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Dufry (DUFNSW; Ba2, BB; S) {AVOL SW Equity}

CONSUMER CYCLICALS
  • Dufry, the duty free retailer & now subsidiary of Avolta, has been given one-notch upgrade to Ba2 Stable by Moody's - its generally been rated one-notch lower by Moody's - i.e. a positive for potential rating action from S&P.
  • Moody's flags travel demand recovered faster than expectations in 2023 driving (adj.) EBITDA of CHF2.5b - that was up 900m yoy, it saw 230m of that as organic growth (i.e. ex. Autogrill acquisition).
  • It expects 5% organic revenue growth in 2024-25, slower than 9% forecast global air traffic growth this year due to Avolta exposure towards EMEA & Americas.
  • On the Autogrill acquisition; it notes it was credit positive with gross debt ex. leases declining by 200m last yr while Autogrill added EBITDA of over 600m. It expects 55m in cost synergies this yr.
  • It sees leverage at 4.6* to end last year and sees that as a temporary spike on lease liabilities - it expects it to come below 4* by end of this year and fall further next year on both EBITDA growth and amortisation of leases. It recognises mgmt net leverage target of 1.5*-2* (company reported 2.6* end of FY23) as support for this.
  • Front maturity is the €800m Oct 24's (€99.1), liquidity isn't a issue given CHF1.9b available in a RCF (total 2.75b facility). €27 & 28's trade at Z+125 & +160 - both unch today.
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