March 2019
Investor Presentation March 2019 Disclaimer This presentation - - PowerPoint PPT Presentation
Investor Presentation March 2019 Disclaimer This presentation - - PowerPoint PPT Presentation
Investor Presentation March 2019 Disclaimer This presentation contains forward - looking statements within the meaning of the Private Securities Litigation Reform Act of 19 95 (Reform Act). Forward-looking statements are based on our
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This presentation contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (Reform Act). Forward-looking statements are based on our beliefs and assumptions and on information currently available to us, and include, without limitation, statements regarding our business, financial condition, strategy, results of operations, certain of our plans, objectives, assumptions, expectations, prospects and beliefs and statements regarding other future events or prospects. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believe,” “expect,” “plan,” “intend,” “seek,” “anticipate,” “estimate,” “predict,” “potential,” “assume,” “continue,” “may,” “will,” “should,” “could,” “shall,” “risk” or the negative of these terms or similar expressions that are predictions of or indicate future events and future trends. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, the development of the industry in which we operate and the effect of acquisitions on us may differ materially from those made in or suggested by the forward looking statements contained in this presentation. In addition, even if our results of operations, financial condition and liquidity, the development of the industry in which we operate and the effect of acquisitions on us are consistent with the forward-looking statements contained in this presentation, those results or developments may not be indicative of results or developments in subsequent periods. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them in light of new information or future developments or to release publicly any revisions to these statements in order to reflect later events or circumstances or to reflect the
- ccurrence of unanticipated events. Factors that may cause our actual results to differ materially from those expressed or implied by the forward-looking statements in
this presentation, or that may impact our business and results more generally, include, but are not limited to, the risks described under “Item 3. Key Information—D. Risk factors” of our Annual Report on Form 20-F for the year ended December 31, 2018 which may be accessed through the SEC’s website at https://www.sec.gov/edgar. You should read these risk factors before making an investment in our shares. This presentation contains a discussion of Adjusted EBITDA, a non-IFRS financial measure. We define Adjusted EBITDA as net earnings adjusted for certain items, as set forth in the reconciliation to the most directly comparable IFRS measure in the Appendix. Adjusted EBITDA is not a substitute for IFRS measures in assessing our overall financial performance. Because Adjusted EBITDA is not determined in accordance with IFRS, and is susceptible to varying calculations, Adjusted EBITDA may not be comparable to other similarly titled measures presented by other companies. Adjusted EBITDA is included in this presentation because it is a measure of our operating performance and we believe that Adjusted EBITDA is useful to investors because it is frequently used by securities analysts, investors and other interested parties in their evaluation of the operating performance of companies in industries similar to ours. Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for an analysis of our results as reported under IFRS as issued by IASB
Disclaimer
3
COMPANY OVERVIEW
1
4
Stores in airports and other major transportation centers
1000+ 88
Locations
200+
Concession contracts
120M+
Transactions
Turnover of $1.9
1.9 bil billion
6.8% y/y growth
10 10,00 ,000+ 0+
Employees and more than 50 nationalities represented 1)
76 76%
- f net sales from
Duty Paid 1
- Adj. EBITDA 2 of
$23
238million
12 12.4% margin
`
Note: Unless otherwise noted data presented as of or for the twelve months ended, December 31, 2018. Anchorage, Alaska location not pictured in map. (1) As of December 31, 2018 (2) Adjusted EBITDA is a non-IFRS measure. See reconciliation at the end of this presentation for a reconciliation to the most comparable IFRS measure.
Hudson Group is an Industry Leader in Travel Retail with a Broad Geographic Footprint Spanning Four Corners of North America
5
Diversified set of highly recognized concepts
Travel Esse ssentials s & & Bookstores Proprietary Duty ty Free Branded Sp Specialty Pr Proprietary Spe Specialty Quic uick-Service Foo
- od &
& Beverage
Over 75 specialty brands including:
Por
- rtfolio
lio of f br bran ands unde underpin ins go go-to mar market t str trategy
6
$660 $766 $835 $917 $1,090 $1,370 $1,650 $1,761 $1,880 1987 2010 2011 2012 2013 2014 2015 2016 2017 2018
Long and consistent record of impressive net sales growth
2014: Acquisition
- f Nuance Group
2015: Acquisition of World Duty Free Group 1987: First stores
- pen at LGA 1987
14.2%
Net sales growth 2010-2018 (1)
$6
9.1%
Organic growth 2010-2018 (1)(2)
Note: $ in millions. Represents net sales (i.e., turnover minus advertising income). 2011 onwards reflects consolidation of Dufry North America assets owned prior to acquisition of Hudson. (1) Year-over-year average for the years ended 12/31/2010 through 12/31/2018. (2) Excludes growth attributable to specific stores acquired in the acquisition of Nuance Group or World Duty Free Group that management expected, at the time of the applicable acquisition, to wind down.
