Food & Beverage 25

 (€m)  2012 % of revenue  2011 % of revenue Change
2011 at constant
exchange rates
Revenue 4,075.6 100.0% 4,023.8 100.0% 1.3% (2.4%)
Other operating income 112.2 2.8% 114.0 2.8% (1.6%) (1.9%)
Total revenue and other operating income 4,187.8 102.8% 4,137.9 102.8% 1.2% (2.4%)
Raw materials, supplies and goods (1,366.2) 33.5% (1,374.5) 34.2% (0.6%) (3.8%)
Personnel expense (1,313.4) 32.2% (1,256.6) 31.2% 4.5% 0.2%
Leases, rentals, concessions and royalties (678.7) 16.7% (642.0) 16.0% 5.7% 1.1%
Other operating costs (473.4) 11.6% (450.9) 11.2% 5.0% 1.0%
EBITDA before Corporate costs 356.1 8.7% 413.9 10.3% (14.0%) (17.8%)
Corporate costs (28.5) 0.7% (25.3) 0.6% 12.8% 12.8%
EBITDA 327.6 8.0% 388.6 9.7% (15.7%) (19.7%)
Depreciation, amortisation and impairment losses (208.7) 5.1% (192.7) 4.8% 8.3% 4.1%
Impairment losses on goodwill (16.7) 0.4% 0.0 0.0% n.s.
EBIT 102.2 2.5% 196.0 4.9% (47.8%) (50.7%)
Net financial expense (50.3) 1.2% (46.9) 1.2% 7.3% 3.8%
Impairment losses on financial assets (2.2) 0.1% (2.1) 0.1% 3.6% (4.4%)
Pre-tax profit/(Loss) 49.7 1.2% 147.0 3.7% (66.2%) (68.2%)
Income tax (27.2) 0.7% (66.1) 1.6% (58.8%) (59.4%)
Profit/(Loss) attributable to: 22.5 0.6% 80.8 2.0% (72.1%) (74.8%)
 - owners of the parent 11.3 0.3% 70.5 1.8% (84.0%) (85.6%)
 - non-controlling interests 11.2 0.3% 10.4 0.3% 8.4% 1.0%

25Unlike in previous editions, since the fourth quarter of 2011 the Food & Beverage segment has been shown together with "Corporate," which covers the centralized functions operating almost exclusively for the Food & Beverage business in the areas of administration, finance and control, strategic planning, legal affairs, human resources and organization, marketing, purchasing and engineering and information and communication technology.

Revenue

Revenue in this segment came to €4,075.6m, compared with €4,023.8m the previous year, decreasing by 2.4% at constant exchange rates. At current exchange rates there was an increase of 1.3%, due to the appreciation of the dollar against the euro.

Food & Beverage sales enjoyed growth in the airport channel, thanks to the strong flow of passengers and the higher average purchase per customer, particularly in North America. Sales were weak in the motorway channel in Europe, and especially in the Mediterranean area, where the recession caused a steep decline in motorway traffic and spending by travelers.

Sales by geographical area confirm the trend by channel, with revenue rising in North America—thanks to higher average spending per customer—and falling in Europe, where the recession penalized traffic flows and discretionary spending. 

Food & Beverage revenue by channel

In 2012, North America and the Pacific generated sales revenue of $2,730.0m, up from $2,679.0m the previous year (+1.9%).

On a comparable basis26,revenue at U.S. airports27 increased by 5.3%, outperforming a 0.8% rise in traffic28 thanks to the greater number of transactions and, above all, a higher average spending per customer. On an overall (not comparable) basis, the airport channel actually grew by 1.5% due to the temporary closure of more than 150 locations for major renovation work during the year, in connection with the new concession contracts awarded in 2010 and 2011.

Unlike in Europe, in North America revenue in the motorway channel rose by 5.8%, thanks to the positive contribution of the service area on the Delaware Turnpike, new openings on the Ohio Turnpike, and locations on the Ontario Turnpike in Canada. On the U.S. motorways29, revenue on a comparable basis increased by 5.8% against traffic growth of 0.8%30, due primarily to the higher average spending per customer.

