WORLD DUTY FREE S.P.A.

Transcription

1 WORLD DUTY FREE S.P.A. HALF YEAR REPORT AT JUNE 30, 2014 [This is a courtesy translation from the Italian original which remains the definitive version. In case of discrepancy the Italian version prevails.]

2 CONTENTS The World Duty Free Group 1. Directors Report Definitions 1.1 The World Duty Free Group 1.2 Group performance Financial Highlights Income statement results Financial position 1.3 Business segments 1.4 Performance in the second quarter of Outlook 1.6 Other information Related party transactions Events after the reporting period Main risks and uncertainties for the remaining six months of the year Share buy-back programme 2. Condensed interim consolidated financial statements 2.1 Statement of financial position 2.2 Income Statement 2.3 Statement of comprehensive income 2.4 Statement of changes in equity 2.5 Statement of cash flows 2.6 Notes to the condensed interim consolidated financial statements Statement of the CEO and manager in charge of Financial Reporting Independent Auditors Report 2

3 Boards and Officers Board of Directors Chairman Gianmario Tondato da Ruos 1 CEO José Maria Palencia Saucedo 2,3,E Directors Gilberto Benetton 2 Alberto De Vecchi 2 Gianni Mion 1 Paolo Roverato 1 6, 9 2,5, 10 Carla Cico 2,4,8, 11,L Laura Cioli Lynda Christine Tyler-Cagni Secretary Marcello Marzo 14 Board of Statutory Auditors 2,7, 11 Chairman Marco Giuseppe Maria Rigotti 12 Standing auditors Massimo Catullo 12 Patrizia Paleologo Oriundi 12 Alternate auditors Antonella Campus 12 Cinzia Cravagna 12 Independent auditors KPMG S.p.A Appointed upon the incorporation of the company on March 27, 2013 and remain in office until the shareholders meeting approving the financial statements for the year ending December 31, Appointed by shareholders meeting held on July 18, 2013 and assumed office starting September 16,2013 and until the shareholders meeting approving the financial statements for the year ending December 31, Appointed as CEO at the Board of Directors meeting of September 20, Independent non-executive director, chairman of the Internal Control Committee and Corporate Governance. 5 Independent non-executive director, member of the Internal Control Committee and Corporate Governance. 6 Non-executive director, member of the Internal Control Committee and Corporate Governance. 7 Independent non-executive director, chairman of the Human Resources Committee. 8 Independent non-executive director, member of the Human Resources Committee. 9 Non-executive director, member of the Human Resources Committee. 10 Independent non-executive director, chairman of the Related Parties Operations Committee. 11 Independent non-executive director, member of the Related Parties Operations Committee. 12 Certified auditor, appointed upon the incorporation of the company on March 27, 2013, remain in office until the shareholders meeting approving the financial statements for the year ending December 31, Appointed by shareholders meeting held on July 18, 2013 for the financial years from 2013 to Appointed by Board of Directors held on February 13, 2014 until June 30, E Executive Director. L Lead Independent Director. 3

4 1. DIRECTORS REPORT Definitions EBITDA: Earnings before Depreciation, Amortization and impairment loss, Net Financial Income (Expense) and Income Taxes EBIT: Earnings before Net Financial Income (Expense) and Income Taxes WORKING CAPITAL: Inventories plus Trade Receivables and Other Current Receivables lees Trade Payable and Other Current Payables NET CASH FLOW from OPERATIONS: EBIT plus Depreciation, Amortization and impairment loss less Proceeds from Asset Disposal plus Change in Working Capital plus change in Non-Current Asset and liabilities less Net Interests and Taxes paid CAPEX: Capital Expenditure excluding Investments in Financial Fixed Assets and Equity Investments FREE OPERATING CASH FLOW (FOCF): Net Cash Flow from Operations less Capex paid, plus Fixed Asset disposal proceeds CASH EBITDA: EBITDA plus the recovery of annual concession fees paid in advance to AENA NET PROFIT: Profit after Tax and before Non-Controlling Interests NET FINANCIAL POSITION: Current and Non Current Financial Liabilities minus Cash & Cash Equivalents and Other Financial Assets NET INVESTED CAPITAL: Non-Current Assets plus Working Capital plus Other non-current non-financial assets and liabilities plus Assets held for sale EARNINGS PER SHARE: Profit for the period attributable to owners of the parent divided by the average number of outstanding shares CONSTANT EXCHANGE RATES CHANGE: The variation that would have been reported had the comparative figures of consolidated companies with functional currencies other than Euro been converted at the same exchange rates COMPARABLE GROWTH: Revenue generated only by those stores which have been up and running for periods reported with the same offer The indicators presented are not identified as accounting measures under IFRS and should not be considered as alternative measures to those provided by the financial statements to evaluate the economic performance of the Group. Since these financial measures are not determined and regulated by the relevant accounting standards for the preparation of consolidated financial statements, the methods applied for its determination might not be consistent with that adopted by other Groups and therefore these data might not be comparable with those eventually presented by such groups. Some figures may have been rounded to the nearest million. Changes and ratios have been calculated using figures in thousands and not the figures rounded to the nearest million as shown. 4

