FURTHER Q1 HIGHLIGHTS:

• Encouraging and ongoing re-initiation of travel and travel retail demand in regions progressing with vaccination and implementation of travel protocols, especially in the US and in Central America & Caribbean
• Around 60% of stores open, representing close to 70% of sales capacity, including successful partnership-opening of strategically important duty-free operation in Hainan
• Successful execution of CHF 1,619.9 million refinancing with well-diversified product mix, no relevant maturities before 2024, and extension of covenants holiday for another 12 months
• Strong liquidity position of CHF 2,213.7 million
• Introduction of The Americas segment, following successful Hudson re-integration and in alignment with centralized logistics platform, regional operations and decision-making process

JULIÁN DÍAZ, CEO of Dufry Group, commented: “We are seeing encouraging signs for resuming travel trends and shop re-openings in the regions that have most progressed with vaccination campaigns and have established cross-border travel protocols accompanied by clear procedures and necessary documentation for travelers. Customer behavior indicates continued demand for travel and travel retail, and we are well positioned to accelerate sales with further re-openings. The close relationship with our landlords, suppliers, employees and shareholders continues to be a valuable support during the recovery. We are confirming the scenarios we have laid out for 2021, and are confident that we can achieve the targeted cost savings for the year.

As part of the re-organization and the streamlining of our processes, we have now merged our North, Central and South America businesses into one reporting segment to reflect the decision-making process for the region. This step has been facilitated by the completed Hudson re-integration as well as the alignment of our operations and logistic platforms. 

Over the last weeks, we have successfully executed the refinancing of all relevant maturities until 2024 at attractive terms by applying a diversified product mix of convertible bonds, senior notes and bank debt. This allowed us to reduce our net debt position while securing additional liquidity, which currently stands at CHF 2,213.7 million. In addition, we achieved an extension of the covenant holiday by another twelve months with the next testing now due in September 2022, and an increased threshold for both September and December 2022.

The further strengthened financial profile adds to the significant achievements realized in 2020 with respect to the implementation of recurring cost savings of CHF 400 million, tight cash flow management and several financial initiatives to safeguard liquidity. We currently see progress on the re-openings in the US and Central America, and on plans communicated by authorities globally for collaboration on cross-border travel. The new organizational setup and strong liquidity position allows us to drive the recovery, while also engaging in strategic partnerships and opportunities to accelerate growth.”

TURNOVER

Summarizing the first three months of 2021, turnover reached CHF 460.3 million as compared to CHF 1,438.7 million in the same period in 2020 and versus CHF 1,882.6 million in the same period in 2019. Organic growth for the first quarter 2021 stood at -66.7% vs Q1 2020, and -73.9% versus Q1 2019. Like-for-like performance came in at -68.3% vs 2020 due to continued reduced passenger traffic across most airports and other channels globally. Net new concessions developed positive and represented 1.6%. The translational FX effect in the period was -1.3% mainly as a result of USD devaluation, the currency in which most of turnover was generated in Q1 2021.

The category mix reflects the current re-opening patterns with domestic flights recovering earlier due to continued cross-border travel restrictions in some regions. Therefore, duty-paid sees some stronger demand, with food & confectionary and convenience product offerings increasing in sales level compared to the same period in 2019. Spend per passenger remains elevated on a location-by-location comparison.

REGIONAL PERFORMANCE

In the context of the reorganization first announced in June 2020, Dufry has retrospectively combined its North America and Central & South America operations as of 1 January 2021 into the new reporting segment The Americas. The integration has been facilitated by the successful completion of the Hudson delisting and full reintegration into the Dufry Group, and reflects the organizational decision-making process for the region as well as the aligned logistics platforms and operations. The new segment will directly report to Eugenio Andrades, Chief Executive Officer Operations and member of the Global Executive Committee, as it is the case for the other two segments of the Group. Consequently, from now onwards, Dufry will use for its segment reporting its three regions Europe, Middle East & Africa, Asia Pacific and the Americas as well as its distribution centers.

Europe, Middle East and Africa

Turnover amounted to CHF 134.5 million in Q1 2021, versus CHF 647.7 million in the same period in 2020 and CHF 818.0 million in the same period of 2019. The first quarter 2021 saw an organic growth performance of -78.9% versus Q1 2020 and -83.5% versus Q1 2019. Performance remained relatively unchanged compared to Q4 2020 due to ongoing restrictive measures including quarantines and lockdowns across Europe. Especially impacted were the UK, Central and Southern Europe, whereas Eastern Europe and Russia as well as Middle East and Africa remained less affected and performed above average for the region. Demand is picking up as soon as travel can resume, which became visible in January and since end of March across several locations in the region, where authorities allowed cross-border travel temporarily.