7 7
Travel Retail Has Distinct Advantages
Passengers arrive at airports
earlier due to travel unknowns
Average dwell time between
90 – 105 minutes increases spend Captive Audience
Passenger spend increased at a 4%
CAGR from 2007 to 2017
The median passenger is 45 – 54
years old
$100k - $125k median household
income Propensity to Spend
Customer driven by a combination
- f impulses and immediate needs
Need exacerbated by lack of
in-flight services onboard airlines Immediate Needs and Wants
Airport retailers face limited
competition from Internet retailers Limited E-Commerce Competition
Complex operating environment Controlled by government and
airport authorities
Longstanding relationships with
airports and landlords drive contract extensions and new business wins
Consistent execution and scale
are required to grow Regulatory Environment Landlord Relationships
Overall the competitive landscape for travel retail remains consistent. Unique challenges and complexity of travel retail environment combined with years required to scale serve as barriers to entry.
8 8
The North American Travel Concessions Market is Expected to Continue Growing
Source: ACI-NA Concessions Benchmarking Survey, Airport Revenue News (ARN). .
(billions) ($)
- Historical spend per passenger
– 1.0 2.0 3.0 2010 2013 2016 2019 2022 2025 Domestic passengers International passengers $0 $2 $4 $6 $8 $10 $12 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
- Historical and projected North American passenger volumes
Air travel is a way of life
9 9 (1) Over the past 5 years as of December 31, 2018.
Ad Adva vance kn knowledge and dee eep insight into to ma market dyna ynamics cs Hu Hudson anch chor conce cepts Unique and loca cal conce cepts
Target win rate
25-35%
Contract renewal rate(1)
80%+
Our distinct commercial approach makes us the partner of choice for landlords
We apply a consistent “playbook” across a broad range of concessions
Wins ns and d ret etenti ntion Portf tfolio, store formats and des esigns opti timized to speci cific conce cession
4 3 2 1
Ongoing superior ex execu cution Du Duty ty Free ee, branded and proprieta tary speci cialty ret etail
5
RELATIONSHIPS PS BR BRAND PORTFOLIO KNOW KNOW-HOW EXPERTISE WIN
10 10
Organizational Structure That Delivers Value to Key Constituents
Rog
- ger Fordyce
Chief Executive Officer
Brian Quinn
EVP & Chief Operations Officer
Hop
- pe Remoundos
EVP & Chief Marketing Officer Adri rian Bart rtella Chief Financial Officer
Michael Levy
SVP & Chief Merchandising Officer
Dave Stubbs
SVP & Chief Information Officer
170 170 year
ears s of management exp xperience
Andy Rattner
EVP, Duty Free Operations
Michael Mullaney
EVP, Corporate Strategy & Development
Brad Lenz
SVP, Design, Facilities & Store Devp.
