A Challenging Year Ahead, but a Solid Performance in 2019

We are currently facing a challenging year ahead, despite the solid results and performance we managed to deliver for the 2019 business year. While at the beginning of 2020, we first saw a continuation of the positive development seen in the last quarter of 2019, as of February, Covid-19 started to impact the travel retail industry and our performance in several locations.

Based on our experience gained from similar situations in the past, we have immediately setup a special committee within the Global Executive Committee (GEC), who has developed and action plan aiming at generating cash flows, reducing costs and safeguarding our profitability. The action plan leverages three key strength of our resilient business model:

• First, our highly flexible cost structure protecting cash generation and profitability.

• Second, Dufry’s risk diversification strategy mitigating the impact. Our concession portfolio is diversified across 65 countries, 420 locations and different channels, and we have limited exposure to single contracts.

• And third, we have a highly integrated and centralized organization structure, with short reaction times, which allows us to deploy action plans fast across the whole group,
  

In more detail the action plan includes a variety of initiatives focusing on:

• driving sales in all locations to accelerate volumes through promotions supported by brands, by driving conversion in our stores and maximizing sales per customer
• maintaining the level of gross profit margin in collaboration with brands
• renegotiating concession fees; with some airports having already offered reliefs
• immediately implementing an efficiency program including all types of expenses as well as a hire freeze and a limitation to appoint temporary staff
  

These initiatives are expected to generate savings of CHF 60 million on a full-year consolidated basis at Adjusted Operating Profit level. Moreover, we have launched additional initiatives to reduce Net Working Capital and Capex expected to contribute a total of CHF 40 million. Last, but not least, we have also immediately implemented a CoronaVirus Protocol across the Group to safeguard health and safety of our employees and customers.

Based on current information, we expect to see a negative organic growth performance in the first months of 2020. Provided that the situation improves in the second half of the year, and that we could benefit from our strongest quarter – July, August and September – we would expect to improve the performance and to reach for the full-year only a negative, single digit organic growth.

Solid results in 2019 and targets achieved
From a 2019 business year perspective, we have presented a solid set of results and achieved our targets. We have made important steps to further grow our company through the acceleration of our strategy of profitable growth – both from an organic perspective as well as through acquisitions. In this context, our turnover grew by +1.9%, reaching CHF 8,848.6 million. Organic growth for the year stood at 3.0%, with like-for-like contributing 0.6% and net new concessions adding 2.4%, thus achieving our target of organic growth communicated to the market. Moreover, our gross profit margin increased again by 40 base points and reached 60.2% following our ongoing negotiations with suppliers, the further standardization of our supply chain and the implementation of the commercial platforms.

The second target we had communicated to the market was to reach a mid-term range of CHF 350-400 million of equity free cash flow on a yearly basis – and with the CHF 383.3 million we reported for 2019, we perfectly met this expectation as well. This is an important result as it underlines our capability to generate resilient cash flows, allowing us to further invest in developing our company and to reduce our debt. At year-end 2019, our net debt had thus further decreased by CHF 184.2 million to CHF 3,102.0 million, which is the lowest level since 2015. Moreover, the Board of Directors decided to propose to the upcoming Annual General Shareholder Meeting the approval of a CHF 4.00 dividend per share.

Thank you for your support With the implemented action plan, Dufry is well prepared to face the temporary, but challenging situation we discussed above. The best reaction to win this challenge is to stay focused on our defined initiatives and action plans, executing them thoroughly with the goal to drive sales, reduce costs and focus on cash generation. I thank you for your continued dedication and motivation to support our company.