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Dufry (now Avolta) (DUFNSW; Ba2/BB+) 1H (to June) Results

CONSUMER CYCLICALS

Firm results from the airport retailer and allows it to justify trading through most equal rated curves. Reminder this is exposed to travel, though right now that enhanced beta is benefiting it (see below graph for system growth it's riding there). We prefer Coty over Avolta only because former is targeting IG ratings (but contingent on Wella asset sale) while Avolta ratings already account for planned deleveraging. The new Coty 27s (effectively bullet given debt ahead of it) continues to be our value pick among the curves with some value (not firm view) to extend into the Dufry 28s. Regardless a rotation out of VFC - which is now trading close to both and facing a likely rough 1Q earnings next Tuesday - looks sensible to us.
All figures in CHF = €1.04


  • Revenue at 6.3b over 1H (+7% organic), gross profit at 65.5% margin (+100bps), adj. EBITDA at 568m (+16%) on a 9% margin (+40bps), adj. EBIT at 402m (+17%) on a 6.3% margin (+30bps). Adjusted figures are actually lower than IFRS reported EBITDA/EBIT and is on lease adjustments (normal).
  • Duty free was 35% of sales, duty-paid 30% and F&B 35%. By channel airports were 82%, motorways 10% and other (railways, ferries, ports) 8.1%.
  • By region EMEA (49% of group) was +10%, NA (34%) +7%, LATAM (12%) +1.2% and APAC (4.4%) -2.5%. That was over the half but trends were worse in LATAM and APAC over Q2 with -2.6% and -9.2% falls respectively. It says LATAM impacted by situation in Argentina. Not much colour on Asia - a tad concerning given it is investing to expand the footprint there.
  • It says "tight cost control" helped FCF come in at 286m. LTM leverage decreased to net 2.35x (-0.25x yoy) which it notes is getting close to target of net 1.5-2x (raters already account for a decrease into that). It reiterates cap. allocation policy of 1/3 Equity FCF (FCF net of interest payments) to dividends with remaining to deleveraging and growth.
  • On current consensus EBITDA (1.3b, +13%) we see it net 2.2x/gross 2.9x levered. * Guidance is surprisingly firm (vs. airlines); "Avolta has continued to see strong demand into summer, especially across all key holiday destinations. Avolta continues to believe that these positive trends will persist throughout the remainder of 2024"
  • Numerically it's pointing to MT target of +5-7% turnover growth, and +20-40bps in adj. EBITDA margin a year but noting 2024 will come in "at the top end of mid-term trends". It continues to expect FX impact of -2 to -3% this year and targets 4% of sales in capex.
  • This years maturity has already been addressed/we don't expect supply.

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