5 1.1 THE WORLD DUTY FREE GROUP Operations World Duty Free S.p.A. (WDF S.p.A.) was incorporated on March 27, 2013 and was listed on the Milan Stock Exchange on October 1, 2013 (see paragraph 1.2.2). WDF S.p.A. is the parent of World Duty Free Group ( WDFG or the Group ), one of the leading operators worldwide in the airport travel retail sector. The Group is present in 21 countries with a workforce of 8,500 and it manages 533 stores. The Group operates duty free and duty paid stores, mainly located in airports, through a partnership concession model. Under the duty free regime, goods sold are exempt from import taxes, customs and other taxes while under the duty paid regime, import taxes and other taxes are applied to the goods sold. As regarding the operations in the European Union, in accordance with Directive 91/689/CEE of December 16, 1991 the duty paid regime applies if the passenger s final destination is domestic of a European Union member state, while the duty free regime applies if the passenger s final destination is outside of the European Union. The Group s largest market is Europe, with a solid presence in the United Kingdom and Spain. The Group is also active in the Americas, Asia and the Middle East. Particularly, 490 stores are located in 98 airports around the world and in some selected non-airport locations and 39 stores located in cultural institutions. Among the stores, WDFG manages six stores in Saudi Arabia and India that are run through local partners with whom WDFG signed, respectively, joint venture and operating agreements. The Group provides a large range of products, mainly comprised in the following categories: Beauty, Wine & Spirits, Tobacco, Food & Confectionery, Souvenirs and Others (Luxury, Fashion & Accessories). The wide variety of products are tailored according to the store location, in line with the customers needs and expectations. Each store is designed on the basis of the flight destinations served in the airport where the store is located and to the specific profile of passengers in transit. 5

6 Simplified Group structure 1 The main group companies in terms of revenue are reported below: World Duty Free, S.p.A. World Duty Free Group S.A.U. 99,89% 80,1% World Duty Free Group Espana, S.A. 19,9% WDFG UK Holdings Limited Aldeasa Mexico, S.A. de C.V. Aldeasa Chile, Limitada Aldeasa Jamaica Ltd WDFG UK Limited Aldeasa Jordan Airports Duty Free Shops WDFG Germany GmbH 60% Sociedad de Distribución Commercial Aeroportuaria de Canarias, S.L. Autogrill Lanka, Ltd WDFG US, Inc. WDFG Vancouver, LP World Duty Free US, Inc. WDFG North America, LLC On June 18, 2014, the Board of Directors of World Duty Free, S.p.A. approved the project to simplify and streamline the corporate structure of the Group through the merger of World Duty Free Group, S.A.U. and World Duty Free Group España, S.A.. The merger is expected to be executed in the third quarter of Upon completion of the process, the merged company will adopt the name World Duty Free Group, S.A. 1 Where not otherwise specified, all companies are wholly owned. See the Annex to the notes to the condensed interim consolidated financial statements for a complete list of equity investments. 6

7 1.2 GROUP PERFORMANCE Introduction During 2013, Autogrill S.p.A., a subsidiary of Edizione S.r.l. Group through Schematrentaquattro S.p.A., initiated and completed a strategic project to split the Food & Beverage business from the Travel Retail & Duty Free business. That split was realized through the partial proportional demerger (the Demerger ), effective from October 1, 2013, of the Travel Retail & Duty Free business from Autogrill S.p.A. in favor of WDF S.p.A., specifically incorporated by Autogrill S.p.A. for the purpose of the Demerger. In particular, with the Demerger, Autogrill S.p.A. transferred to WDF S.p.A. its investment in World Duty Free Group SAU ( WDFG SAU ), a parent of a group operating in the Travel Retail & Duty Free sector. Based on the approach already followed in the consolidated financial statements of the Group as at and for the year ended December 31, 2013, the Director s Report considers in the column 1st Half 2013 the combined financial and economic results of the World Duty Free Group for the six month period ended June 30, 2013, irrespective of the Demerger s effective date. This column represents, therefore, the economic and financial results of WDF S.p.A. for the period from March 27, 2013 to June 30, 2013 and the consolidated results of the WDFG SAU Group for the six month period ended June 30, Financial highlights in millions of Euro 1st Half st Half 2013 change change at constant exchange rates Revenue 1, % 13.8% EBITDA (3.2%) (3.4%) EBITDA margin 10.2% 11.9% Cash EBITDA % 6.1% EBIT (10.5%) (11.0%) EBIT margin 5.6% 7.1% Net Profit (34.1%) (34.1%) % of revenue 2.7% 4.6% Free Operating Cash Flow 75.7 (137.1) n.a. CAPEX % % revenue 3.4% 1.1% Basic earnings per share (in cents Euro) Diluted earnings per share (in cents Euro) in millions of Euro June 30, 2014 December 31, 2013 change Net invested capital 1, ,445.9 (1.2%) Net financial position ,026.7 (4.8%) 7

