Autogrill revenues dip in 2009, but margins and cash flow improve

INTERNATIONAL. Autogrill Group today reported a -1.1% fall in revenues year-on-year to €5.72 billion in 2009. Despite net profits plunging -55% to €37 million, the company said it had “successfully weathered the crisis,” pointing to improvements in operating margins and strong cash flow generation. Travel Retail & Duty Free revenues grew by +7.6% in the year to €1,538.1 million, helped by a strong performance in the UK, and especially at London Heathrow.

Efforts by the entire organisation to achieve economies and the strategy of geographical and business diversification made it possible to achieve better results than expected.
Gilberto Benetton
Chairman
Autogrill

Group EBITDA was up by +3.4% to €606.3 million, with EBITDA margin rising to 10.6% against 10.1% a year ago. Cash flow was €263.6 million, up by almost +150% on 2008. Net debt stood at €1.93 billion, down by €233.2 million on a year earlier.

Consolidated revenues in 2010 are expected to be between €5,925 million and €6,025 million and EBITDA between €615 million and €635 million.

Revenues in the first eight weeks of 2010 are up +2.7% at constant exchange rates (up 3.5% on a comparable basis) on the same period in 2009.

Autogrill said: “The Group outperformed its own objectives for 2009 thanks to measures to increase efficiency, defend profitability and maximise cash flow generation, which showed the Group’s proactive capacity in a particularly complex economic scenario.

“The traffic trend, in fact, was negative for much of the year, especially in the airport channel, while motorways suffered somewhat less, despite the strong contraction in heavy vehicle traffic. It was not until the last quarter that signs of a recovery were seen.”

“Efforts by the entire organisation to achieve further economies and the strategy of geographical and business diversification made it possible to achieve better results than expected,” said Autogrill Chairman Gilberto Benetton. “The excellent work done by the management will enable the Group in 2010 to exploit to the full the benefits of the recovery in demand, which seems to be continuing despite high volatility.”

In the Food & Beverage sector, the Group said it managed to cushion both the effects of lower productivity (due to lower sales) and higher rents (following the renewal of motorway contracts in Italy in 2008).

In the Travel Retail & Duty Free business, efficiency measures and synergies (over €30 million in the period out of a total expected to reach €45 million at the end of the process) through the integration of WDF and Aldeasa delivered a significant increase in margins.

In flight catering too, despite the reduction in flights and crisis at certain client airlines, there was improved profitability thanks to better sales in Australia and Middle East and successful cost control at central management level.

Spanish travel retail sales were affected by the tough economic climate (pictured is Aldeasa’s main Barcelona T1 outlet)


Revenues
The annual result reflects full consolidation of Aldeasa as of 1 April 2008 (previously 50%) and World Duty Free Europe, consolidated as of 1 May 2008. On a pro forma basis, the -5.1% decrease in revenues (-1.1% on a reported basis) was due to the contraction in traffic and spending, especially in the first half.

In the Food & Beverage sector, where sales suffered most from the slump in traffic, measures were taken to support profitability and efficiency. In Travel Retail & Duty Free, business in UK airports bucked the traffic trend and got revenues rising again, said Autogrill, while in Spain the contraction in sales was limited by the results at Madrid Airport, only slightly down, and more in general by those for business traffic.

In the Flight sector, growth in international business offset the drop in sales in the UK due to airline failures and reduced flight frequency in 2009.

Q4 consolidated revenues amounted to €1,462.9 million against €1,556.1 million in the same period in 2008, down -6%. The change on a pro forma basis (down -2.3%) confirms the first signs of a recovery in traffic in certain channels (US and Italian motorways) in the period.

EBITDA
As noted above, in 2009 Autogrill posted consolidated EBITDA of €606.3 million, up +3.4% on €586.3m in 2008 (down -3.4% on a pro forma basis). The result was partly due to non-recurring income of €11.3 million.

The Group’s fourth quarter EBITDA amounted to €126.9 million against €141.8 million in the same period in 2008 (down -10.5%, or -6.6% on a pro forma basis), due to variability in November and December sales, with affected profitability. The EBITDA margin was 8.7% against 9.1% in Q4 2008.

EBIT
The operating result was €250.9 million, down by -11.1% and down -15.7% on a pro forma basis. This reflects higher amortization and depreciation charges relating to the investment programme launched following new contracts and acquisitions in 2008 and including, in particular, €74.6 million in amortization of intangible fixed assets.

Net profit
In 2009, following application in advance of the new IFRS3R accounting standard, the Group’s interest in net profits was €37 million, against €83.7 million in pro forma 2008, after net financial charges of €94.7 million, €104.7 million in taxes and €14.4 million in minority interests.