Overall sales in the other channels were down by 9.6% for the year, mostly because of the Group's exit from certain shopping center locations.

Revenue generated in Italy in 2012 came to €1,228.0m, a decrease of 9.4% on the previous year's €1,356.1m.

The motorway channel closed the year with revenue of €929.6m, down from €1,034.8m in 2011 (-10.2%). With traffic down by 7.1%31, sales on a like-for-like basis decreased by 10.5%, reflecting a shift toward lower spending per customer and a greater concentration in the food sector: while strictly food and beverage sales decreased by 9.3%, revenue from market items fell by 14.6%, with an even sharper decline for non-food products (-19%).

In the airport channel, revenue dropped by 9.7% due in part to the closure of some locations. On a like-for-like basis, sales decreased by 2.9% against a 1.8% drop in traffic32.

Revenue in other channels was down by 5.3% with respect to 2011. Growth at railway stations (+5.1%) partially offset the negative performance by high street, shopping center and trade fair locations, where overall results were also penalized by the closure of some unprofitable outlets.

Revenue from other European countriesin 2012 came to €723m, a decrease of 3.4% on the previous year's €743.7m (-2.8% at current exchange rates). The healthy performance of the airport and railway channels did not fully compensate for declining sales at motorway locations.

In the motorway channel revenue was off by 7.7% (-7.4% at current exchange rates) with respect to 2011, due to the decline in traffic but also to the closure or sale of locations, mostly in Belgium and France, which was only partly offset by new openings in Germany.

Revenue in the airport channel increased by 2.7% (+4.2% at current exchange rates), with growth in all airports served.

In the other channels, revenue rose from €148.4m in 2011 to €150.5m (+0.9% or +1.5% at current exchange rates), thanks mostly to the solid performance at train stations, especially in Belgium (where Starbucks shops were opened) and Switzerland.

26Same locations and menus. 
27Accounting for around 81% of the channel's revenue.
28Source: A4A, number of passengers, January-December 2012
29Accounting for around 81% of the channel's revenue.
30 Source: Federal Highway Administration, January-November 2012 (stretches of road served by the Group)
31Source: AISCAT, January-December 2012
32Source: Group estimates on Assoaeroporti data, January-December 2012 (airports served by the Group)

EBITDA

In 2012 EBITDA for the Food & Beverage segment came to €356.1m, down from €413.9m the previous year (-17.8%, or -14% at current exchange rates). That figure includes reorganization expenses of €9.5m. The EBITDA margin went from 10.3% to 8.7%, due mainly to the rise in personnel expense and the relative weight of rent and concession fees which, despite significantly lower sales in Europe, proved to be rather inflexible in light of the substantial fixed component.

Change in Food & Beverage EBITDA margin

In North America and the Pacific, EBITDA amounted to $291.5m, a decrease of 6.7% compared with the $312.5m reported in 2011. The 2012 result includes reorganization expenses of $5.3m. As a percentage of sales, EBITDA came to 10.7% (11.7% the previous year). The decrease in the margin stems from the reorganization costs mentioned above and especially from the rise in personnel expense as a percentage of sales, due to an increase in the average hourly cost and the introduction of new concepts that boost average spending per customer but are also more labor intensive. Especially during the first half of the year, personnel expense was also affected by temporary inefficiencies caused by the closure of various stores for renovation. The cost of goods sold showed a relative increase in the first half and recovered during the second six months.

Italy EBITDA came to €86.7m, down from €132.7m the previous year (-34.6%). The 2012 result includes reorganization expenses of €3.5m. The EBITDA margin fell from 9.8% to 7.1%, reflecting the reduced ability to absorb the fixed component of rent and especially personnel expense, as locations have to be kept open at night and on holidays despite the significant decline in sales. In addition to a drop in productivity attributable to decreased sales of the Group's main offerings, personnel expense was also affected by a rise in the average cost per hour.

