Turnover continued to grow strongly by 14% to CHF 2,688.7 million with operational performance following the trends seen in the second quarter across most of the regions. The acquired business in Greece, which started to be consolidated from April, achieved a very strong result.

EBITDA in the third quarter grew by 20% and EBITDA margin reached 16.4% for the quarter. For the first nine months of 2013, EBITDA amounted to CHF 386.0 million versus CHF 359.9 million in the first nine months of 2012 and EBITDA margin reached 14.4%.

Projects announced in Brazil and Asia with almost 34,000 sqm of retail space

In terms of new achievements, Dufry announced on September 3, 2013, the signing of 10 year contracts in São Paulo, Brasilia, Viracopos and Natal to operate duty free and duty paid spaces, and the opening of a duty paid shop in Goiânia.  Overall, Dufry will operate 19,700 sqm of retail space in these locations once all the expansion projects in the different airports are completed. With these new agreements, Dufry enters a new phase in the development of the Brazilian travel retail market and will bring a first class shopping experience for passengers in Brazil, while providing scope for a substantial increase in spend per passenger and overall sales. Last but not least, these projects will support the development of the duty paid business in Brazil, which has not been well explored in the past years and where Dufry foresees an extraordinary opportunity to expand. In addition to branded duty paid stores, Dufry will introduce in Brazil its Hudson convenience store concept with six new shops in São Paulo, Brasilia and Natal. Besides that, border duty free shops will be a whole new opportunity in the country and with Dufry´s worldwide and local expertise it will be another channel to further grow the business.

Dufry has been increasing and developing its presence in Eurasia and Asia, following the strategy of pursuing growth in Emerging Markets and tourist destinations, adding several and sizeable contracts throughout the year. The signing of the new agreements this year in Kazakhstan, Bali, Sri Lanka, Taiwan, and mostly recently, in Beijing and South Korea, will increase Dufry’s presence to 14,000 sqm in the region. In this context, Dufry will operate 140 shops in 14 locations, in the Far East, Middle East and Central Asia.

Turnover by Region

Turnover for the Group reached CHF 2,688.7 million from CHF 2,363.9 million in the first nine months of 2012. Growth in constant exchange rates stood at 14.0%. Organic growth was 2.4%, to which like-for-like growth contributed 1.8% and new concessions, net, 0.6%. Growth from acquisitions added 11.6% to the turnover growth and translational effect was -0.3%.

Turnover in Region EMEA & Asia grew by 50.9% in the first nine months of 2013 and reached CHF 894.9 million from CHF 592.9 million in the previous year. The business acquired in Greece in April 2013 performed strongly, with the number of international tourists visiting the country increasing by 10% in the year to September. The other operations in Europe continued to perform well, with strongest growth in France, Switzerland, Serbia and Czech Republic. As for Middle East and Asia, Dufry’s operations in China and Cambodia continued to outperform. In Africa, operations in Egypt were impacted by the political situation, whereas the performance in Morocco continued to be strong.

Turnover in Region America I stood at CHF 569.6 million in the year to September, versus
CHF 575.8 million in the same period in 2012. In the third quarter, there was a marked improvement in Uruguay on the back of the recovery from the bankruptcy of Pluna last year. Furthermore, Mexico and Argentina continue to perform solidly. In the British Caribbean, the situation remains unchanged compared to the first half of the year with a soft performance.

Turnover in Region America II stood at CHF 519.8 million in the first nine months of 2013 compared to CHF 548.3 million in the same period in 2012. The high volatility of the Brazilian Real versus the US Dollar in the third quarter continued to hold back further improvement in this region. The first phase of the new arrivals space at São Paulo International Airport Terminal 2 opened last August, has been showing good results with double-digit growth recently and the full benefit starting to materialize from the 4^th quarter onwards. The plans for the departure shops in Terminal 2 remain on track for opening by the beginning of 2014.

Turnover in Region United States & Canada came to CHF 659.0 million in the first nine months of 2013 from CHF 613.9 million in the same period in 2012, a growth of 7.3%. In constant exchange rates (CER) turnover growth was 8% compared to one year earlier. The business continues to perform solidly through a combination of passenger growth and increase in spend per passenger, new concessions and expansions. So far in 2013, 3,700 sqm were added as net new retail space in the region.

Gross profit grew by 13.6% and reached CHF 1,579.1 million in the first nine months of 2013 versus CHF 1,390.3 million one year before. Gross profit margin remained almost stable at 58.7%, from 58.8% one year ago. The consolidation effect of the business in Greece, which has below average gross margins, was compensated by an increase of gross margin in the existing business. The gross margin improvement of the comparable retail business was 0.7 percentage points.

Selling expenses as a percentage of turnover increased by 110 basis points to 23.0% in the first nine months of 2013, from 21.9% in 2012. In absolute terms, they reached CHF 619.4 million in 2013 versus CHF 517.3 million one year earlier. The renewal of duty free concession contracts in Sao Paulo International Airport resulted on higher concession fees. Dufry has now secured the business at the airport for the next 10 years.

Personnel expenses increased to CHF 399.5 million from to CHF 354.3 million in the same period 2012. As a percentage of turnover it improved to 14.9% versus 15.0% in the first nine months of 2012.

General expenses decreased as a percentage of turnover to 6.5% from 6.7% in the first nine months of 2012. In Swiss Franc terms, general expenses increased to CHF 174.2 million in the first nine months of 2013, from CHF 158.8 million one year earlier.