Asia-Pacific

Turnover amounted to CHF 24.3 million in Q1 2021, versus CHF 100.3 million in the same period in 2020 and CHF 189.2 million in Q1 2019. Organic growth reached -75.5% compared to 2020 and -86.2% compared to 2019 as Dufry’s footprint in the region is geared towards international travel, which is still highly impacted. At the end of the quarter some cross-border travel started to resume, e.g. between Australia and New Zealand, however, the majority of Dufry’s shops in the Asia-Pacific locations were still closed. China is recovering more strongly in the region, and Dufry’s collaboration with Alibaba Group and Hainan Development Holding in Hainan benefitted with its first 3,000 m² store opening on the Island. The full retail space of the new shop at the Mova Mall downtown duty-free shopping mall covering around 39,000 m² will be open for travelers beginning of 2022.

The Americas

Turnover was CHF 241.2 million in Q1 2021 as compared to CHF 644.2million one year earlier and CHF 826.4 million in Q1 2019. Organic growth came in at -59.9% vs 2020 and at -67.9% vs 2019. North America performed at the same level as Q4 2020, however, since end of March the US has seen a pickup in domestic and intra-regional travel activity thanks to the significant progress on vaccination and related easing of restrictions. Dufry and its Hudson brand are well positioned with its strong convenience presence in the region. Turnover was strongly driven by duty-paid during Q1 2021 with above regional and Group-average organic growth of -61.4% compared to Q1 2019. Central America and the Caribbean, including Mexico, Dominican Republic and the Caribbean Islands, continue to perform more robust compared to all other regions, driven by intra-regional travel from the US as well as a more flexible international travel regime. South America’s performance was impacted by the pandemic situation and related new lockdowns in Brazil, however, partly mitigated by easing of restrictions in other countries like Peru.

The regional net sales split saw Europe, Middle East and Africa contributing with 29.8%, Asia Pacific with 5.4% and the Americas with 53.4%. Global distribution centers accounted for 11.4% of Q1 2021 net sales, which was mostly related to the Hong Kong operations temporarily providing supply to the Mova Mall shop in Hainan.

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BUSINESS DEVELOPMENT

During Q1 2021 Dufry has continued to manage its capital allocation in a highly disciplined manner. The deployment of capital expenditures (Capex) remains in accordance with recovery trajectory and in line with scenarios provided to the market with Dufry’s FYR 2020. The total gross retail space opened during Q1 2021 accounted for 1,848 m². Highlights included the opening of Dufry’s first Duty Free store in Odessa, Ukraine, in addition to the duty-paid shops opened at the end of 2020. Porto Alegre Megastore duty-paid (Brazil) shops added 700 m² of retail space in early March following an award at this Airport, while the sales area was further increased at St. Petersburg Pulkovo Airport (Russia) with a new Last Minute Shop adding to the existing stores operated by Dufry. In the US, Dufry started to roll out its Hudson Nonstop concept, powered by Amazon’s Just Walk Out technology, with the first store opening at Dallas Love Field Airport in Q1 2021, and the second store announced for Chicago Midway International Airport. In addition, Hudson opened six new stores at the Virgin Hotels Las Vegas, diversifying its channel mix in line with Dufry’s overall strategy.

Dufry announced a cooperation agreement with Hainan Development Holdings (HDH) to collaborate at the Global Duty Free Plaza at the Mova Mall in the city-center of Hainan’s capital Haikou in China, which successfully opened with a first store on January 31, 2021. The collaboration represents an important development in the attractive Hainan market and adds to Dufry’s strategic partnership with Alibaba Group to operate offline and online travel retail in China.

A total of 2,100 m² was refurbished during Q1 with the main refurbishment project in Rio Galeão Dufry Shopping Megastore (Brazil), with additional works completed for the Express shop and the Hudson convenience stores. During Q1 Dufry also reported several concession wins, which will start operations throughout 2021. Dufry has been awarded a new concession license at Sangster International Airport in Montego Bay, Jamaica, for duty-free and duty-paid operations, increasing its current retail space to 2,260 m². Dufry won a new concession contract to operate the duty-free 173 m² walk-through store at Teesside International Airport (UK) for a period of 12 years, further consolidating its footprint in the UK, where it currently operates duty-free shops at 25 airports. The current pipeline of opportunities stands at approximately 32,500m² as at the end March 2021.

