Lagardère Travel Retail has announced an agreement to purchase Belgian travel retailer International Duty Free (IDF).

A wholly-owned subsidiary of Compagnie Nationale à Portefeuille, itself owned by the Frère group, IDF was the subject of an extensive two-part interview with TRBusiness, which was undertaken at the end of last year.

The leading duty free and fashion operator in Belgium, IDF is the world’s second oldest duty free operator after Aer Rianta International. The latter opened the first ever duty free shop at Shannon Airport in 1947.

IMPRESSIVE STORE PORTFOLIO

The retailer operates more than 30 stores, including 25 duty free, fashion and confectionery points of sale at Brussels Airport. It also runs two duty free stores at Charleroi Airport and premium chocolate stores under The Belgian Chocolate House branding at Brussels South Station and in downtown Antwerp and Luxembourg.

A point of sale in Kenya is also part of its portfolio. Last year, IDF, which celebrated its 60th anniversary in 2018 generated total revenue of €183m ($204m).

In conversation with TRBusiness last December, Nicolas Van Brandt, CEO, IDF hinted that international expansion was a possibility, but unsurprisingly did not reveal any information regarding a possible acquisition.

He said: “Opportunistically, we would consider overseas expansion, but strategically no. We are a very small company and very profitable with operational excellency. We are not a company with a flagship strategy and do not compete for sales. We are just here to create value and to serve the customer.”

Pressed further, Van Brant commented:  “If we can be intelligent, agile and flexible then such opportunities could be appealing. Either way though, we are not out to compete against the big players and cannot afford big losses.

“If an interesting opportunity arises for us or the shareholders, we will be interested of course.”

Lagardère Group commented: “This transaction once again illustrates the reinvestment of proceeds from disposals in activities that provide significant operating synergies. These are accretive to Group recurring EBIT and ensure solid cash generation.”

FIRST-HALF REVENUE RISE

The announcement of the IDF acquisition came as Lagardère Travel Retail revealed its H1 2019 results. In the first half of the year, the retailer generated €2bn, a 15.8% increase on a consolidated basis compared to H1 2018 and 6.5% rise on an organic basis. Recurring EBIT amounted to €46m, up €12m versus 2018.

According to the company, the difference between the two growth figures is mainly due to the acquisition of HBF in North America and a positive foreign exchange effect. This is essentially due to the appreciation of the US Dollar.

Dynamic commercial performance and new points of sales helped Lagardère maintain healthy organic growth in H1 2019. Revenue in France grew 11%, driven by strong performance in regional airports and the growth of the network in Foodservice and Travel Essentials (including Toulouse Airport).

The EMEA region (excluding France) registered solid growth of +5.1%. Rising air traffic, positive sales performance in Italy and Eastern Europe (especially Romania) and the development of the Foodservice network in the Netherlands (with the opening of Smullers) and Middle East (with openings such as The Daily DXB food hall in Dubai) all contributed.

In North America, revenue grew +4.4%, assisted by expansions of the Foodservice and Travel Essentials networks, while in Asia Pacific, revenue was up +6.5%. The latter was enhanced by network and organic expansion in China, where Lagardère aims to reach 20 Chinese airports by the end of the year.

The Pacific region is slightly behind as recent openings in Christchurch were unable to offset the unfavourable network effect in Australia.

NEW MARKETS

During the first half of 2019, Lagardère Travel Retail, which is now operating in 38 countries, expanded into Slovakia (Foodservice), Gabon (duty free and foodservice after a successful launch in Senegal) and Turkey (Franchise).

In the second half of the year, Lagardère Travel Retail will continue to experience strong development in fashion, with openings in Vienna (an 800sq m multi-fashion store will open early August), Beijing Daxing and Shanghai Pudong (in Autumn). The retailer will also open an expanded 500sq m concession in Geneva.

Several openings in the Foodservice segment are also planned in Q2. These are in the US (Bourbon Pub with chef Michael Mina), Hong Kong (The Kitchen with Chef Wolfgang Puck) and in in Beijing Daxing and Shanghai Pudong.

Lagardère Travel Retail also excelled in terms of business development in the first half of the year. The renewal and expansion of several duty free concessions were secured in locations such as Adelaide in March (1,700sq m), and more recently in Prague (4,300sq m).

Additionally, Lagardère acquired the Foodservice concession at Prague main station, effective 1 June.

Dag Rasmussen, Chairman and CEO, Lagardère Travel Retail commented: “I am pleased with the superior growth we were able to generate throughout our network and confident for the months to come as the business dynamic continues to come fuelled by increasing pax and our ability to adapt our offer to their evolving needs.

“It is also satisfying to see that our three-business line [Travel Essentials, Duty Free & Fashion and Foodservice] strategy is paying off and that our investments on concepts, innovation, and customer services are being increasingly recognised by the industry and customers”.