World Duty Free Group (WDFG) nears $3bn in 2013 and accelerates in Q4

By Kevin Rozario |

Milan listed World Duty Free Group generated sales of €2,078.5m ($2,879m) in 2013, up by +3.8% from 2012’s €2,002m (+7.1% at constant exchange rates) but EBITDA fell by -2.9% to €254.8m (+0.6% at constant rates).


The duty free and travel retail operator – which demerged from former parent Autogrill on 1 October – has been performing well since the spin off. Its share price has risen by +50% driving up the company’s market capitalisation to €2.7bn ($3.7bn) and it has put in place a series of refurbishment and contract extension initiatives to strengthen its position in the market.


Spanish contracts, which WDFG holds until 2020, have been a focus for the group with 26 airports refurbished in 10 months which has resulted in 25,000sq m of revamped space in Spain [about 40% of the refurbishment plan].


According to CEO José María Palencia (left), the contracting Spanish aviation market is now seeing a turnaround with, he says, “an average growth trend of +3% in the past three months”.


Palencia, yesterday, gave analysts an interesting snapshot of how both currency and traffic have affected results at its top airports: London Heathrow, London Gatwick, Madrid and Barcelona (see main image and click to enlarge).


While traffic at LHR and LGW grew at similar rates (+3.4% and +3.6% respectively) sales in British pounds at LGW rose by +7.5%, reflecting a positive reaction to new stores at Gatwick, while at LHR they were only in line with traffic at +4.0%. However, in euros, LHR sales were down by -0.7% while LGW stayed positive at +2.6%.


Madrid continued to perform poorly. “It was badly hit by passenger numbers and sales were down 22%,” says Palencia. However spend per head rose by +1.4% indicating that if numbers start to rise consistently this year, sales results could be much better. Barcelona meanwhile did far better; traffic was +0.2% up but sales climbed by +5.3% on the back of store refurbishments.



In the final quarter of 2013, since it became a separate entity, WDFG’s revenue has been on a sharper growth trajectory than in the full year (see chart, right).


Excluding the contribution of US Retail (HMS Host), revenue versus Q4 2012 rose by +12.8% to €547.0m (+7.5% at constant rates). EBITDA in Q4 2013 reached €60.8m showing an increase of +4.4% (+8.3% at constant rates).


Revenue from UK airports – almost 50% of group revenue – reached €253.2m, up +3.1% (+7.4% at constant rates) driven by traffic (up +3.5%) and higher spend per passenger.


Sales in the Rest of Europe [chiefly Spain, but also Germany and Italy] were €139.5m, up +7.5%. On a like-for-like basis, therefore excluding activities in Düsseldorf in Germany and the effect of the closure of boutiques in Spain (mainly in Madrid), there would have been an increase of +2.9%.


WDF notes that on this comparison, Spain recorded an increase in revenue of +3.1% compared to a traffic increase of +1.5% in the period. Sales at Düsseldorf Airport alone hit €12.3m in Q4 which offset the overall decline in Spain of -2.2%.


In the Americas revenues amounted to €113.3m, up +77.5% at constant rates but that takes account of the HMS Host acquisition [US Retail] which accounts for €44.8m. Excluding the contribution of US Retail, the growth at constant rates would have been +8.6%. In Asia and Middle East, revenue was €41.0m up +6.3% at constant rates.


For the year as a whole regional growth at constant rates (and excluding US Retail) was strongest in the UK and then Rest of Europe, WDFG’s two biggest markets with a 77% share of sales (see tables left).



In the first eight weeks of 2014 the positive evolution of revenue continues in all regions (+11.6% y-o-y) at constant rates, compared with the same period in the previous year.


WDFG says: “The recovery of a positive economic environment in Europe, which has started to be seen both in terms of traffic and consumer confidence, has been reflected in the good performance of the company in the first part of the year.”


The highest contributing region to the growth in sales is Asia and Middle East (+9.4%) while Rest of Europe and UK have grown +4.0% and +3.9%, respectively. However the Americas (excluding the consolidation of newly-acquired activity in the US) is delivering weaker growth due to the financial situation that the region has faced during this period according to WDFG.


“As is well known, the start of the year is the low season in most of the group’s operations, particularly in Europe; trends start to become more relevant as the summer season begins,” says WDFG, adding that it will provide more detailed information on forecasts for the year when it publishes results for the first half of 2014.


WDFG maintain that international expansion through new operations in Germany, Saudi Arabia, Brazil and Jamaica, plus its US acquisitions “have left the group in a better position to benefit from the improvement in passenger traffic in more dynamic markets and to minimise the impact of the economic recession and the drop in consumption registered in some European countries”.


From a financial perspective the group’s focus this year will be on generating cash and also to reduce debt levels, implementing development programmes across the group and executing openings at Helsinki airport.


Palencia notes: “Luxury is an area where we can expect good growth in the next year and we will be opening our new luxury stores in Madrid, Barcelona and in Helsinki. The latter stores will be exposed to Asian travellers.”



WDFG’s full income statement for 2013 is shown below. The first nine months of the year are exclusively attributable to Autogrill as the demerger of World Duty Free Group took place on 1 October.


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