Dufry CEO, Xavier Rossinyol reiterated the overarching ambitions for the company’s merger with Autogrill, offered his thoughts on its future in China, whilst stressing the significance of new financial reporting metrics, during a H1 2022 results call on 9 August.
During the conference call, Rossinyol and Gerster said they were ‘cautiously optimistic’ about the coming months – with Rossinyol sharing that the company is operating at 90% capacity – but both caveated this by stating that the macroeconomic situation remains unclear and that the ‘challenging labour market’ means that they are unable to hire as many employees as they might wish or ‘as fast as we would like’.
As reported, Dufry Group’s turnover reached CHF 2,922.5 million/$3,068.8 for the first half of 2022, representing growth of 146.2% year-on-year and 75.5% of 2019’s turnover in constant currency (69.9% in reported currency).
“We are very closely monitoring the global travel situation and we are deciding on a case by case basis on the opening of shops, or the signing of new contracts, on expenditure and investment.”
Moving on to the company’s acquisition of Autogrill, he did not play down the magnitude of the deal. Echoing previous statements made in July, he said, the aim of joining forces was to ‘redefine the travel experience for customers worldwide’, whilst emphasising the fact that the addition of Autogrill would allow it to look at the customer journey in a more holistic way.
Whilst more effectively integrating travel retail and food & beverage operations along the customer journey, the aim is to also continue striving for a more seamless blend of the physical and digital realms. More obviously, from a geographical standpoint, Dufry will gain a stronger presence in the ‘resilient US market’, while adding opportunities in other key regions, said Rossinyol.
Later on, the CEO was asked a question about the importance of Chinese travellers as well as Dufry’s business interests in China and more specifically Hainan. His response was measured. “We believe that when the country reopens – that could be in a few months or could be in a year’s time – the Chinese traveller will be once more very relevant globally. We definitely want to deliver value to those travellers any where they are…in Asia Pacific, Europe, America or China.
“But we cannot forget that China has certain regulatory restrictions that we need to follow. Hainan remains a key bet of our long-term strategy in China. We keep committed, it’s a market that’s changing and adapting very quickly.”
He then spoke about the true business potential in China, where international companies are still not permitted to directly-operate duty free stores. “As you know there was very limited number of [duty free] licences. More licences were given only to Chinese companies.
“But the reality is that the market has remained extremely consolidated with one of those licence holders, and the rest of those licence holders – as you know we partner with one of them – have had (so far) limited success to penetrate the market. Let me be clear; Hainan, China and the Chinese travellers are a long-term bet. This is not something you do overnight.
“The business [in China] is going well, but it’s still very limited in volume for the overall group. But the joint venture with Alibaba and [what we are learning there], mean it’s going [to prove to be] over time a very clear strategic decision by the company; long-term.”
During the early part of the conference call Rossinyol was keen to emphasise how significant it was that the company had introduced a new reporting format for its alternative performance measures (APM). He explained that CORE figures represent the full business. He also reiterated that the result excludes the impact from the IFRS16 lease accounting standard, and as done so far, adjustments for acquisition-related amortisations and expenses.
Yves Gerster, CFO of Dufry Group, was able to drill into the detail: “We introduced an EBITDA concept and related performance indicators on top of our IFRS results. Those CORE figures consider all our concession fees and corresponding payments as a part of our operational activities.
“Therefore, they better reflect the actual performance of our business, the reality of our concession contracts and are best equipped to follow and evaluate our performance, while we are continuing with our IFRS reporting. We have published also historical figures in a consistent manner to allow clear comparisons.”