REFINANCING & LIQUIDITY

In Q1 2021, Dufry has initiated the refinancing process of its debt positions with upcoming maturities until 2023. Overall, CHF 1,619.9 million have been successfully refinanced by end of April. Dufry made use of a diversified product mix including convertible bonds, senior notes and bank debt, thereby optimizing terms in the current market environment. In detail, Dufry issued CHF 500 million new convertible bonds due 2026 with a 0.75% coupon and CHF 87 conversion price, while early converting its existing CHF 350 million 2023 convertible bonds. Further, Dufry priced EUR 725 million 3.375% Senior Notes due 2028 and CHF 300 million 3.625% Senior Notes due 2026, which are used to refinance existing bank debt. The maturities for the remaining term loans have been extended to 2024, and Dufry has received an extension of the covenant holiday until June 2022. The September and December 2022 testing deadlines require a 5x net debt/adjusted operating cash flow before the company will return to its 4.5x net debt/adjusted operating cash flow threshold in 2023.

Dufry has already concluded a comprehensive set of initiatives to strengthen its capital structure and liquidity position in 2020. With the refinancing Dufry further strengthened its financial structure. As of March 31, 2021, net debt amounted to CHF 3,621.1 million; including the CHF 321.1 million in equity from the early conversion of the CHF 350 million convertible bonds 2023 (CHF 28.9 million already recognized as equity component in 2020) and CHF -29.5 million for incentives and fees paid for early conversion, net debt position end of March stood at CHF 3,330.0 million. This compares to CHF 3,344.2 million as of December 31, 2020, and to CHF 3,537.4 million at the end of March 2020.

Cash consumption, defined as Equity Free Cash Flow, stood at CHF -219.3 million for the first quarter 2021 and relates to the normal seasonality of Dufry’s business. The measures on cost and cash flow management successfully implemented in 2020 supported the better than expected cash consumption. Dufry’s liquidity position amounted to CHF 2,213.7 million as of March 31, 2021, including:

• Cash and cash equivalents of CHF 876.1 million
• Available credit lines of CHF 1,232.3 million
• Available uncommitted lines of CHF 105.3 million

OUTLOOK

With the FYR 2020, Dufry provided the market with turnover scenarios for 2021 and respective sensitivities for concession fees, personnel expenses, other expenses, Capex as well Equity Free Cash Flow. Based on information available to management, Dufry confirms its previously communicated cost and cash flow scenarios, which are included in Dufry’s Q1 2021 investor presentation. Dufry is on track to achieve CHF 530-670 million savings compared to 2019 in personnel and other expenses for FY 2021, and MAG relief for 2021 of around CHF 300 million were signed as of April 2021.

In line with easing of travel restrictions by governments and resuming of operations by airports and other landlords, Dufry re-opens its retail businesses gradually, following single-location productivity scenarios. At the end of April, more than 1,400 shops globally were open, representing around 70% in sales capacity compared to full-year 2019. Newly re-opened locations include shops in Australia, Greece, Italy, UK and in the US, including Chicago (IL), Dallas Fort Worth (TX), JFK (NY), Los Angeles, Oakland, San Diego, San Francisco, San Jose (CA), among others. At the end of May, Dufry expects to operate around 65% of shops, representing close to 75% of sales capacity.

In April, Dufry estimates organic growth (based on net sales) to have reached -70.5% compared to the same month in 2019. By region, estimates for Europe, Middle East and Africa are -84.3%, for Asia Pacific -81.6%, and for The Americas -56.2%. Based on the already successfully implemented measures taken in 2020, the recent refinancing and the continued focus on cost savings, cash flow management and liquidity preservation, Dufry expects to be well positioned during the reopening while in parallel engaging in strategic initiatives and driving growth acceleration during the recovery.

¹ No changes in overall retail space (“scope”), as positive contribution of the acquisitions of RegStaer Vnukovo (Russia) and the Brookstone airport stores (US), conducted in November and October 2019 respectively, offset by disinvestments in 2019 (defined as closure of all operations in a specific location).

² Organic growth adjusted for FX and regional revenue allocation.

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