Mar 11, 2014
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World Duty Free seeking concession opportunities

Mar 11, 2014

MILAN, Italy - World Duty Free Group (WDFG) is looking to open concessions in big metropolitan airports worldwide and mid-sized airports in the United States, it said on Monday after posting 2013 sales in line with expectations.

WDFG, which was spun off from Italian motorway restaurant operator Autogrill in October, operates in five of the world's 30 biggest airports and is eyeing contracts due to come up for tender this year in Sydney, Abu Dhabi and Rio de Janeiro.

World Duty Free in Birmingham International Airport

"We will watch with a lot of attention all these opportunities," Chief Executive Jose Maria Palencia said on a conference call, adding that he also saw "a lot of potential" in mid-sized city airports in the United States.

The company said revenue rose 3.8 percent to 2.078 billion euros ($2.88 billion) in 2013, beating its own guidance and in line with analyst estimates of around 2.1 billion euros.

WDFG said sales had risen 11.6 percent at constant exchange rates in the first eight weeks of 2014, boosted by the contribution of its recently acquired U.S. retail business, which includes roughly 250 stores in 29 airports.

A new concession in Helsinki, which should be up and running by the end of March, will provide access to around 2 million high-spending Asian passengers, Palencia said.

The spin-off from Autogrill was partly intended to pave the way for tie-ups at both companies.

World Duty Free was smaller than Autogrill but growing in a profitable sector. Sweden-based Generation Research calculates duty free and travel retail sales - including transactions on airplanes and in free zones - was worth a preliminary $60.25 million in 2013.

"We are in an industry which is consolidating. We will always have this in mind," Palencia said, although he gave no indication of any current plans to tie up with other companies.

Analysts said at the time of the spin-off that possible partners for WDFG could include Switzerland-based travel retailer Nuance and Paris-based Lagardere Services, which also operates duty free stores and distribution services.

WDFG will pay dividends when it does not see opportunities to use its cash for acquisitions, Palencia said.

WDFG also said the board would ask shareholders to approve a share buyback programme, worth up to 5 percent of the company.

"It is an option the company will have, but it does not mean we will be buying back," Chief Financial Officer David Jimenez-Blanco said on the conference call.

The company said net profit increased by 5.1 percent to 105.8 million euros last year, above a mean forecast of 91.36 million euros from 12 analysts polled by Reuters.

Beauty products - the biggest segment of the travel retail market according to Generation Research - were also WDFG's biggest money-spinner in 2013, making up 44 percent of sales.

$1 = 0.7214 euros

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