World Duty Free Group today revealed a net profits fall of -19.9% to €72.9m ($90.6m) in the nine months to September, and at the same time announced the promotion of former Chief Commercial Officer, Eugenio Andrades (main image), to CEO with immediate effect, taking over from José María Palencia.

 

The company – whose share price has tumbled since October principally on financial concerns about its Spanish operations – has also announced a new strategic plan for the period 2015-2017, to be presented at the end of January 2015 in order to recover market confidence. It has also approved the refinancing of existing credit facilities maturing in November 2019.

 

9M SALES RISE STRONGLY

WDFG blames the big profits fall on higher depreciation and amortisation, financial expenses and taxes for the year. Revenue-wise, the company saw a strong increase in the nine month period, rising to €1,773.2m/$2,204m (+15.8% or +14.7% at constant exchange rates). Excluding its US business [acquired in September 2013] the revenue was €1,671.6m (+9.2%; +7.9% at constant rates).

 

Ebitda fell by -1.2% (-2.9% at constant rates) to €191.7m to produce a net profit of €72.9m, down -19.9% (-21.6% at constant rates). The company’s net financial position of €887.9m, improved by €138.8m compared to the end of 2013.

 

UK VERSUS REST OF EUROPE

WDFG’s two biggest regions, the UK and Rest of Europe both grew. In the UK, revenue reached €776.3m, up by +7.5% year-on-year (+2.4% at constant rates) while the Rest of Europe region performed better, up +15.6% to €556.0m (see revenue bridge below for details of all regions’ contributions). Of the latter figure, Spanish airports contributed the vast bulk at €455.4m, up by +12.1%.

 

WDFG says: “The Spain airport revenue increase was despite Madrid sales dropping by €6.5m or -6.5%, affected by the lost non-core categories and poor spends on domestic traffic.”

 

 

Heathrow Airport – where WDFG has recently had its contract extended – recorded sales of €340.7m, down -2.1% at constant rates against a traffic increase of +1.5%. Spends were hampered from nationals of countries where local currencies had weakened versus a strong sterling (for example Russia, Japan, Norway and South Africa). Average spends from the Chinese have also been falling. “But these spends continue significantly above the norm,” says WDFG.

 

WDFG QUITS MADRID FOR LONDON

A review of the business – with the support of Boston Consulting Group and Bain & Co – has resulted in a new business plan for 2015-17 focused on organic growth, integration and more operational efficiencies which will be reviewed by the Board and presented to investors by the end of January 2015.

The plan has three area of focus:

1. Integration of European platforms

In particular, this will simplify corporate organisations and central functions in Spain and the UK, integrate IT platforms (retail, finance and supply chain) and redesign logistics systems. London will become the centre of the group’s operation principally due to the fact that the UK currently generates 44% of group revenue and 60% of Ebitda.

2. Actions to improve Spanish profitability

These include commercial actions to refocus the offer, improve the attractiveness of points of sale, revise some product categories and commercial spaces; and add incentive schemes for sales staff. The optimisation of processes and costs will come from improved opening hours and a streamlined logistics platform.

3. US business expansion

This will be done by identifying growth opportunities and revitalising US assets “particularly pursuing the expansion of the perimeter of duty free and duty paid activities by identifying new opportunities in the segment, revisiting the current formats, as well as through a review process of the regional organisation (structure, roles, processes and systems)” says WDFG.