Business segments

Given the significant changes in the scope of consolidation in 2007 and 2008, to ease comprehension of performance, figures for the travel retail & duty-free and in-flight segments are also provided on an annualised basis. These figures have been calculated by supplementing the data from the Group's accounting system with financial information drawn from the internal reporting systems of the acquired companies, which has been adjusted as necessary and is neither audited nor subject to the Group's administrative and accounting procedures1.

Change
(€m)                    
2008 2007 at current
exchange rate
at constant
exchange rate
Revenue 3,924.6 3,877.6 1.2% 4.7%
EBITDA 465.5 494.2 (5.8%) (2.4%)
EBITDA margin
11.9% 12.7%
Capex 278.6 255.9 8.9% 6.1%

HMSHost (North America and Pacific Region2)

 

To eliminate interference from fluctuations in the euro/dollar exchange rate and make it easier to interpret performance, figures are reported in millions of US dollars ($m).

($m) 2008 2007 Change Change net
of costs
of reorganisation
Revenue 2,773.2 2,651.7 4.6% 4.6%
Airports 2,222.7 2,109.2 5.4% 5.4%
Motorways        
451 .8 464.6 (2.8%) (2.8%)
Malls 98.7 77.8 26.8% 26.8%
EBITDA 339.2 349.6 (3.0%) (0.8%)
% on revenue 12.2% 13.20%
Capex 196 167.5 17.1% 17.1%
% on revenue 7.1% 6.3%

Italy

(€m) 2008 2007 Change Change net
of costs
of reorganisation
Revenue 1,319.9 1,270.7 3.9% 3.9%
Motorways 1,039.5 1,023.2 1 .6% 1.6%
Airports 77.9 68.3 14.1% 14.1%
Railway stations
and shipboard
catering
36.5 19.9 83.4% 83.4%
Others 166.0 159.3 4.2% 4.2%
EBITDA 173.5 176.0 (1.4%) (0.5%)
% on revenue 13.1% 13.9%
Capex 85.1 90.2 (5.7%) (5.7%)
% on revenue 6.4% 7.1%

Other Countries 3

Change
(€m) 2008 2007 4 at current 
exch. rates
at constant
exch. rates
Revenue 719.4 672.7 6.9% 6.8%
Motorways 423.2 417 1 .5% 1 .1%
Airports 168.4 141 .9 18.7% 20.2%
Railway stations 
86.4 76.2 13.4% 12.9%
Other 41 .4 37.7 9.9% 7.9%
EBITDA 61.3 63.2 (3.0%) (3.2%)
% on revenue 8.5% 9.4%
Capex 52.6 51.9 1.3% 1.4%
% on revenue 7.3% 7.7%

1 Most of the supplementary information consists of: -for 2007: the months from January through May of Alpha Group Plc., consolidated since 1 June 2007; full-year figures for World Duty Free Europe Ltd., acquired in 2008; full consolidation of Aldeasa for the entire year -for 2008: the months from January through April of World Duty Free Europe Ltd., consolidated from 1 May 2008; full consolidation of the first quarter of Aldeasa, which came under exclusive control on 1 April 2008
2 North American operations are headed up by Autogrill Overseas Inc., with headquarters in Bethesda, Maryland. Under the trade name HMSHost, in addition to the North American business it also manages food & beverage services at Amsterdam's Schiphol Airport (grossing $128.6m in 2008, or 4.6% of sales by HMSHost), and at other airports in Asia and Australasia (total 2008 revenue of $26.4m)
3 France, Switzerland, Spain, Belgium, the Netherlands, Luxembourg, Austria, Slovenia, Czech Republic, Germany, Sweden, Greece, Denmark, Ireland and the UK
4 Figures for 2007 have been adjusted with respect those originally published to include the food & beverage operations of Alpha Group Plc., consolidated from 1 June 2007. Specifically, revenue have been adjusted by €15.6m, EBITDA by €2.1m and capex by €1 .1m

The Group has expanded considerably in the travel retail & duty-free segment with the acquisition of Alpha Group, the remaining shares of Aldeasa, and World Duty Free Europe Ltd. About 99% of its sales are generated in airports and the remaining 1% in museums.