Rick Yoc
- ckelson
SVP, People & Administration
Adam Ratner
General Counsel
26 26+ 27 27+ 30 30+ 13 13+ 10 10+ 18 18+ 4+ 14 14+ 13 13+ 13 13+ 1+
11 11
Strong Market Share with Room to Grow
Top 25 airports represent ~59% of total N.A. travel retail market 1 We have significant room to grow sales, not only in travel retail but also in food & beverage, a category that is a natural extension of our business While we are in 24 of the top 25 airports, we are not in every terminal
(1) Based on square feet available for retail and food & beverage operations Source: ARN, company data and N.A. airport data
Top 25 Airports by Enplanements: Total Retail + F&B square footage Top 25 Airports by Enplanements: Total Retail Square Footage
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Hudson Whitespace 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Hudson Whitespace
For illustrative purposes only. Revenue opportunities in particular airports may be limited by airport policies
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FY 2018 / Q4 HIGHLIGHTS
1
13
- Publicly lis
isted on
- n NYSE in Feb
ebruary ry
- Or
Organic ic ne net t sale sales gr growth of
- f 7.0
7.0% 1
1 for
- r FY1
FY18
- 4.1% organic net sales growth in Q4 2018
- Like-for-like net sales growth of 3.7% (3.7% CC) for FY18; 1.6% (2.5% CC) in Q4 18
- Impacted by FX (Q4 only) and softer duty free/luxury sales from trends in Chinese
travelers
- Gr
Gros
- ss pr
profit mar argin in expanded 140 140 bp bps to to 63.7 63.7% in FY18 FY18
- Expanded 180 bps during Q4 18
- Continued impact of successful vendor negotiations and positive sales mix shift
- 2018
2018 Adj djusted EB EBITD ITDA 2 gr growth of
- f 38%
38% (13. (13.9% ass assuming red educed fr franchise se fee ee in effect in 2017 2017)
- Q4 18 adjusted EBITDA growth of 27.5% (4.4% assuming reduced franchise fee in
effect in Q4 17)
- Won
- n key RF
RFPs s an and ext xtensions/expansions s that will ill ad add over 50K 50K sq square fee eet t to to cur current foo
- otp
tprint
- Sur
Surpassed 1,000 1,000 sto tore mile lestone
FY 2018 / Q4 Highlights
1 See slide 19 for a description of organic net sales growth 2 See Appendix for reconciliation to most directly comparable IFRS measure
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2018 Wins and Extensions
(1) An extension is defined as a continuation in the same market whether the Company won through an RFP process or extended an existing contract.
New Wins Extensions (1) + Expansions
New Market Existing Market Existing Market
Billy Bishop Toronto January 2018 Seattle-Tacoma Int’l Airport March 2018 Clinton National Airport January 2018 Burlington Int’l Airport June 2018 Phoenix Sky Harbor Int’l Airport March 2018 Pittsburgh Int’l Airport March 2018 Baltimore/Washington Int’l Thurgood Marshall Airport June 2018 Boston Logan Int’l Airport April 2018 JFK Terminal 7 March 2018 LaGuardia Airport Terminal B June 2018 Philadelphia Int’l Airport July 2018 Orlando Int’l Airport April 2018 Chicago CitiGroup Center August 2018 Salt Lake City Int’l Airport December 2018 Greater Rochester Int’l Airport April 2018 Dallas Love Field August 2018 Vancouver Int’l Airport October 2018
Total 2018 Wins: Existing Sq. Ft. Incremental Sq. Ft. Total Sq. Ft. Locations with New RFPs
- 31K
31K Locations with Extensions / Expansions 117K 22K 139K Total 117K 52K 170K
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Whitespace Opportunities Continue to Expand
$2.0B $2.1B $3.2B $3.5B $3.6B $4.0B $6.2B $7.4B $8.1B $11.7B $15.0B Dallas (DFW) Charlotte (CLT) Ft Lauderdale (FLL) Seattle (SEA) Orlando (MCO) San Diego (SAN) Atlanta (ATL) San Francisco (SFO) Chicago (ORD) Los Angeles (LAX) New York (JFK)
Select Airports with Large CapEx Plans in the Works 2
(1) SOURCE: Airports Council International: Unmet Airport Infrastructure Needs, January 2019; Represents an increase of 70% over four years (2) SOURCE: DFW Airport; Dallas News
Investment needed to accommodate passenger and cargo growth and modernize aging infrastructure ACI estimates nearly $130 billion in airport infrastructure spending needs through 2023 1
16
FY 2018 / Q4 FINANCIAL RESULTS
2
17
172.5 238.0
2017 2018
11.6% 9.6% Margin
Adjusted EBITDA ($M) 2
Pro Forma Margin 12.4% 36.5
Financial Highlights FY 2018
41.4 52.8
Q4 17 Q4 18
50.6
11.2% 9.2% 11.2%
9.2
140bps gross margin expansion Adjusted EBITDA growth of 38.0% (13.9% assuming lower franchise fee structure was in place in 2017) Strong 6.8% turnover growth and 7.0% organic net sales growth1 Adjusted EBITDA margin of 12.4%, an improvement of 280 bps (80 bps improvement w/comparable franchise fees)
(1) See reconciliation to Turnover in Appendix. Organic net sales growth represents the combination of growth from (i) like-for-like net sales growth and (ii) net new stores and expansions. Organic net sales growth excludes growth attributable to (i) acquired stores until such stores have been part of our business for at least 12 months and (ii) eight stores acquired in the 2014 acquisition of Nuance and 46 stores acquired in the 2015 acquisition of World Duty Free Group that management expected, at the time of the applicable acquisition, to wind down. (2) For a reconciliation of Adjusted EBITDA to net earnings for the periods presented see Appendix.
