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INTERNATIONAL. Dufry Group delivered a +13.8% rise in turnover to CHF2,237.7 million (US$2.42 billion) for the first nine months of 2011 (at constant exchange rates), though the reported figure for the period was CHF1,879.0 million (US$2.03 billion), down by -4.4% year-on-year.
Organic growth grew by +8.4% and new projects (net) contributed 2.0%. The effect from acquisitions was 3.4% while the translation effect from exchange rates reached -18.2%, driven by the depreciation of the Euro and the US Dollar of -12% and -18% respectively until the end of September.
Gross profit hit CHF1,070 million (US$1.16 billion), down by -3%, with EBITDA up +23.7% at constant rates to CHF313.6 million (US$340 million) and up by +1.2% on a reported basis to CHF256.4 million (US$278.1 million).
The company noted: “Dufry continued to present a strong performance in the first nine months of 2011 outperforming international passenger numbers with organic (like-for-like) growth of +8.4%. In the third quarter, Dufry grew organically by +9.2%.
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“These results confirm the rationale and credibility of Dufry’s strategy defined back in 2004 of being a pure travel retail player with focus on emerging markets and tourist destinations.“ |
Julián Díaz CEO Dufry |
“On top of organic growth, Dufry continued to expand its presence by opening approximately 6,700sq m of net new retail space, which contributed for 2.0% of the turnover growth (openings +5.0%; closings -3.0%) in the first nine months of 2011. In the third quarter, Dufry increased its space by 1,750sq m.”
As reported, on 4 August Dufry acquired several operations in emerging markets. The acquired businesses comprise of the leading airport retailer in Argentina (InterBaires), airport retail operations in Uruguay, Ecuador, Armenia and Martinique, as well as a wholesale platform. These operations have been consolidated since August and contributed 3.4% to the group’s growth in the first nine months of the year and 9.7% in the third quarter. “The businesses themselves continued to grow dynamically compared to their previous year performance,” said Dufry.
It added: “The first phase to integrate the new businesses has already been completed including the takeover of key functions as well as finalizing a detailed analysis and action plan through a dedicated integration team. The second phase of the integration will focus on the implementation of the integration plan in each key area. In procurement, we will include the new businesses in the group’s global negotiations, in logistics the Dufry supply chain model will be implemented and in finance, the new operations will be integrated in the group’s cash pool and tax structure. Overall, we are well on track to generate synergies of US$25 million within 24 months.”
In addition, as reported last week, Dufry has entered the Indian market in partnership with InterGlobe, and will operate retail outlets under the Hudson News brand across airports, metro and train stations.
A joint InterGlobe Retail and Dufry team will work with DMRC (Delhi Metro Rail Station) to develop around 2,000sq m of retail space throughout the DMRC network over the next six months.
Julián Díaz, CEO of Dufry Group, commented: “I am convinced that these results confirm the rationale and credibility of Dufry’s strategy defined back in 2004 of being a pure travel retail player with focus on emerging markets and tourist destinations. Following this orientation, we were able to present a continuous organic growth in the nine months of 2011 and to improve our profitability based on the initiatives we started in 2010. Going forward, we will manage the group based on the same fundamentals and our aim is to continue delivering superior growth rates based on our three pillars: organic growth, new concessions and expansions, and acquisitions.
“The acquisitions that we communicated in August 2011, will have a significant impact on Dufry’s profile going forward. They further strengthen our position as the leading travel retailer and increase our presence in emerging markets. We have already started the integration of the new businesses and are creating synergies which will be a main priority during the next 12 to 24 months.
“In this respect, our mid-term initiatives “Dufry Plus One” and “One Dufry” become even more important as we will include the new businesses directly into these projects, focusing on top-line growth, productivity and efficiency improvements. The integration of the new businesses will significantly enhance the gains that we have already generated in procurement, marketing, risk and cash management as well as tax optimization initiatives. The new businesses will also increase the overall value of these projects.
“In addition, we are thrilled to announce our entry in the Indian market. India is one of the fastest growing economies in the world, with tremendous potential in the travel retail segment. Together with InterGlobe, we are looking to redefining convenience travel retailing in India, starting with New Delhi as we deliver a truly unique shopping environment at the metro stations with the Hudson News Café concept. InterGlobe and DMRC are both strong partners and we are convinced that this will prove to be a strong team for the further development of travel retail in India.”
Díaz added: “As far as FX is concerned, the translation effects in our financials will be substantially lower going forward compared to the last quarters if the USD/CHF exchange rate remains at similar levels than today.
“So far, our business has been robust in terms of passenger growth and customer spend. Additionally, experts continue to forecast a 4-5% passenger growth for the next year indicating a positive development also for 2012.
