Dufry delivers strong and resilient 2023 third quarter results
Xavier Rossinyol underlines Dufry’s resilience
Dufry – soon to be named Avolta – confirms the delivery of a strong set of quarter three 2023 (+16.0% organic growth) and nine months 2023 numbers.
According to the company, its performance is a result of its global portfolio and a clear strategy designed to drive growth, resilient profitability and cash generation.
“Yet another quarter has shown the value of the Dufry-Autogrill combination: more diversified and resilient, Dufry is driving the travel experience revolution,” the company said in a statement.
Dufry’s core nine-month turnover was CHF9,383.3 million (US$10,378 million), growing 24.8% organically, and CHF3,668.1 million (US$4,057 million) for Q3 2023, growing 16.0% organically. Q4 2023 started equally strong thanks to resilient demand for travel retail and F&B and strong execution. Core EBITDA for Q3 2023 reached CHF401.7million (US$444.4 million) resulting in an 11.0% margin; nine months 2023 was CHF893.5 million (US$988.2 million), with a 9.5% margin.
Dufry noted its integration with Autogrill was “advancing successfully, with full run-rate synergies of CHF85 million as of 2024 and in-year synergies of CHF30 million already in 2023”.
Xavier Rossinyol, CEO of Dufry Group, commented, “Our Q3 2023 Trading Update will be the final set of results shared under the name Dufry Group – pending the approval of our shareholders at tomorrow’s EGM, the Dufry-Autogrill business combination will take the next step forward and become a visibly unified company under our new name Avolta, more than the sum of its parts.
“The delivery of Q3 and 9M 2023 figures driven by robust demand, strong execution and the broadest portfolio in the industry, paired with continued cost management and earlier synergy implementation, openly demonstrates the resilience of our combined company.”
Rossinyol noted the company has “successfully advanced on the integration, with our rebranding to Avolta as the final step, generating full run-rate synergies of CHF85 million already as of 2024, one year ahead of plan”.
“Should our current performance continue through the last quarter, we project a full year 2023 organic growth of around 20% versus the previous year turnover for the proforma combined business of CHF10,805 million,” he said.
“Having a translational effect on our growth, the devaluation of relevant currencies against our reporting currency, Swiss Francs, is expected to impact growth by around -5% to -7%. Based on this, FY 2023 reported growth is expected to be around 15% versus the previous year for the proforma combined business. As a translational effect, this does not impact on EBITDA margin or cash conversion. We further expect to report an improved Core EBITDA margin of 8.5% to 8.7% and an improved EFCF of CHF270 million to 290 million.”
Rossinyol continued, “Set in line with our Destination 2027 strategy, our capital allocation policy aims to realize profitable growth, stable cash flow and value creation for our shareholders. As we seek to strike a balance across deleveraging, growth and returns to our shareholders, we will use 2/3 of EFCF for deleveraging, relevant business development and small bolt-on M&A. Deleveraging remains a focus point and we are targeting a leverage of 1.5-2.0x net debt/CORE EBITDA, with a maximum of 2.5x after relevant business development or small bolt-on M&A, with the aim to return to target. Further on this, 1/3 of the group’s EFCF will be allocated to dividends.
“While our Destination 2027 strategy has the traveler at its core, it is completely powered by our people. We thank our employees all around the world for their exceptional motivation, dedication, and most importantly, their delivery.”
Recent Developments
With a footprint spanning 75 countries, Dufry has continued to see strong demand for travel retail, essentials and travel F&B despite recent geopolitical tensions and challenges described by other discretionary spending categories, not comparable to Dufry’s business. The company estimates October CORE Turnover performance of plus 14.6% versus 2022 and of plus 7.9% versus 2019 (both in constant FX, proforma combined).
Looking forward, Dufry expects continued positive developments for the remaining part of 2023 based on the successfully completed integration and its resilient, well-diversified business set-up, together with productivity increases, operational efficiencies, current trading and visibility on travelers' behavior. Dufry said it continues to “remain vigilant on geopolitical and macro-economic developments, flexibly adjusting its operations as needed, protecting margins and cash flows”.