While the income statements of Alpha Group Plc. and World Duty Free Europe Ltd. have been consolidated on a line-by-line basis (Alpha for the entire year and World Duty Free from 1 May 2008), the Aldeasa Group's income statement has been consolidated using the proportional method (50%) for the first quarter and line-by-line since 1 April 2008.

The overall contribution of travel retail & duty-free operations to the main consolidated results for the year is summarised as follows:

      Change  
(€m)   2008 2007 at current
exchange rate
at constant
exchange rate
 Revenue   1,438.7 663.3 116.9%   129.0%  
 EBITDA   123.6  54.1 128.6%   138.2%  
 EBITDA margin   8.6% 8.2%       
 Capex   51.1 17.0   n.s.   n.s.  

Annualised figures

The following comments refer exclusively to airport operations. Museum gift shops produced revenue of €14m in 2008, down from €18.3m the previous year, as the merchandising business at the Prado has been taken over by the museum itself. Fourth quarter sales came to €3.3m, compared with €4m in 2007.

Revenue

Revenue in the travel retail & duty-free segment amounted to €1,679.1m in 2008, a decrease of 7.7% (-0.1% at constant exchange rates) on the previous year's €1,819.9m, and were affected by currency translation losses (mainly between the pound and the euro) and varying traffic trends. Excluding the effects of the major portfolio streamlining measures1, sales would amount to €1,668.2m, a decrease of 3.7% (+3.9% at constant exchange rates) compared with the 2007 figure of €1,733.1m.

Performance by region was as follows:

  • Spain2: the decrease in traffic (-3.2% year-on-year, according to A.E.N.A.3) during the second half the year (-8.2%, versus +2.8% through June; source: Group calculations on A.E.N.A. data) was heavily influenced by the economy. Results took a further hit from the devaluation of the British pound, which reduced the spending power of passengers arriving from the United Kingdom (especially at tourist destinations). Sales in 2008 totalled €584.6m, down 5.6% on the previous year's €619.2m. Another detrimental factor was competition from the high-speed rail service on major routes like Madrid-Barcelona and Madrid-Malaga, and the reorganisation works at Terminals 1, 2 and 3 of Madrid's airport. The Group reacted with a series of promotions that helped recover much of the difference in spending per passenger.
  • United Kingdom4: revenue amounted to €749.1m, -15.9% (-2.1% at constant exchange rates) with respect to the previous year's €891.2m, due mainly to the good performance at London Heathrow and Manchester Airports. Net of the disposals mentioned above, revenue were up by 4.8%, from £560.8m in 2007 to £587.8m. Heathrow reported sales growth of 11.6%, from £220.6m to £246.2m, despite a 1.4% decline in traffic (source: B.A.A.5). The main event during the year was the opening of the new Terminal 5 for British Airways flights, which has not changed Heathrow's overall capacity but has allowed a better distribution of passengers. As a result of the Open Skies agreement and cost-cutting measures by certain airlines, towards the end of 2008 there was also a gradual shift in-flights from Gatwick and Stansted to Heathrow. The stark contrast between traffic and revenue trends reflects the Group's ability to outpace the market, thanks to the steadfast improvement of its wares with a view to attracting more shoppers, making larger average sales, and increasing penetration. The improvement in "environmental conditions" (less crowding and faster security checks, for example) in all of Heathrow's terminals has also encouraged travellers to spend, along with the pound's notable depreciation against the euro (mainly to the benefit of international passengers1).
  • Rest of the world2: sales rose to €331.4m in 2008, from €291.1m in the previous year, an increase of 13.8% (+19.5% at constant exchange rates). At the airports served by Aldeasa, revenue were up by 21.1%, from €192.8m to €233.5m; net of the businesses launched in the previous year in North America, the increase comes to 13.2%, thanks to outstanding results in Mexico (where a new "walk through" shop has been opened), Kuwait, Chile, and Jordan.

