The world’s duty free retailer Dufry announced a set of initiatives to strengthen its capital structure and liquidity position.
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In addition to the cost saving and cash flow management measures announced on 12 March, 2020. These initiatives are designed to help the company sustain a prolonged period of significant disruptions and reinforce its competitive positioning in the longer term.
The business performance in the first quarter 2020 was characterized by completely different developments in each of the three months. In January, there was an organic growth increasing to +0.8%; in February, there was the first sales slowdown starting in Asia with organic growth decreasing to -2.3% year-to-date, while in March the increasing travel restrictions and airport closures resulted in a negative sales performance for the month of -55.9%. The turnover for the first quarter 2020 amounted to CHF 1,438.7 million, resulting in an expected organic sales growth performance of around -22.0%. In the first two weeks of April, Dufry has seen reduced sales levels in the amount of around 90% as compared to the same period in the previous year.
The implemented cost savings and cash flow management measures allow Dufry to considerably reduce its cash burn rate and to continue operations for a prolonged duration until the business environment normalizes, even in a scenario of sales reducing by 70%-80%, with shops being closed due to travel restrictions and with travel activities remaining at a minimum in the locations where Dufry operates its shops. During the months of April and May cash outflows will be higher than in the following months due to the payment of previously incurred costs.
The company has secured commitments from certain of its relationship banks based on a term sheet for an approx. CHF 425.0 million 12-month facility with two 6-months extensions. This allows to convert current uncommitted into committed facilities. The company is working with the group of banks to finalize the full documentation.
The company plans to undertake a private placement to institutional investors by means of an accelerated book-building procedure of up to 5,000,000 shares from its existing authorized share capital and up to 500,000 treasury shares. Members of the Board of Directors and Management plan to participate in the share placement with a meaningful amount.
In addition, Dufry plans to issue a senior, unsecured guaranteed convertible bond with an aggregate principal amount of CHF 300.0 million. The new convertible bond will also be placed by means of an accelerated book-building procedure with institutional investors.
Further to the actions outlined above, the Board of Directors also proposed to cancel the dividend payment for 2020, thus reducing short-term cash outflows.
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Julián Díaz, CEO of Dufry, added: “These equity measures, in addition to the new credit facility, the cancellation of the dividend and the other operational cost cutting measures being implemented, will significantly strengthen Dufry’s capital base and liquidity position. The initiatives are designed to help Dufry to weather the COVID-19 pandemic and current economic downturn even under a severe scenario, while also providing the company with enough flexibility to react to business opportunities arising in the context of the current situation. The company’s setup allows us to react fast and adapt to business requirements as needed, also in view of the travel recovery phase.”