The integration of Autogrill is now completed, delivering in-year cost synergies of CHF 30 million in 2023, with full run-rate synergies of CHF 85 million expected as of 2024 – one year earlier than planned. Integration-related costs amount to CHF 50 million and are equally split between 2023 and 2024.
With ESG continuing as a core pillar in its long-term strategy, Dufry maintains its focus on strengthening its sustainability impacts around People, Communities and Planet. Dufry has now fully integrated F&B in its ongoing stakeholder engagement, materiality assessment and strategy re-definition. Further ESG information is provided in the Sustainability part of Dufry’s website.
Regional performance
Reported turnover in Europe, Middle East and Africa (EMEA) amounted to CHF2,089.4 million, core turnover to CHF2,002.1 million in Q3 2023, resulting in proforma combined organic growth of 12.3% year-on-year.
The EMEA region’s continued healthy performance was largely driven by leisure demand, benefitting holiday traffic destinations in Southern Europe, Middle East and Africa on both travel retail and F&B. Best performing included leisure destinations in the Mediterranean. In addition, the UK, Nordics and Central Europe benefitted from increasing international inbound travel – including returning travelers from Asia Pacific.
During Q3 2023, Dufry had new openings or significant upgrades in several relevant locations, including for example its innovative Haute Perfumery concept, opened in Zurich (Switzerland) or the opening of the new Debonair Food hall in Palermo’s Falcone Borsellino International Airport (Italy). Significant refurbishments include the grand opening of the Next Generation store in Arlanda (Stockholm, Sweden) combining Swedish hospitality and sense of place with digital and innovation. Among one of the first new hybrid concepts, Hudson Cafè with Baci, was opened at Milan Malpensa Airport (Italy).
Turnover for North America stood at CHF1,081.3 million in Q3 2023, with organic growth versus 2022 proforma of 11.1%. In the US, both F&B and travel retail businesses continued with robust growth, supported by traffic trends and solid demand from domestic and international. Canada benefitted from some early returns of Asian travelers during this period, expecting gradually increasing supply out of the region. In retail, a number of stores were opened in Harry Reid International Airport (Las Vegas) in connection with Dufry’s contract extension through 2038, which has transformed the specialty retail and travel convenience portfolio there through a combination of digital innovation, brand partnerships, and reimagined stores. In the modernized international Terminal E at Boston Logan International Airport (BOS), store openings included several Duty Free stores as part of Dufry’s recently awarded 12-year Duty Free contract; new specialty retail stores also opened at John F. Kennedy International Airport (JFK). Additionally, the Group was awarded a new 15-year travel convenience contract for Fresno Yosemite International Airport (California).
Latin America turnover came in at CHF421.9 million in Q3 2023 with an organic growth versus 2022 proforma of 27.8%. Best performing markets were Argentina, positively impacted by local currency developments, as well as Mexico and the Caribbean, especially benefitting from leisure demand.
Brazil continued to improve as well, having experienced returning international traffic. The cruise line business progressed further with new and/or extended concessions in this region including Vitória Airport (Brazil) where Dufry opened its new duty paid store, after signing a ten year contract, and new openings in Argentina and Jamaica. In addition, Dufry signed a 20-year contract to operate a duty free store at the international bridge ‘General San Martin’, the main crossing point between Argentina and Uruguay.
Asia-Pacific saw a significant improvement from its previous year’s low base, driven by domestic, intra-regional and gradually returning inbound and outbound international travel. The region reported turnover of CHF134.8 million in Q3 2023, with organic growth versus 2022 proforma of 44.8%. “While Chinese outbound travel continued to be impacted by air capacity constraints, demand from other nationalities to travel within the region as well as internationally became increasingly evident, in addition to strong domestic demand,” Dufry said.
New, newly opened or extended concessions within the region included the seven-year extension in Kuala Lumpur International Airport (Malaysia) for F&B, the grand opening of Retail and F&B operations at Bali Airport (Indonesia), and the announcement of Dufry forming a joint venture with Hubei Airport Group to operate the Wuhan Tianhe Airport’s Terminal 2 as master concessionaire for retail and F&B, serving 27 million passengers (as of 2019). Dufry opened new retail stores at Bangalore International Airport where the company has a joint venture for 15 years to operate duty free shops, presenting internationally and domestically sourced brands, while also operating F&B outlets.