8 1.2.2 Income Statement Results Condensed Consolidated Income Statement (m ) st HALF % on Revenue Revenue The Group closed the 1st Half of 2014 with consolidated revenue of Euro 1,046.9 million, +13.4% compared to the previous year s figure of Euro million. At constant exchange rates, revenue increased by +13.8%, since the exchange rate trends of the currencies other than Euro in which WDFG operates had a slightly negative impact on revenue due to USD weakness against the Euro being offset by sterling strength versus the Euro. The US Retail Division, acquired in September 2013, had an impact on total revenue of Euro 65.0 million for the 1st Half of Excluding the US Retail business, sales grew by +6.4% at both current and constant exchange rates. Revenue related to the airport channel amounts to Euro 1,026.6 million or 98.1% of the total revenue generated in the 1st Half of The Group also supplies s commercial and operating services in certain cultural institutions in Panama and Spain and logistic and wholesale commercial services for different categories of customers, for amounts of 1.9% of the Group s total revenue, amounting to Euro 20.3 million. Category sales mix movements versus the 1st Half of 2013 were impacted by the inclusion of the US Retail Division with a different category profile. Excluding this effect, the airport sales growth above the average was seen in the Beauty, Tobacco and Food categories. This is supported by a strategy focusing on Beauty excellence. Beauty airport sales at Euro million (+7.8% versus 2013) are 42.0% of the airport sales. Wine & Spirits sales grow in line with the average % on Revenue Change constant 2014 exchange rates Revenue 1, % % 13.4% 13.8% Other Operating Income % % 16.0% 19.3% TOTAL REVENUE AND OTHER OPERATING INCOME 1, % % 13.5% 13.8% Cost of goods sold (421.9) 40.3% (374.6) 40.6% 12.6% 13.1% Personnel expense (125.8) 12.0% (99.7) 10.8% 26.2% 26.2% Rents&Royalties (334.7) 32.0% (292.0) 31.6% 14.6% 14.9% Other operating cost (72.0) 6.9% (58.7) 6.4% 22.7% 24.7% EBITDA % % (3.2%) (3.4%) Depreciation, amortisation and impairment losses (47.6) 4.5% (44.2) 4.8% 7.7% 7.9% EBIT % % (10.5%) (11.0%) Net Financial expense (20.6) 2.0% (13.6) 1.5% 51.5% 50.0% Revaluation of financial assets % (0.2) 0.0% (150.0%) (150.0%) Pre tax profit % % (26.3%) (26.4%) Income tax (10.2) 1.0% (9.3) 1.0% 9.7% 8.6% Net profit attributable to: % % (34.1%) (34.1%) - controlling interest % % (38.9%) (38.9%) - non-controlling interest % % 145.5% 145.5% 8

9 Change in Revenue (in Euro million) 1, , , , , (0.3) Revenues H Forex effect United Kingdom Rest of Europe Americas (ex US Retail) Asia & Middle East Revenues H (ex US Retail) US Retail Revenues H Ebitda Ebitda amounted to Euro million, down 3.2% from Euro million in the 1st Half of Ebitda margin was 10.2% on revenue compared to 11.9% in the same period of Change in Ebitda margin 13.0% 12.0% 11.9% (1.1%) 11.0% 10.0% 10.8% (0.6%) 10.2% 9.0% 8.0% 7.0% 6.0% Ebitda margin H Rents & Royalties Ebitda margin H (ex US Retail) US Retail Ebitda margin H The decrease in the Ebitda margin was driven by two factors: higher rents in new contracts in Rest of Europe along with the dilutive contribution of the US Retail Division business, since the products sold in the United States have a lower marginality. Cash Ebitda was Euro million, +6.2% compared to Euro million in the 1st Half of 2013 (+6.1% at constant exchange rates). 9

10 Depreciation and amortization In the 1st Half of 2014, Depreciation and amortisation reached Euro 47.6 million, +7.7% compared to Euro 44.2 million recorded in the same period of 2013, mainly due to the contribution of the US Retail during the 1st Half of 2014 as well as the additional investments made during the last 12 months. Net Financial Expense Net financial expense in the 1st Half of 2014 reached Euro 20.6 million, higher by Euro 7.0 million compared to the same period of 2013, mainly due to higher debt amount resulting primarily from the payments relating to the extraordinary dividend to Autogrill, S.p.A. of Euro 220 million and the Euro 80 million acquisition of the US Retail Division to Autogrill Group, made in June 2013 and September 2013, respectively. In the 1st Half of 2013, this caption included the expenses relating the cancellation of the former financing. Income Tax In the 1st Half of 2014, Income Tax was Euro 10.2 million compared to Euro 9.3 million in the same period of The average tax rate increased to 26.7% in the 1st Half of 2014 from 17.9% in the six first months of 2013 due to the short term different tax impact of the net investment hedge in both periods (income tax expense of Euro 3.5 million in the 1st Half of 2014 against a tax benefit of Euro 4.2 million in the same period of 2013; see note of the condensed interim consolidated financial statements, section Other comprehensive income). Excluding this effect, the average tax rates would have been 17.7% and 26.1% in the first half of 2014 and 2013, respectively. This decrease mainly comes from the tax rate reduction in the UK along with lower profits generated in regions with higher tax rates. Net Profit for the period In the 1st Half of 2014, Net profit was Euro 28.0 million, lower by Euro 14.5 million compared to Euro 42.5 million recorded in the same period of 2013, mainly driven by lower EBIT and higher net financial expenses. Net profit attributable to owners of the parent and to non-controlling interests was Euro 25.3 million and Euro 2.7 million, respectively, while the 1st Half of 2013 saw Euro 41.4 million and Euro 1.1 million, respectively. 10

