When Autogrill's results for the first quarter of 2009 are published they are expected to show just how difficult present trading conditions are and particularly following the substantial declines in traffic at both Spanish and

UK airports.

Conversion of results in pounds and US dollars will be within the parameters of the 2009 guidance, but will show a marked deterioration on first quarter 2008 ($1.498 and ?0.757 respectively).

The first quarter of the year is the weakest for Autogrill, although guidance indicates sales growth at March 1 through the inclusion of WDF (over 2008) saw like-for-like sales decline and Autogrill will be hoping that restructuring savings in F+B (E.16m/$21.7m for the full year) and early integration savings in UK retail, will be enough to offset the trading result deterioration.

In addition, the G20 summit takes place in early April and later in the month the UK Budget is obviously set for April 22. The impact of these two events may well be reflected in the economic prospects for UK and Germany (Spain's two major tourist markets) and an adverse forex market reaction to the pound and US dollar.

These exchange rates, if weakening, will cause particular concern to the Group (US F+B is the main EBITDA contributor) and for its strategy for the rest of 2009, threatening as they will the debt covenants of the Group and of course its share price.

Key debt covenants are:

1.) Ebitda interest coverage – not less than 4.5 times. Net debt to Ebitda – not more than 3.5 times (4.0 for 18 months to November 09).

2.) At 31 December 2008 the actual ratios were (although not for a full year of consolidated acquisitions) 5.0x and 3.40x.

3.) Net debt to Ebitda will likely exceed 3.5x at the end of the first quarter. Interest cover may be tight.

4.) No major debt repayments are due before 2010, but Autogrill may well need to reduce debt in 2009 to avoid a breach. This would suggest a reduction in dividends payout this year to conserve cash and this may – or may not – be factored into the current share price.

5.) Inventory to trade creditors ratio is already high, suggesting there is little cash flow benefit to be gained through working capital.

Considering this, Autogrill will be doubly keen to fast track the synergies and reap any savings from integrating the various parts of the group – in particular its retail integration plan. Phase II – for 2009 – foresees the integration of the UK and Spanish retail activities into one commercial model, one logistic platform and one IT system.

But a word of caution may be relevant here since integrating different cultures, languages, currencies and geographies will test the organization, and it is far more complicated than putting together WDF and Alpha under one structure and in one country like the UK.

Autogrill will hope that this integration goes as smoothly as possible and not prove more time consuming or difficult than envisaged and particularly considering it is taking place at such a crucial trading time in the year.

But while it faces a lot of challenges, it should be said that since acquiring WDF and the incremental 50% of Aldeasa, Autogrill has made good progress in the physical integration of the newly configured Global Travel Service company.

Acquisitions made entirely with new debt obviously carry an inherent risk in the strategy. At the same time and with the cosy benefit of hindsight, the acquisitions were made at 'the top of the market' and certainly Autogrill was a clear 'winner' in the financial bidding for WDF.

Nonetheless, the strategy was brave and audacious and offered the potential synergies for a new and hugely influential and profitable Group. Indeed, it may well prove to become just that in the long run. But, in 2009 and quite probably into 2010, Autogrill will face some strong headwinds.