In the fourth quarter, the heightening financial crisis posed a further obstacle to Spanish traffic (-12.7%3) and reduced traffic growth in the United Kingdom (-3.6% at Heathrow4). The quarter closed with revenue of €394.4m, a decrease of 11.4% (-3.3% at constant exchange rates) on the previous year's €445.3m. On a like-for-like basis, sales would have been lower by 9.3% (-1.2% at constant exchange rates) with respect to €435m in the fourth quarter of 2007.

EBITDA

EBITDA for the travel retail & duty-free segment in 2008 was €143.0m (net of €10.9m in reorganisation expenses), an increase of 1.7% (+8.6% at constant exchange rates) with respect to the previous year's EBITDA of €140.7m5. On a like-for-like basis, EBITDA would have grown by 2.4% (+9.3% at constant exchange rates), from €139.8m to €143.1m. The improvement was driven essentially by the increase in the profit margin, on the strength of Spanish and international operations. The reduction in personnel expense, thanks to reorganisation of the network, was another factor that contributed to the rise in EBITDA. Central costs also started to go down during the year, as a result of the reorganisation efforts begun and completed in 2008. Reorganisation costs (including for the integration of the retail business) came to 0.6% of sales (€10.9m). In Spain, the improvement in the cost of sales, the successful limitation of payroll expenses, and other cost-cutting measures softened the impact of the business slump. The reduction in the cost of sales reflects a positive change in the sales mix, in terms of both merchandise category and the greater incidence of passengers with destinations outside Europe. In the United Kingdom, the profit margin was essentially stable despite a slightly less favourable passenger mix (i.e. a higher incidence of European travellers). The increase in store space at Heathrow, with the opening of Terminal 5, raised personnel and operating costs by an amount nearly totally offset by efficiency gains at the airports served by Alpha Retail UK.

1 International passengers make up more than 90% of total traffic (source: B.A.A., 2008)
2 Sales in the rest of the world correspond to Aldeasa's and Alpha's operations in Sri Lanka, the United States, India, Jordan, Chile, Canada, Kuwait, Peru, Portugal, Colombia, Cape Verde, Panama, Maldives, Mexico, Dutch Antilles and France
3 Source: Group calculations on A.E.N.A. data
4 Source: B.A.A.
5 Museum gift shops contributed E1 .3m for the year.

The in-flight segment joined the Group in June 2007, with the acquisition of Alpha Group. Therefore, its contribution to consolidated figures refers to different periods in 2007 and 2008, to the detriment of direct comparison.

Change
(€m) 2008 2007 at current
exchange rate
at constant
exchange rate
Revenue 431.2 320.4 34.6% 56.7%
EBITDA 41.5 32.5 27.5% 48.5%
EBITDA margin 9.6% 10.1%
Capex 7.5 5.2 45.4% 88.9%

Annualised figures (in £m)

Revenue

Alpha Flight grossed £343.4m in 2008, an increase of 2.5% on the previous year (£335.1m). The significant growth of international operations offset part of the decline in the UK and Ireland.

Region-by-region performance was as follows:

  • United Kingdom and Ireland: : in 2008 this region reported a 21% drop in sales (£51m), from £243.1m in 2007 to £192.4m, due to the lapsed contract with EasyJet (which contributed £47.8m in 2007) and the bankruptcy of the airline Excel. Net of these two factors, growth would have been 4.1% on the previous year.
  • International1: taken together, the nine countries in this region enjoyed growth of 64.4%, closing the year with sales of £151.0m (£92m in 2007). The main drivers were Australia (+112%, with sales of £48.3m), Jordan (+24.2%, with sales of £15.3m), United Arab Emirates (+127.1% with sales of £7.4m), and Italy (+20% with sales of £35.5m). A further £15.9m was contributed by the newly acquired Air Czech Catering A.S., the Czech Republic's leading provider of in-flight food & beverage. On a like-for-like basis, the increase in international sales was 47.1%.

EBITDA

In 2008, post-acquisition streamlining and strong international growth raised EBITDA for the in-flight segment from £27m in 2007 to £33.0m (+23.6%), and the EBITDA margin from 9.2% to 9.6%.

1 Australia, Italy, Czech Republic, Jordan, Romania, The Netherlands, United Arab Emirates, Bulgaria and USA