Travel Retail & Duty-Free

 (€m)  2012 % of revenue  2011 % of revenue Change
2011 at constant
exchange rates
Revenue 2,002.0 100.0% 1,820.8 100.0% 10.0% 5.2%
Other operating income 25.4 1.3% 24.1 1.3% 5.5% 5.5%
Total revenue and other operating income 2,027.4 101.3% 1,844.9 101.3% 9.9% 5.2%
Raw materials, supplies and goods (820.0) 41.0% (765.1) 42.0% 7.2% 3.9%
Personnel expense (205.9) 10.3% (192.4) 10.6% 7.0% 3.7%
Leases, rentals, concessions and royalties (615.5) 30.7% (551.2) 30.3% 11.7% 7.8%
Other operating costs (123.7) 6.2% (107.8) 5.9% 14.7% 11.6%
EBITDA 262.3 13.1% 228.3 12.5% 14.9% 11.1%
Depreciation, amortisation and impairment losses (112.7) 5.6% (121.3) 6.7% (7.1%) (9.1%)
EBIT 149.7 7.5% 107.0 5.9% 39.9% 33.5%
Net financial expense (18.5) 0.9% (28.2) 1.5% (34.4%) (35.5%)
Impairment losses on financial assets 1.8 0.1% 1.4 0.1% 32.1% 32.1%
Pre tax profit 133.0 6.6% 80.2 4.4% 65.8% 56.7%
Income tax (30.2) 1.5% (16.3) 0.9% 84.9% 75.1%
Profit attributable to: 102.8 5.1% 63.9 3.5% 60.9% 51.7%
 - owners of the parent 100.5 5.0% 61.5 3.4% 63.6% 54.0%
 - non-controlling interests 2.3 0.1% 2.5 0.1% (7.4%) (7.4%)

Revenue

Travel Retail & Duty-Free closed the year with revenue of €2,002m, an increase of 5.2% with respect to the previous year’s €1,820.8m (+10.0% at current exchange rates), thanks in particular to the excellent performance of shops in the UK, Latin America and the Middle East.

In the United Kingdom revenue came to £779.9m, compared with £746.1m in 2011 (+4.5%). Against traffic growth of just 1.2%33, this improvement results from the substantial increase in average spending per passenger, thanks to the constant adjustment of commercial offerings in order to capture the attention of travelers flying outside Europe who tend to spend more and to prefer higher-ticket items.

Sales at Heathrow Airport, totaling £372.2m, increased by 4.2% in comparison with traffic growth of 0.9%. Gatwick also did well, with sales up by 8.4% on the previous year against a 1.6% rise in traffic, thanks to the opening of new walk-through stores in the South Terminal and the increase in flights to non-European destinations (mainly China, Turkey and Korea). Manchester closed the year with sales growth of 4.9%.

Revenue from Spanish airports in 2012 came to €544.4m, an increase of 2.3% on the previous year (€532.1m), despite the steep decline in passenger traffic (-5.0%34). The best performance was Barcelona35, where revenue growth of +11.9% strongly outperformed the 2.2% increase in traffic, due to the larger volume of passengers with non-European destinations which translated into higher average spending per person. At Madrid, sales fell by 4.5% to €169.5m, versus negative traffic growth of 9%. In 2012 this airport was affected by the Spanair crisis, strikes by Iberia personnel, and the elimination of various flights, but here too, the increased spending per passenger helped mitigate the decline in traffic. Results were good at the airports serving tourist destinations.

Sales in other countries36came to €449.2m in 2012, up from €386.8m the previous year (+9.7%, or +16.1% at current exchange rates), despite the closure of locations at Orlando and Atlanta airports. Adjusting for those closures, revenue on a like-for-like basis would have increased by 13.5% (+19.9% at current exchange rates). Of particular note is the excellent performance of Vancouver (+24.8%), thanks to the higher number of flights to Asia and despite the expansion work carried out in the spring. Sales growth was also significant in Chile (+23.6%), Mexico (+21.8%), Peru (+21.9%), Kuwait (+20.6%) and Jordan (+20.5%).

33Source: BAA, Manchester Airport and Gatwick Airport, January-December 2012.
34Source: AENA, January-December 2012.
35Source: AENA, January-December 2012
36Mexico, Jordan, Chile, Canada, Kuwait, Peru, United States, Dutch Antilles, France, Cape Verde, Panama, Sri Lanka, India and Italy.

EBITDA

In 2012 EBITDA grew by 11.1% to €262.3m, up from €228.3m in 2011 (+14.9% at current exchange rates), more than doubling the increase in sales. The improvement in the EBITDA margin, from 12.5% to 13.1%, reflects the sales mix weighted towards high margin products such as cosmetics, and at the European airports, an increase in passengers with non-European destinations who are more inclined to spend. 

 

Change in Travel Retail & Duty-Free EBITDA margin

Depreciation, amortization and impairment losses

In 2012, depreciation, amortization and impairment losses came to €112.7m, a decrease of 9.1% (-7.1% at current exchange rates) compared with the previous year's €121.3m. Amortization of the British and Spanish concessions amounted to €69.5m (€68.7m the previous year). In 2011, due to the non-renewal of concessions at Atlanta and Orlando airports, impairment losses were recognized on contractual rights in the amount of €8.1m.

Net financial expense

The significant drop in net financial expense, from €28.2m in 2011 to €18.5m, reflects the lower average financial indebtedness of this segment and the relative decrease in fixed-rate debt decided as part of the July 2011 refinancing. 

Income tax

The increase in taxes from €16.3m to €30.2m mirrors the higher profit earned by this segment, while the tax rate was essentially unchanged on the previous year. 

Profit for the year

Travel Retail & Duty-Free recognised a profit of €100.5m, significantly higher than the previous year's €61.5m (+54.0%), thanks to the improvement in EBITDA and the decrease in financial expense. Profit attributable to non-controlling interests came to €2.3m (€2.5m the previous year). 

Net invested capital

(m€)31/12/201231/12/2011 Variazione
2011
Goodwill 605.1 598.0 7.1
Other intangible assets 622.9 690.1 (67.3)
Property, plants and equipment 87.3 96.7 (9.4)
Financial assets 13.1 9.7 3.4
Non-current assets 1.328.4 1.394.5 (66.1)
Net working capital (102.0) (93.7) (8.2)
Other non-current non-financial assets and liabilities (53.9) (83.2) 29.3
Net invested capital 1.172.5 1.217.6 (45.0)
Net financial position 561.5 639.1 (77.7)

Net cash generation

(€m) 2012 2011
EBITDA 262.3 228.3
Change in net working capital (13.9) (31.1)
Other non-cash items 1.0 1.6
Cash flows from operating activities 249.4 198.8
Tax paid (42.5) (34.2)
Net interest paid (18.3) (29.4)
Net cash flows from operating activities 188.6 135.2
Net Capex paid (28.3) (23.7)
Free operating Cash Flow 160.3 111.5

Free operating cash flow in the Travel Retail & Duty-Free segment continued to improve (+43.8% to €160.3m) thanks to excellent operating performance, the better management of net working capital, and the reduction in financial expense. 

Capital expenditure

Net capital expenditure amounted to €28.3m (€18.6m in 2011), rising from 1% to 1.4% of revenue, and primarily concerned the airports of Gatwick, Vancouver and Jordan.