“Nevertheless, as mentioned before, our focus in the coming quarters will be on cash generation and reducing leverage that we incurred as part of the recent acquisitions. Furthermore, we will also continue to closely monitor the situation in order to be prepared and act quickly on any possible development in the global economic situation.”
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Review of Financials
Region Europe’s turnover grew by +7.1% at constant FX rates. In Swiss Francs terms, turnover decreased by -4.4% to CHF230.3 million (US$250 million). All major operations contributed to the growth, including France, Italy, Spain and Switzerland.
In Region Africa, turnover was down by -16.4% when measured in constant FX rates and reported turnover decreased by -27.7% to CHF100.7 million (US$109.2 million) in the first nine months of 2011, due to the political turmoil that started at the beginning of this year in several countries in the region. In the third quarter, performance in Egypt and Ivory Coast moved back to growth whereas the recovery in Tunisia has been limited, said Dufry.
Turnover of Region Eurasia grew by +6.4% at constant FX rates. When measured in Swiss Francs decreased by -11.0% amounting to CHF154.6 million (US$167.7 million) in the first nine months of 2011. In the third quarter, operations in Russia and Sharjah grew by double digits backed by a strong passenger growth and thanks to improved productivity.
Turnover of Region Central America & Caribbean increased by +5.6% on constant FX rates. In Swiss Francs terms, it decreased by -13.1% and stood at CHF262.0 million (US$284.2 million) in the first nine months of 2011. Sales in Mexico returned to positive territory in the third quarter following a redistribution of slots by the airport authority at the Mexico City Airport. Additionally, the performance of the Caribbean operations continues to be positive, said Dufry.
Region South America increased its turnover by +36.6% at constant FX rates. Translated to Swiss Francs, turnover increased by +14.4% to CHF594.9 million (US$645.4 million) in the first nine months of 2011. The company noted: “Dufry has continued to take advantage of the good economic development in the region which has driven the increase in international passenger numbers. On top of that we have been able to increase the productivity in the region by implementing successful marketing initiatives and promotions.”
At Dufry’s recently acquired operations in Argentina, Uruguay and Ecuador, the operations achieved a turnover of CHF64.4 million (US$69.8 million) since their consolidation in August 2011.
In Region North America, turnover increased by +9.4% at constant FX rates. Turnover in Swiss Francs decreased by -10.2% and amounted to CHF519.1 million (US$563.2 million) for the first nine months of 2011. The development in the region continued to be positive and growth accelerated in the third quarter based on an ongoing moderate increase in passenger numbers, productivity improvements and expansion of the concession portfolio.
Gross margin reached 58.0% in the first nine months of the year from 57.2% one year earlier, resulting in a improvement of 0.8 percentage points.
Selling expenses as a percentage of the turnover decreased to 22.1% from 22.4% in the first nine months of 2010. In absolute terms, expenses decreased by -6.0% to CHF414.7 million in the first nine months of 2011 versus CHF441.1 million one year before.
EBITDA margin improved 0.7 percentage points to 13.6% in the first nine months of 2011 compared to 12.9% in the same period of 2010. EBITDA margin in the third quarter 2011 increased to 15.5% from 14.2% one year earlier thanks to the contribution of the newly acquired businesses and the cost improvements.
Other operational results reached CHF21.2 million (US$23 million) in the year to September. The majority of the expenses (CHF11.3 million) are due to costs related to the acquisitions done in August.
EBIT in the first nine months of 2011 remained practically stable as a percentage of the turnover at 7.8%. Expressed in Swiss Francs, EBIT amounted to CHF146.1 million (US$158.5 million) compared to CHF149.5 million in the respective period of 2010, and included an increased amortization as well as non-recurring other operational results mentioned above, both related to the acquisitions done in August. EBIT before acquisition effects was CHF149.6 million (US$162.3 million) with EBIT margin reaching 8.3%.
Net earnings to equity holders reached CHF79.1 million (US$85.8 million) in the first nine months of 2011 compared to CHF83.5 million in the same period of last year.
Cash flow generation
Net cash flow from operating activities reached CHF230.4 million (US$250 million). Excluding investments in net working capital, operating cash flow before net working capital changes was CHF276.2 million compared to CHF259.2 million in the same period of last year. Main drivers for the improvement are the substantial cash generation of the newly acquired businesses as well as the increased profitability of the existing business. Capex for the first nine months of the year reached CHF62.3 million (US$67.5 million), from CHF66.2 million registered in the same period in 2010.
Net debt was CHF1,399.9 million (US$1.51 billion) at the end of September 2011, compared to CHF637.9 million at the December 31, 2010.
In August, Dufry structured an additional committed five-year syndicated bank facility of US$1 billion to finance its last acquisitions. Syndication was successfully completed on September 13, 2011, with 16 banks participating. Despite a lean process, the syndication was over-subscribed and the lending banks got scaled back, said Dufry. The new credit line facility has been structured to sit alongside with the previously existing financing.