11 1.2.3 Financial position Reclassified consolidated statement of financial position in millions of Euro June 30, 2014 December 31, 2013 change Intangible assets 1, , Property, plant and equipment Financial assets (8.1) A) Non-current assets 1, , Inventories Trade receivables Other receivables Trade payables (295.5) (235.5) (60.0) Other payables (125.1) (119.2) (5.9) B) Working capital (136.4) (107.0) (29.4) C) Invested capital, less current liabilities (A+B) 1, ,239.4 (16.6) D) Other non-current non-financial assets and liabilities (9.5) E) Assets held for sale F) Net invested capital (C+D+E) 1, ,445.9 (17.2) Equity attributable to owners of the parent Equity attributable to non-controlling interests (0.1) G) Equity Non-current financial liabilities 1, Non-current financial assets H) Non-current financial indebteness 1, Current financial liabilities (31.8) Cash and cash equivalent and other current financial assets (69.9) (35.8) (34.1) I) Current net financial indebteness (23.5) 42.4 (65.9) Net financial position (H+I) ,026.7 (49.3) The net invested capital was Euro 1,428.7 million, Euro 17.2 million lower than the amount shown as at December 31, 2013, mainly due to the change in working capital offset by the increase in Property, plant and equipment. The increase in property, plant and equipment is connected with the investments made that are described in the section of this report relating to capital expenditure. The change in working capital is mainly due to the net effect of the increase of the balance of trade payables and inventories that typically follows seasonality patterns. Moreover, the change in trade payables includes the payment of Euro 12.3 million made in the 1st Half of 2014 to HMS Host as a net working capital adjustment as set out in the Sale and Purchase Agreement signed in July 2013 for the acquisition of the US Retail Division (see note of the condensed interim consolidated financial statements). Excluding this effect, the increase in trade payables would have been Euro 72.3 million. In June 2014, the Group entered into a purchase and sale agreement, subject to the fulfillment of certain conditions precedent, in order to sell its investment in the associate Creuers del Port de Barcelona, S.A to a third party. Accordingly, the investment has been reclassified as Assets held for sale in the statement of financial position. 11

12 Change in net financial position 1,050 1,030 1,010 1, (120.8) (23.5) NFP Forex effect Cash EBITDA Change in Net tax/interest working capital paid Net CAPEX outflow Dividends paid Other movements NFP In the first six months of 2014 the net financial position has decreased to Euro million from Euro 1,026.7 million at the end of 2013, thanks to the strong cash generation described in the following section. Net Cash Generation 1st HALF Million EUR Change EBITDA (3.5) Change in working capital and net change in noncurrent non-financial assets and liabilities (35.7) AENA advance payment (net) 14.5 (275.0) Other non-cash items (0.2) 0.5 (0.7) CASH FLOW FROM OPERATIONS (105.5) Tax (paid) / refund (15.2) (15.9) 0.7 Net interest paid (22.8) (8.3) (14.5) NET CASH FLOW FROM OPERATIONS (129.7) Net CAPEX outflow (30.4) (7.4) (23.0) FREE OPERATING CASH FLOW 75.7 (137.1) Free Operating Cash Flow was Euro 75.7 million in the 1st Half of 2014, showing a strong underlying cash generation despite being affected by the higher than prior s year payments on Net Interest (mainly due to the increase on the debt level) and Net Capex outflow (following the higher level of investment required mainly in the new contracts in Spain and the Rest of Europe). 12

13 Cash flow from operations was Euro million in the 1st Half of 2014, compared to Euro (105.5) million in the same period of The corresponding period of the previous year was impacted by the net advance payment of Euro million made to AENA to be offset against future rent payments. The change in net working capital and in non-current non-financial assets and liabilities in the 1st Half of 2014 includes the already mentioned payment of Euro 12.3 million to HMS Host Corporation. Excluding this effect, the change in net working capital would have been Euro 35.8 million, thanks to a very positive cash generation during the second quarter of Capital expenditure Net capital expenditure was Euro 35.4 million, up from Euro 9.7 million in the 1st Half of 2013 and rose from 1.1% to 3.4% of revenue. It mostly concerned the new and extended concessions in European airports totaling about Euro 30.1 million. 1.3 BUSINESS SEGMENTS 1H 2014 Million EUR UK Rest of Europe Americas Asia and Middle East TOTAL Revenue ,046.9 Other Operating Income TOTAL REVENUE AND OTHER OPERATING INCOME ,060.7 EBITDA Depreciation, amortisation and impairment losses (17.3) (19.5) (6.6) (4.2) (47.6) Operating Profit (loss) 45.7 (3.2) H 2013 Million EUR UK Rest of Europe Americas Asia and Middle East TOTAL Revenue Other Operating Income TOTAL REVENUE AND OTHER OPERATING INCOME EBITDA Depreciation, amortisation and impairment losses (18.7) (16.6) (4.5) (4.4) (44.2) Operating Profit (loss) Revenues In the United Kingdom revenue reached Euro million, compared with Euro million in the first half of 2013, representing an increase of 6.6% despite the weak performance of Heathrow, offset by other main airports. At constant exchange rates the growth was 2.9%. Heathrow Airport recorded sales of Euro million (-1.5% at constant exchange rates). This compares to a traffic 2 increase of +1.9%, with these volume gains being seen across all destinations (Non-EU, EU and Domestic traffic). Spends at constant exchange are an adverse 3.4% on these destinations. Non-EU spend decline is focused on countries where local currency has weakened versus the sterling (e.g. Russia, China, Japan, Norway, South Africa). Outside Heathrow the remaining UK sales were Euro million, growing strongly by +7.1% at constant exchange rates. This growth was achieved jointly between passenger volume increases and spend gains, with the stronger sterling not impacting on these airports to the same level. Gatwick at Euro 83.9 million sales grew by 4.9% at constant exchange rates. Passenger volumes 3 2 Heathrow Airports Ltd, January-June Gatwick Airport, January-June