Travel Retail & Duty Free
In 2009, the Travel Retail & Duty Free business generated revenues of €1,538.1 million, up by +7.6% on the €1,429 million posted in 2008 (down -3% on a pro forma basis).

Business in UK airports saw growth of +18.8% (+6.4% pro forma) despite the -6% drop in traffic. This result was mainly due to an excellent performance at Heathrow (the combined effect of new development at Terminal 5 and new commercial initiatives) and was helped at the same time by depreciation of Sterling. Revenues in Spanish airports (down -7.8%) were penalised by the negative macro-economic situation and resulting traffic figures (down -8.1%) and by lower spending on the part of UK passengers due to their weak currency.

Results in the Rest of the world were positive (up +13%), mainly due to full consolidation of business in India and to the performance in Kuwait, which enjoyed growth in traffic.

EBITDA in this sector in 2009 amounted to €156.9 million, up +26.9% on €123.7 million in 2008 (up +15.4% on a pro forma basis). The result was partly due to non-recurring income of €7.5 million relative to a retroactive concession rent rebate, without which growth would have been +9.9% on the 2008 pro forma value. It was also due to synergies generated by the integration process and efficiency measures that offset the drop in revenues and gave a considerable boost to the EBITDA margin, from 8.7% to 10.2%.

Investments in the sector amounted to €21.8 million against €51.1 million in 2008 and related mainly to upgrading of points of sale at Barcelona’s Terminal 2, and at Manchester, Jersey and Amman airports.

Food & Beverage
Sales in the Food & Beverage sector in 2009 amounted to €3,787.3 million against €3,934.3 million the previous year (down -3.7% and down -6.2% on a pro forma basis).

Motorways did better than airport business, in terms of both traffic and sales. In the North American airports, which saw a drop in passenger traffic of -6.9%,sales were down -10.7% (down -7.7% on a comparable basis).

EBITDA in the Food & Beverage business in 2009 amounted to €437.5 million, down -6% on €465.4 million in 2008 (down -8.6% on a pro forma basis). The result was favoured by non recurring income of €3.8 million. Efficiency measures, stabilisation of raw materials prices and a more favourable sales mix worked together to offset the impact of diminishing traffic and higher rents in new motorway concessions in Italy kept the EBITDA margin substantially stable at 11.6% (11.8% in 2008).

Investments in 2009 stood at €121.5 million (€278.6 million in the same period in 2008) and were rationalized in response to the economic crisis and in line with long-term strategies. They referred mainly to contract renewals in the motorway channel and new openings in airports in both Italy and the US.

Flight
In 2009, Flight revenues amounted to €403 million, down -6.5% on 2008. The year was characterized by the consolidation of Alpha Flight A.S. (former Air Czech Catering A.S.) for the whole period. The result was down -2% on a pro forma basis. The positive trend in international business, mainly in the Middle East and Australia, helped offset the contraction in sales in the UK due to airline failures in the second half of 2008 and the reduction in sales volumes caused by reduced passengers numbers and flights in 2009.

EBITDA in the Flight sector in 2009 reached €42.2 million, up +1.8% (up +1.1% on a pro forma basis) on 2008. Successful efficiency boosting, improvements in the contracts portfolio and leverage of the Group’s presence in remunerative markets (the Middle East and Australia) pushed up the EBITDA margin from 9.6% to 10.5%.

Investments in 2009 amounted to €7.3 million against €7.5 million the previous year and were concentrated mainly in Sharjah Airport (United Arab Emirates) and Amman and Sydney airports.

Business development
In 2009 Autogrill said it achieved important results through the renewal of contracts already in force and development in new geographical regions.

In the Food & Beverage sector, contracts were renewed in the North American airports of Chicago (Illinois), Charlotte Douglas (North Carolina) and Dayton (Ohio).

In the Travel Retail & Duty Free sector, presence in the UK was strengthened by starting up in Bristol International Airport, while in Spain operations were initiated in Barcelona Airport’s new T1 terminal.

In the Flight business, a number of major existing contracts, including those with British Airways and Royal Jordanian, were renewed.

Outlook
In 2010, Autogrill said it will “stay focused on profitability, efficient use of resources and cash flow generation in a scenario that is improving in terms of traffic but still characterised by high volatility”.

Two possible traffic scenarios have been considered. “Best case” indicates more growth in American airports and a moderate recovery of traffic in UK airports and Italian motorways, while Spanish airport traffic stays at last year’s levels. “Worst case” indicates a more modest recovery in US airports, traffic on Italian motorways and in UK airports in line with 2009 and a slight contraction in Spain.

Food & Beverage The Magazine eZine