World Duty Free Seeking Concession Opportunities

March 10, 2014

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World Duty Free Group is looking to open concessions in major metropolitan airports worldwide and mid-sized airports in the United States, it said on Monday after posting a 5.1 percent profit rise.

WDFG said net profit increased by 5.1 percent to EUR€105.8 million last year on revenue up 3.8 percent to EUR€2.078 billion (USD$2.88 billion).

The company 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 US retail business, which includes about 250 stores in 29 airports.

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.

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

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 is smaller than Autogrill but growing in a profitable sector. Sweden-based Generation Research calculates duty free and travel retail sales - including transactions on aircraft and in duty free zones - was worth a preliminary USD$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, 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.

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.