14 improved by 7.8%, however a spend decline of 2.9% was driven by Gatwick South, with the sales of some shopsdeclining through adverse passenger flows and lower Norwegian spends. Manchester at Euro 43.2 million sales improved 5.2% at constant exchange, driven fully by +5.1% traffic 4. Stansted with Euro 26.6 million sales achieved a constant exchange rate growth of +16.0%. The airport attracted greater passenger volumes 5 of +7.6% whilst also increasing spends +8.4%. Rest of Europe sales were Euro million, +10.5% versus Of this, some Euro 19.4 million sales were from Wholesale and Palacios y Museos businesses, which are -7.2% versus the first half of Rest of Europe Airport sales were Euro million, up +12.0% compared to Euro million in the first half of This Euro 30.3 million sales increase includes Euro 8.0 million of sales or +3.2% from the new Helsinki business. A sales increase of Euro 22.2 million was seen across Spain, Germany and Italy combined, being +8.8% versus last year. Spain airport sales at Euro million improved +9.2%. This growth is despite the exclusion of the lost non-core categories 6 and also despite the collateral disruption 7 caused by refurbishment works being carried out in Spanish Airports. (Spain airport sales excluding this lost non-core categories effect showed growth of +11.2% while traffic 8 increased by +4.2%). The Spain airport revenue increase was despite Madrid sales dropping by Euro -7.6 million or %, affected by the lost non-core categories and poor spends on domestic traffic. Madrid spends were -14.6% after traffic volume gains of +3.3%. Spanish airport sales excluding Madrid were Euro million, being Euro million or +17.8% higher. This included a +4.4% gain on passenger volumes. Sales growth was led by the Canary Islands; most Canary airport sales showed strong growth, particularly the new Tenerife Sur main store, driving Euro 7.6 million growth. Refurbishments that went first on the investment plan for the airports in Spain like Palma de Mallorca or Malaga are now paying-off, with Palma being +17.9% (fully driven by spend increase) and Malaga +16.8% (traffic +7.7% and spends +9.1%). Other airports outside Spain improved Euro 35.7 million, or Euro 27.7 million excluding the addition from the new opening in Helsinki. Italy was down Euro 1.0 million against the corresponding prior year period while Dusseldorf has seen a Euro 2.3 million sales increase, despite development disruption continuing all through the period. The Americas revenue amounted to Euro million, up 56.8% at constant exchange rates. The acquisition of the US Retail Division in September 2013 contributed 1 st Half Euro sales of 65.0 million. Americas sales growth at constant exchange rates excluding US Retail came to 7.5%. 4 Manchester Airport, January-June Stansted Airport, January-June Certain non-core categories, like Luxury, were excluded from the scope of the AENA tender won by the Group in December Obviously, while the refurbishment works derived from the new contract in Spain are taking place, the affected shops are not at full speed. 8 AENA, January-June

15 North America airports drove this growth, with Vancouver at +23.1% at constant exchange rates. A complete store development here giving improved Luxury and Beauty propositions have pushed strong sales gains on high-spending Chinese passengers. LATAM airport sales declined 0.5% at constant exchange rates. Jamaica improved by 73.2% as a local competitor closed and business sales moved to WDFG store, improving predominantly liquor sales. Peru recovered from a disappointing Quarter 1 to be up 9.5% at constant exchange rates for the 1 st Half, with Quarter 2 sales being driven by strong commercial activity. Chile was down by 9.1% in the 1 st Half with Quarter 2 showing signs of recovery compared to Quarter 1, as the development work progressed. For Chile, continued local currency weakness and new taxes impacting spends on high spending nationalities such as Argentineans still affect the sales. Asia and Middle East revenue amounted to Euro 82.5 million, up 9.7% on constant exchange rates. This growth has been driven entirely by Jordan, with sales of Euro 40.1 million being up 19.9% on constant exchange rates. The new walkthrough development completed has been the most important factor, using slightly improved passenger volumes to increase spends substantially. This benefit has now annualized but spend gains continue. Outside of this, Kuwait sales are slightly ahead of Sri Lanka sales are marginally down, as it competes directly with another travel retailer at the airport. Ebitda In the United Kingdom, Ebitda was Euro 63.0 million, being 1.4% higher in respect to Euro 62.1 million in the first half of However, Ebitda was down 1.8% at constant exchange rates. The Ebitda margin came to 13.7% compared to 14.4% in the corresponding prior year period. Operational costs increased as Heathrow moved from 4 terminals to 5 terminals on the same sales base, with the new terminal 2 being opened in June In the Rest of Europe, the Ebitda reached Euro 16.3 million, a drop of 31.2% with respect to Euro 23.7 million reported in the corresponding period of 2013, while the Ebitda margin came to 5.4%, versus the prior year at 8.7%. This 3.3% drop was accounted for by the increase in rentals, with the Spanish tendered business going live at higher rentals from mid-may 2013, and by the weak performance in the Madrid airport. In the Americas, Ebitda amounted to Euro 13.9 million, improving by 4.5% at current exchange rates in respect of the Euro 13.3 million reported in Ebitda improved by Euro 0.6 million, through the new US Retail business inclusion. Excluding US Retail, the Americas business Ebitda increased by Euro 0.1 million despite lower sales volumes and margins being adversely impacted by currency. The Ebitda margin of 9.7% in 2013, stays flat on a like-for-like basis, then lowers by 2.8% to 6.9% after the US Retail business is included. In Asia and the Middle East, Ebitda amounted to Euro 13.1 million, improving by 28.0% at current exchange rates compared to Euro 10.7 million reported in the first half of The Ebitda margin was 15.9%, increasing by 2.3 percent points from 13.6% in 2013 through reduced operating expenses. Depreciation, amortization and impairment losses The United Kingdom accounted for a reduction of Euro 1.4 million compared to the 1st Half of 2013, since investment levels in the UK were relatively low throughout the last 12 months. The Rest of Europe increased by Euro 2.9 million derived from investments in Spain. The Americas increased Euro 2.1 million basically due to the incorporation of the US Retail Division. Asia and Middle East sees no significant variance versus the corresponding prior year period. 15