1,802.5 1,924.2
2017 2018
450.4 471.4
Q4 17 Q4 18
Turnover ($M) 1
209.0
18
2018 Growth Components Quarterly Evolution
Organic Net Sales Growth Components 2018
5.6% 5.5% 4.5% 3.3% 1.6% 3.8% 3.9% 3.7% 3.2% 2.5% 9.4% 9.4% 8.2% 6.5% 4.1% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% Q4'17 Q1'18 Q2'18 Q3'18 Q4'18
Reported Like for Like Net new business Like for like, constant currency
Net Sales Growth Components 2018 / 2017 Like for Like @ constant FX 3.7% Like for Like FX effect 0.0% Like for Like @ reported currency rates 3.7% Net new business 3.3% Organic Net Sales Growth @ reported currency rates 7.0% Acquired wind down stores
- 0.2%
Net Sales Growth 6.8%
- Q1 and Q2 like for like benefited from 0.9% FX
tailwind, Q3 and Q4 suffered from 0.9% FX headwind
- Softening of duty free and luxury sales in Q3 and
Q4 mainly due to trends in Chinese passenger demographic
- Net new business slowed in Q4 2018 as some of
the main new contracts/stores have cycled
7.0% 6.8% 0.2% 3.7% 3.3% Like for Like Net new business Organic Growth Acquired wind down stores Reported Growth
19
Full Year Summary
(in millions USD) 2018 % of turnover 2017 % of turnover % Change
Turnover $1,924.2 100% $1,802.5 100% 6.8% Gross Profit $1,225.7 63.7% $1,122.2 62.3% 9.2% Selling Expenses $445.3 23.1% $421.2 23.4% 5.7% Personnel expenses $411.1 21.4% $371.3 20.6% 10.7% General and administrative expenses $131.4 6.8% $156.9 8.7% (16.3%) Share of result of associates $0.1
- $(0.3)
- NM
Adjusted EBITDA $238.0 12.4% $172.5 9.6% 38.0% Depreciation & Amortization $128.9 6.7% $108.7 6.0% 18.6% Other Operational Result $(10.9) (0.6)% $(3.7) (0.2)% 194.6% Operating Profit (EBIT) $98.2 5.1% $60.1 3.3% 63.4%
20
Balance Sheet and Cash Flow
Net Debt and Leverage 1 Evolution
(USD millions)
Cash Flow Statement
Full Year In millions USD 2018 2017
Net cash flows from operating activities $232.7 $130.8 Net cash flows used in investing activities (69.1) (86.1) Net cash flows (used in) / from financing activities (64.8) (95.8) Currency translation on cash (2.0) 0.9 Increase / (decrease) in cash and cash equivalents 96.8 (50.2)
Cash and cash equivalents at the – beginning of the period 137.4 187.6 – end of the period 234.2 137.4
(1) Net debt leverage represents total debt less cash at the end of the period presented divided by Adj. EBITDA for the last 12 mo.
464 380 344 304 310 2.7x 2.0x 1.6x 1.3x 1.3x Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Net Debt Net Debt to Adj EBITDA
21
2019 Outlook
- FY 2019:
- Organic net sales growth expectations: low to mid single digit range
- H1: Expect headwinds from weakening CAD vs. USD and softer spending trends with Chinese
travelers to continue
- H2: H1 headwinds expected to anniversary; expired contracts will impact net sales while new
store sales come online
- Gross margin expected to slightly improve from 2018
- Expect modest deleverage in personnel expense
- Expect flat EBITDA margins
- Effective tax rate expected to be ~40% due to non-deductibility of certain compensation/severance
expenses and increase of BEAT 1 tax to 10%
- Expect relatively flat EPS to 2018
- Above does not include IFRS 16 impact
- IFRS 16 – New Standard on Lease Accounting:
- To be implemented January 1, 2019
- Requires recording contractual lease obligations on the balance sheet
- Balance sheet impact:
- Right of use asset and lease liability measured at PV of future fixed lease payments
- Income statement impact:
- For capitalized fixed lease payments, rent expense is replaced with amortization and interest
expense (variable lease payments continue to be recorded as rent expense)
- Different treatment than U.S. GAAP companies that will continue to record straight line operating
lease expense
(1) Base erosion and anti-abuse tax
22
Components of long term revenue growth and financial targets
Lik ike-for-like gr growth
Growth in aggregate mo monthly net sales les in the e appli licable e perio iod at stor