EBITDA in other European countries amounted to €41.4m, a decrease of 27.5% on the previous year's €56.8m (-27.1% at current exchange rates). The 2012 result includes reorganization expenses of €1.9m, while EBITDA in 2011 benefited from net non-recurring income of €1.4m. Adjusting for non-recurring items, the decrease in EBITDA comes to 21.7%.

The EBITDA margin went from 7.6% to 5.7%, due to the reduced ability to absorb the fixed components of costs and a highly unfavorable summer season. 

Corporate costs

Corporate costs in 2012 amounted to €28.5m (€25.3m the previous year). In 2011 this item benefited from €8m in non-recurring income relating to the sale of the Flight segment. 

Deprecation, amortization and impairment losses

These came to €208.7m compared with €192.7m in 2011, for an increase of 4.1% (+8.3% at current exchange rates), due to greater capital expenditure, especially in North America. 

Impairment losses on goodwill

Goodwill on Spanish food & beverage operations suffered an impairment loss of €16.7m in 2012, due to ongoing weakness in the motorway channel that reflects the economic situation in the country. There was no impairment of goodwill in 2011.

Net financial expense

Net financial expense came to €50.3m, compared with €46.9m the previous year.  The change reflects the higher average cost of debt due to the refinancing completed in July 2011. 

Income tax

The decrease in income tax, from €66.1m in 2011 to €27.2m, basically reflects reduced profits in this segment as well as a refund of €12.5m in IRES (Italian corporate income tax), due to the formal recognition of the deductibility of IRAP (Italian regional business tax) pertaining to personnel expense. 

Profit for the year

The profit for the Food & Beverage segment (including Corporate costs) came to €11.3m (€70.5m the previous year). Profit attributable to non-controlling interests amounts to €11.2m, in line with the previous year.

Net invested capital

  (€m) 31/12/2012 31/12/2011 Change
Goodwill 789.1 812.8 (23.6)
Other intangible assets 55.9 53.5 2.3
Property. plant and equipment 870.7 826.7 44.0
Financial assets 14.5 16.9 (2.3)
Non-current assets 1,730.2 1,709.9 20.3
Net working capital (411.8) (397.5) (14.3)
Other non-current non-financial assets and liabilities (147.7) (177.9) 30.2
Net invested capital  1,170.8 1,134.6 36.2
Net financial position 933.2 913.6 19.6

Net cash generation

(€m) 2012 2011
EBITDA 327.6 388.6
Change in net working capital (17.3) (69.0)
Other items (3.3) (4.0)
Cash flows from operating activities 307.0 315.6
Tax paid (34.8) (53.3)
Net interest paid (42.0) (83.4)
Net cash flows from operating activities 230.2 179.0
Net Capex Paid (250.8) (184.5)
Free operating cash flow (20.6) (5.5)

Free operating cash flow in the Food & Beverage segment was a negative €20.6m in 2012, after a negative €5.5m the previous year.

Regarding cash flows from operating activities, the more efficient management of working capital softened the impact of the decline in sales and margins.

Net cash flows from operating activities, which rose from €179.0m to €230.2m, benefited from a lower tax charge and a decrease in net interest paid. In 2011, interest included non-recurring charges of €39.2m for the early termination of interest rate hedges in the context of the debt refinancing process.

The greater cash flows from operating activities made it possible to finance nearly all of the Group's net capital expenditure, amounting to €250.8m in 2012 (€184.5m the previous year). 

Capital expenditure

Details of net capital expenditure by geographical area are shown below: 

 (€m)  2012  2011 Change
2011 at constant
exchange rates
North America and Pacific Area           156.0             97.4 60.2% 63.3%
Italy             55.2             55.2 (0.0%) (0.0%)
Other Countries             35.1             32.0 9.9% 9.4%
Corporate and unallocated               6.2               6.2 (0.5%) (0.5%)
Food & Beverage 252.6 190.8 32.4% 33.6%

Net capital expenditure was €252.6m, up from €190.8m in 2011, and rose from 4.7% to 6.2% of revenue. It mostly concerned the U.S. airports of Atlanta, Phoenix, Las Vegas and Salt Lake City, as well as the Pennsylvania Turnpike.