16 1.4 PERFORMANCE IN THE SECOND QUARTER OF 2014 Revenue Group revenue at Euro million for the second quarter 2014, up 15.9% at current exchange rates (+8.9% at constant exchange rates and excluding the contribution of US Retail Division) against the same quarter of Adverse Easter timing from Quarter 1 feeds into a stronger Quarter 2 sales output. Revenue in the United Kingdom airports reached Euro million, up 4.0% at constant exchange rates (+8.3% at current exchange rates) compared to the second quarter of 2013, driven by traffic (up 4.6% across listed airports) alongside higher spend per passenger. Heathrow Airport recorded sales of Euro million (down 0.2% at constant exchange rates) despite a traffic increase of 1.9%. Passenger spends are down 3.5% with level close to sterling forex appreciation. Sterling prices are being seen as poor value to non-sterling traffic. Outside Heathrow the positive sales performance continued into the second quarter, with sales of Euro million being 7.5% higher than in the corresponding period of 2013 at constant exchange rates. Stansted s positive results continued for the quarter, being 18.8% higher through 9.9% volume increases and a 8.9% spend gain supported by the abolition of the One Bag restriction. Gatwick (+4.4%) and Manchester (+7.9%) sales have both been fully volume driven with lower spends per passenger. Sales in the Rest of Europe were Euro million, up 15.6% compared to the same period of Airport sales of Euro million were Euro 26.3 million or 16.9% higher. The new Helsinki business contributed Euro 6.9 million, with Dusseldorf rising Euro 1.2 million as development progresses. Spanish airports improved by 13.5% versus the second quarter of 2013, even better than the promising +5.8% growth on traffic. Madrid is -7.0% though, primarily through a reduction in the average spending per passenger and non-core categories exit. Canary Islands grew +76.5% supported by Tenerife Sur improving Euro 7.1 million with the new store completion. Palma de Mallorca is +18.6%, Malaga is +16.6%, Alicante is +11.8%. Barcelona grew below two digits, recording +3%. In the Americas revenue amounted to Euro million, up 61.4% at constant exchange rates compared to the same period of This performance is affected by the change in the scope, with the new US Retail Division acquisition accounting for Euro 34.3 million sales (excluding the contribution of the US Retail Division, the growth at constant exchange rate would have been 10.0%). Canada grew 22.9% at constant exchange rates benefitting from new developments and brands. Jamaica grew 250.9% through competitor exit and store development. Peru grew 11.7% supported by strong promotions, however Chile was an adverse 2.9% with development disruption being reduced but is still a factor. In Asia and the Middle East, revenue amounted to Euro 44.3 million up 10.0% at constant exchange rates. The new Jordan walkthrough store drives an 18.9% growth, despite annualisation of the store opening now occurring. Ebitda Ebitda in the second quarter of 2014 amounted to Euro 71.0 million, showing an increase of Euro 1.2 million, +1.7% versus the same period of Excluding the US Retail Division, Ebitda would have remained flat compared to the second quarter of The Ebitda margin of 11.7% decreased by 1.6% from 13.3% in the second quarter 2013, mainly due to higher rents and operating costs along with the dilutive contribution of the US Retail Division, since the products sold in the United States typically have a lower marginality. 16

17 Capital expenditure In the second quarter of 2014 net capex was Euro 29.8 million (Euro 8.0 million in the corresponding period of the previous year), amounting to 4.9% of revenue, mainly driven by the investments in the European Airports. Depreciation, amortization and impairment losses In the second quarter of 2014 depreciation, amortization and impairment losses amounted to Euro 24.9 million, with an increase of Euro 3.2 million compared to Euro 21.7 million recorded in the same period of 2013 (14.7% at current exchange rates). Net financial expense In the second quarter of 2014 net financial expense increased to Euro 9.9 million, compared to Euro 9.2 million of the same period of The change is primarily due to the increase in net debt amount already commented, mostly offset by the outstanding balance of the upfront fee written off in June 2013 relating to the financing cancelled in that month. Net Profit In the second quarter of 2014 the net profit reached Euro 25.6 million compared to Euro 30.4 million in the same period of The profit attributable to the owners of the parent amounted to Euro 24.0 million compared to Euro 29.8 million in the second quarter of OUTLOOK The first thirty weeks of 2014 (ending 27 July) delivered a growth rate in airport sales of 14.7% (+13.4% at constant exchange rates) compared to the same period of the previous year. Excluding the contribution of the US Retail Division acquired in September 2013, revenue grew 7.2% (+6.1% at constant exchange rates) with all the regions recording positive growth rates at constant exchange rates. The Group expects to generate revenue for the twelve months of 2014 between Euro 2,375 2,425 million, thanks mainly to the full year consolidation of the US Retail Division acquired in September 2013 as well as to the contribution of the new operations in Helsinki and the expected overall growth across all the regions and the full year additions to the scope of operations. Cash Ebitda is expected to be within a range of Euro million; this translates into Ebitda of between Euro million, with margin on sales below the previous year, basically due to the dilution derived from the contribution of the US Retail Division, with lower profitability than the rest of the group, and higher forecast rent levels (particularly in Spain). The Group expects the net financial position to be in a range within Euro million, projecting a remarkable deleverage despite the higher than prior year s level of net capex outflows and net interest payments. 1.6 OTHER INFORMATION Related party transactions Transactions with the Group s related parties do not qualify as atypical or unusual and fall within the normal scope of operations. They are conducted in the interest of the Group on an arm s length basis. Information about related party transactions during the first six months of 2014 is provided in Note of the condensed interim consolidated financial statements. On June 18, 17