- res that have
e been en op
- per
eratin ing for
- r at least 12
12 mon
- nths
Ne Net t ne new busi business
Con
- nver
ersio ions + New Con
- nces
essio ions – Los
- st Con
- nces
essions & Clos
- sed
ed Stor
- res
Tot
- tal or
- rganic ne
net t sal ales growth Pas asse senger vol
- lume
Prici ricing Prod
- ducti
tivity ty ini nitiatives Con Conversions Ne New con
- ncessions
+
EBI EBITDA growth
Oper eration
- nal
l init itia iatives es, scale le and op
- per
eratin ing leverage benef efit its
Ne Net t inc ncome growth
High gh teens ens Lo Low w doub uble digi git High gh single e digi git
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Well-positioned to drive long-term shareholder value
Anchored by the iconic Hudson brand Attractive in
industry ry that is growing and resilient
Distinct commercial approach makes us the part
rtner of choice for landlords
Multiple levers to gr
grow existing business and expand concession portfolio
Experienced, service-driven, cohesive lea
leadership tea eam complemented by global
travel retailer Dufry
BRA BRAND IND INDUSTRY PARTNER GR GROWTH LEADERSHIP IP
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APPENDIX
4
25
FY 2017 FY 2018
Food & Beverage 36%** Perfume & Cosmetics 15% Fashion 12% Literature 10% Watches, Jewelry, Accessories 6% Electronics 5% Wine & Spirits 5% Tobacco 3% Other 8% Food & Beverage 38%* Perfume & Cosmetics 15% Fashion 12% Literature 9% Watches, Jewelry, Accessories 6% Electronics 5% Wine & Spirits 5% Tobacco 3% Other 7%
** F&B Retail 34.0% / F&B Service 1.6% * F&B Retail 35.4% / F&B Service 2.3 %
Sales Breakdown – by Product Category
26
Sales Breakdown
2017 2018 2018 2017 Net Sales By Sector Turnover By Country
Duty Paid 76% Duty Free 24% USA 81% Canada 19% Duty Paid 76% Duty Free 24% USA 81% Canada 19%
27
2018 Turnover to Organic Net Sales Growth Reconciliation
Organic Acquired Wind Down Stores Reported Growth Like for Like 3.7% 0.0% 3.7% Net New Business 3.3%
- 0.2%
3.1% Organic Net Sales Growth 7.0%
- 0.2%
6.8% Advertising Income 0.0% Total Turnover Growth 6.8 %
28
Adjusted EBITDA Reconciliation
Quarter Ended Quarter Ended Year Ended Year Ended In Millions USD 12/31/2018 12/31/2017 12/31/2018 12/31/2017
Net profit 2.8 (34.8) 65.8 (10.6) Income tax expense (1.1) 34.9 3.0 42.9 Profit before taxes (EBT) 1.7 0.1 68.8 32.3 Foreign exchange gain / (loss) 0.6 0.3 0.9 (0.5) Interest income (0.8) (0.5) (2.5) (1.9) Interest expenses 7.7 7.5 31.0 30.2 Operating Profit (EBIT) 9.2 7.4 98.2 60.1 Depreciation, amortization and impairment 39.3 29.4 128.9 108.7 Other operational result 1 4.3 4.6 10.9 3.7 Adjusted EBITDA 52.8 41.4 238.0 172.5
(1) For the quarter ended December 31, 2018, other operational result consisted of $2.9 million of restructuring expenses, $1.1 million of uncollected receivables and $0.3 million of other expenses and non-recurring items. For the quarter ended December 31, 2017, other operational result consisted primarily of $1.1 million of restructuring costs associated with the World Duty Free Group acquisition and $3.5 million of other operating expenses and nonrecurring items. For the year ended December 31, 2018, other operational result consisted of $3.5 million
- f restructuring expenses, $2.8 million of litigation reserve, $1.9 million of uncollected receivables, $1.5 million of asset write-offs related to conversions and store closings, $0.7 million of
IPO transaction costs and $0.5 million of other expenses and non-recurring items. For the year ended December 31, 2017, other operational result consisted of $4.1 million of restructuring expenses associated with the World Duty Free Group acquisition, $3.4 million of audit and consulting costs related to preparatory work in connection with our initial public offering and $5.6 million of other operating expenses and non-recurring items, partially offset by $9.4 million of other operating income resulting from a related party loan waiver due to Dufry.