EBITDA^[1] increased by 7.3% and reached CHF 386.0 million in the year to September with EBITDA margin reaching 14.4% in the period. In the third quarter, EBITDA grew by 20% and EBITDA margin reached 16.4% for the quarter

Depreciation was CHF 50.3 million in the first nine months of 2013, compared to
CHF 45.5 million in the same period in 2012 and remained stable at 1.9% of the turnover. Amortization increased by CHF 10.2 million, mainly as a result of the consolidation of the Folli Follie Travel retail business, and reached CHF 89.0 million in the first nine months of 2013 from CHF 78.8 million in the same period last year.

Other Operational result (net) was minus CHF 28.3 million in the first nine months of 2013, which are mainly due to the transaction costs of the acquisition in Greece as well as start-up costs for the different new projects EMEA + Asia, America II and US & Canada.

EBIT reached CHF 218.4 million in the first nine months of 2013 versus CHF 223.9 million in year before.

Net financial expenses reached CHF 69.6 million in the first nine months of 2013 compared to CHF 53.1 million one year earlier. As part of the acquisition in Greece, Dufry structured an additional local credit facility of EUR 335 million, which is the main driver for the increase in the financial expenses.

Income taxes as a percentage of EBT was 18.3% and reached CHF 27.3 million in the first nine months of 2013, versus CHF 30.2 million in the same period 2012.

Net earnings for the first nine months of 2013 stood at CHF 121.5 million versus
CHF 140.6 million reported last year. Net earnings attributable to equity holders for the nine months ending 30 September 2013 reached CHF 73.0 million and Core EPS was CHF 5.04.

Net cash flow from operating activities reached CHF 346.6 million in the first nine months of 2013 versus CHF 285.4 million one year earlier. In the year to September, capital expenditure stood at CHF 113.0 million and free cash flow reached CHF 235.2 million. The increase in capital expenditure by CHF 32.7 million, compared to the same period last year, was due to the several new projects, most notably in the US and Brazil. The additional capital expenditure of the new projects that will be implemented along the coming quarters will be important contributors for future organic growth.

Net debt at the end of September 2013, was CHF 1,507.3 million compared to the
CHF 1,571.9 million at the end of June 2013. The main covenant at Group level, Net Debt/adjusted EBITDA, stood at 3.3x as of September 30, 2013.

Accelerating growth mode

Julian Diaz, CEO of Dufry Group, commented: “The third quarter confirms our positive view for the remaining of the year, which is even more important given that the third quarter is the most relevant quarter for Dufry operations. We have started to integrate the business in Greece at full speed and the process has been developing very well. As a consequence, we have already started to see the first synergies materializing ahead of the planned timetable. Also, the operational performance of the new business in Greece was strong and it confirms that it is a very interesting travel retail market.

On the business development side, we have been able to secure a number of projects that will be important growth drivers in the coming years. In Brazil, we have opened the first part of the new retails space in Terminal 2 of Sao Paulo and we signed 10 year contracts at the airports São Paulo Terminal 3, Brasilia, Viracopos and Natal where we will operate duty free and duty paid spaces. Based on these contracts, we want to take Brazilian travel retail to the next level, not only in terms of duty free operation but also in duty paid where almost 90% of the Brazilian passengers fly domestic.

To put a picture on it, in São Paulo, apart from the general duty free shops that will be designed under a walk-through concept, we will also introduce for the first time 15 stand-alone branded boutiques that will bring some of the most prestigious brands in the world. In Brasilia, for instance, we will operate a duty paid retail space of 1,900 square meters with a new walk-through concept, which takes Brasilia’s retail space to world class standards. Last but not least, the introduction of the first six Hudson convenience stores will be a major innovation within the Brazilian travel retail space.

Overall, the new expansion projects will be a very strong platform to develop other travel retail channels and segments in the country, such as duty free border shops. We are thrilled with this recent achievement and at the same time confident about this challenge.

Finally, I would like to highlight our expansion in Asia, the region that we have also been focusing and putting our efforts into developing our presence. Dufry considers Eurasia and Asia as one of the regions for strategic development for the Group, within its strategy of growth in Emerging Markets and tourist destinations. With its existing business in the region plus the contracts won since the beginning of this year, Dufry has built a sizeable business which may give rise to economies of scale for further projects.

With the latest announcements of the new winning projects in Kazakhstan, Bali, Sri Lanka, Taiwan, Beijng, Shenzen and most recently in Korea, Dufry will operate around 140 shops across 14 locations in the Asian region with around 14,000 sqm. With these projects, we deliver on our strategy to expand our presence in Eurasia and Asia. All the projects combined will contribute a turnover around CHF 250 million and will allow us to build a strong foothold in that part of the world that we can further develop.  

We also continue developing the Operations side of our business: In October 2013, we have implemented an internal reorganization of the Procurement and Logistics functions. Going forward, the procurement activities of the most important categories will be coordinated globally by dedicated teams and where within each of the teams, specific responsibilities of the brand relationship management are covered. The change is expected to support sales growth and allow for gross margin improvement as well as improvements in the net working capital.

We are convinced that our strategy of profitable growth with a focus on Emerging Markets and tourist destinations continues to be valid. The new projects will contribute to the growth going forward and we will continue to work hard to improve our capabilities and to deliver an even better shopping experience to our customers.”

Key Figures Dufry Group

Dufry’s Nine Month 2013 Report is available on the following link: http://www.dufry.com/en/Investors/FinancialReports/