18 2014 the Board of Directors of World Duty Free S.p.A. resolved to approve the reverse merger of World Duty Free Group S.A.U. in World Duty Free Group España, S.A. In accordance with Art. 14, paragraph 2, of the regulations adopted by Consob resolution no /2010 concerning operations with related parties (the Consob OPC Regulations ) and Art of the procedure relating to operations with related parties of the Company, the Company exercises the right to not apply the said procedure in relation to the reverse Merger of WDFG SAU in WDFG España, which can be described as an operation of major relevance within the terms of Art. 4, paragraph 1 a) of the Consob OPC Regulations as other related parties of the Company have no significant interest in WDFG SAU and WDFG España Events after the reporting period No events have occurred which would have required an adjustment to the amounts reported in the condensed interim consolidated financial statements or would have required additional disclosures in this report or the notes to the condensed interim consolidated financial statements Main risks and uncertainties for the remaining six months of the year The projections contained in this document are based on the most up-to-date information available. However, economic conditions around the world are highly unstable, making predictions less reliable than usual. Barring any significant unforeseen disruptions (see the 2013 Annual Report for a description of the main risks to which the Group is exposed), the main uncertainties for the second half of the year concern the global market conditions, air traffic trends and traveler s inclination to spend Share buy-back programme On June 18, 2014, WDF S.p.A. announced the launch of a share buy-back programme for up to 12,726,000 shares, representing 5% of its share capital, in accordance with the authorization granted by the shareholders in their meeting held on May 14, The programme has the following aims: a) the carrying out of investment and the establishment of an inventory of shares to be used in each case subject to the provisions in force, either directly or through intermediaries for interventions to contain abnormal movements in prices and stabilise the performance of trading and prices, in the event of momentary phenomena caused by an excess volatility or low trading liquidity; b) use treasury shares to serve any share incentive plans for directors and employees of the Company and / or companies directly or indirectly controlled, either by the free grant of options to purchase, or through the 'attribution of free shares (known as stock option plans and stock grant); (c) acquire its own shares to be used, in line with the strategies of the Company, in capital transactions or other transactions in relation to which it is necessary or appropriate to exchange or sell of blocks of shares by means of an exchange, transfer or other method of disposal. The purchases of treasury shares must take place when referring to the purposes referred to in subparagraph (a) above, at a price inclusive of purchase costs no lower than 20% and not more than a maximum of more than 20% compared the official price of the ordinary shares registered by Borsa Italiana, S.p.A. on the trading day preceding the day on which the purchase is made, or, if referring to the purposes specified in subparagraphs (b) and (c) above, at a price inclusive of purchase costs not less than the minimum of more than 20% and not more than a maximum of more than 20% over the weighted average of the official prices of the ordinary shares of World Duty Free recorded by Borsa Italiana S.p.A. over the last ten trading days prior to the date of 18

19 purchase or price fixing. Based on this criterion, established by the shareholders, the Company is presently unable to estimate the maximum amount of purchases that will be made under the program. Purchases may be transacted on regulated markets and may also be made by trading options or financial instruments based on World Duty Free stock pursuant to the provisions of the law, including, but not limited to, the Rules of the markets organized and managed by Borsa Italiana S.p.A., the Italian Legislative Decree 58/98, the Issuers' Regulations and all other applicable regulations, and therefore the rules laid down in Directive 2003/6/EC and its implementing rules and accepted EU and domestic levels practices. The number of treasury shares acquirable each day must not exceed 25% of the average volume of World Duty Free stock traded in the previous 20 trading days. World Duty Free will disclose to the market the details of any transactions as indicated by relevant legislation and regulations. The buy-back programme may be implemented in one or more tranches within 18 months of the date of the aforementioned shareholders resolution, ie. by November 14, As of today, the company does not own any treasury shares. Shareholder approval does not put the Company under any obligation to make share purchases. The programme may also be implemented on a partial basis and revoked at any time, provided such decisions are promptly disclosed to the market. 19

20 2. CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 2.1 STATEMENT OF FINANCIAL POSITION Notes 2,014 At June 30, At December 31, of which related of which related 2,013 parties parties ASSETS Current assets 354, ,450 2,031 Cash and cash equivalents ,117-22,772 - Other financial assets ,694-12,994 - Tax assets ,845-13,019 - Other assets , ,595 2,013 Trade receivables , , Inventories , ,593 - Assets held for sale , Non-current assets 1,644,527-1,639,759 - Property, plant and equipment , ,100 - Investment property ,375-6,556 - Goodwill , ,234 - Other intangible assets , ,478 - Equity investments ,822 - Other financial assets ,004-32,228 - Deferred tax assets ,536-29,100 - Other assets , ,241 - TOTAL ASSETS 2,007, ,923,209 2,031 LIABILITIES AND EQUITY LIABILITIES 1,556,144 6,053 1,504,074 21,671 Current liabilities 466,989 6, ,928 21,671 Trade payables , ,493 15,529 Tax liabilities ,868-18,351 - Other liabilities ,304 1,284 88,948 2,287 Other financial liabilities ,441 3,955 6,278 3,855 Bank loans and borrowings ,951-71,915 - Provisions for risks and charges ,906-11,943 - Non-current liabilities 1,089,155-1,071,146 - Other liabilities ,401-2,752 - Other financial liabilities ,751 - Loans, net of current portion , ,519 - Deferred tax liabilities ,438-63,939 - Employee benefits ,804-11,904 - Provisions for risks and charges ,579-8,281 - EQUITY 451,329 (2,389) 419,135 (4,006) - attributable to owners of the parent ,208 (2,389) 410,983 (4,006) - attributable to non-controlling interests ,121-8,152 - TOTAL LIABILITIES AND EQUITY 2,007,473 3,664 1,923,209 17,665 20

