities for further consolidation in the industry, most likely towards 2010. This means on one hand that in 2009, Dufry’s focus will be clearly on efficiency improvements, and on the other hand that once the global economic situation has stabilised, Dufry will emphasise its strategy of profitable growth again.”
Comment and analysis to follow.
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MORE STORIES ON DUFRY
Dufry takes Travel Retailer of the Year title at annual DFNI Americas awards – 23/03/09
Dufry forges partnership with GABICO parent Global Retail Services to enter China market – 03/03/09
Focus Network Agencies and Dufry snare Singapore Changi Airport T2 confectionery & delicatessen concessions – 18/02/09
Dufry names Daniel Garcia to key European role – 06/02/09
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