21 2.2 INCOME STATEMENT Notes 1st Half 2014 of which related parties 1st Half 2013 of which related parties Revenue ,046, , Other operating income ,836-11, Total revenue and other operating income 1,060, , Supplies and goods (421,886) - (374,600) - Personnel expense (125,739) - (99,680) 572 Leases, rentals, concessions and royalties (334,687) - (292,012) - Other operating expense (72,107) (2,326) (58,638) (341) Depreciation and amortization (47,645) - (44,189) - Impairment losses on property, plant and equipment and intangible assets - - (2) - Operating profit 58,697 (2,326) 65, Financial income ,772-4,702 - Financial expense (26,374) (63) (18,268) (654) Impairment losses on financial assets (224) - Pre-tax profit 38,197 (2,389) 51,828 (103) Income tax (10,215) - (9,273) - Profit for the period 27,982 (2,389) 42,555 (103) Attributable to: - owners of the parent 25,316 (2,389) 41,427 (103) - non-controlling interest 2,666-1,128 - Earnings per share (in cents) basic diluted The combined financial information for the six-month period ended June 30, 2013 has been prepared in accordance with paragraph Accounting policies, basis of preparation and consolidation. 21

22 2.3 STATEMENT OF COMPREHENSIVE INCOME Notes 1st Half st Half 2013 Profit for the period 27,982 42,555 Comprehensive income items that will not be subsequently reclassified to profit or loss Net actuarial losses on defined benefit plans (6,132) (8,296) Income tax on comprehensive income items that will not be subsequently reclassified to profit or loss ,226 1,797 Total comprehensive income items that will not be subsequently reclassified to profit or loss (4,906) (6,499) Comprehensive income items that will be reclassified subsequently to profit or loss Effective portion of fair value change in cash flow hedges ,561 Foreign currency translation differences for foreign operations ,118 (22,893) Gains (losses) on net investment hedge (11,565) 14,100 Income tax on comprehensive income items that will be subsequently reclassified to profit or loss ,233 (4,998) Total comprehensive income items that will be subsequently reclassified to profit or loss 11,574 (11,230) Total comprehensive income for the period 34,650 24,826 - attributable to owners of the parent 31,970 23,791 - attributable to non-controlling interests 2,680 1,035 The combined financial information for the six-month period ended June 30, 2013 has been prepared in accordance with paragraph Accounting policies, basis of preparation and consolidation. 22

23 2.4 STATEMENT OF CHANGES IN EQUITY (note ) Share capital Legal reserve Reserves Hedging reserve Transalation reserve Equity attributable to owners of the parent Equity attributable to non-controlling interests Balance as of January 1, 2013* ,482 (4,258) (28,683) 595,541 2, ,198 Comprehensive income for the period Profit for the period , ,427 1,128 42,555 Effective portion of fair value change in cash flow hedges, net of tax effect ,794-1,794-1,794 Translation differences on foreign investments (23,375) (22,801) (93) (22,894) Gains (losses) on net investment hedge, net of tax effect ,870 9,870-9,870 Net actuarial losses on defined employee benefit plans - - (6,499) - - (6,499) - (6,499) Total comprehensive income for the period ,502 1,794 (13,505) 23,791 1,035 24,826 Contributions by and distributions to owners of the parent Incorporation of WDF SpA (March 27, 2013) Dividend distribution - - (220,000) - - (220,000) (80) (220,080) Share-based payments Total contributions by and distributions to owners of the parent (219,968) - - (219,848) (80) (219,928) Equity Balance as of June 30, ,016 (2,464) (42,188) 399,484 3, ,096 * The combined financial information for the six month periods ended June 30, 2013 has been prepared in accordance with paragraph "Accounting policies, basis of preparation and consolidation" Share capital Legal reserve Reserves Hedging reserve Transalation reserve Equity attributable to owners of the parent Equity attributable to non-controlling interests Balance as of January 1, ,720 12, ,445 (999) (44,903) 410,983 8, ,135 Comprehensive income for the period Profit for the period , ,316 2,666 27,982 Effective portion of fair value change in cash flow hedges, net of tax effect Translation differences on foreign investments - - (93) - 19,196 19, ,117 Gains (losses) on net investment hedge, net of tax effect (8,095) (8,095) - (8,095) Net actuarial losses on defined employee benefit plans - - (4,906) - - (4,906) - (4,906) Total comprehensive income for the period , ,101 31,970 2,680 34,650 Contributions by and distributions to owners of the parent Dividend distribution (3,490) (3,490) Changes in Group consolidation perimeter ,091 Share-based payments - - (57) - - (57) - (57) Total contributions by and distributions to owners of the parent Equity (2,711) (2,456) Balance as of June 30, ,720 12, ,017 (447) (33,802) 443,208 8, ,329 23