FRANCE/INTERNATIONAL. Lagardère Travel Retail revenue fell by almost -55% to €947 million in the first half of 2020 compared to the same period last year, Lagardère Group revealed today.
The company said: “The closure of virtually all airport networks across the globe, particularly during the hardest-hit period from mid-March to mid-June, led to a slump in revenue, which hit a low in April (down -91% on 2019). Business has picked up slightly since, reaching levels around -82% lower than the same period in 2019, with activity expected to be -65% lower year-on-year in July.”
The division’s revenue fell by -52.5% based on consolidated figures and -54.5% like-for-like. The difference between consolidated and like-for-like data is attributable to a €38 million positive scope effect resulting mainly from the acquisition of International Duty Free (IDF) in Belgium and to a €2 million positive foreign exchange impact.
After a first quarter down -18% like-for-like (+1.3% over January and February and down -53.9% in March), the second quarter saw an -86% year-on-year fall (with decreases of -90.6% in April, -86.8% in May and -81.9% in June).
In France, business was down -59.8% like-for-like as a result of both the strikes which continued into the first month of 2020, and of the pandemic. The EMEA region (excluding France) retreated -53%, affected by travel restrictions and border closures introduced from March in every country across the region.
Revenue was also down in North America, contracting -53.2% amid the lockdown measures introduced in many states. Asia Pacific, the epicentre of the pandemic, was the first to be hit, with revenue down -52% over the period. However, the decline was limited by greater resilience from Mainland China, where revenue fell just -0.7% year on year in the second quarter, thanks to new openings in 2019, online and social media sales, and a gradual resumption of domestic travel.
Lagardère Travel Retail reported negative recurring EBIT of €209 million, down €255 million year on year, representing a flow-through rate of 24% based on consolidated figures.
The company said: “Systematic measures taken to protect earnings helped curb the negative impact of the revenue decline on operating profit to -24% versus a projection of between -20% and -25% for the year as a whole, as communicated at end of April.”
The main measures focused on overheads, which were reduced by around €220 million:
- renegotiation of financial terms (cancellation of fixed rental payments, lower rate of variable payments, deferred maturities);
- reduction in the number of points of sale opened and adjusted opening times
- reduction in payroll costs at all levels, with the introduction of furlough schemes if financed by local government. Where no such financing was available, redundancies or pay cuts were implemented;
- significant reduction in, or downward revision of, virtually all non-essential costs such as business travel costs, consulting fees, maintenance and cleaning expense, and royalties paid.
On trading so far in July, the group said: “Lagardère Travel Retail is continuing to experience a gradual, modest upturn in business. Revenue in July is expected to be around -65% lower year on year, and at the end of July, the vast majority of key airports and train stations in which Lagardère Travel Retail operates are now open.
“The division is pressing ahead with its agile strategy of reopening points of sale in line with the resumption of traffic and operational and contractual constraints, while aiming to maintain the points of sale that are open at operational breakeven.
“On this basis, the gradual, modest upswing is expected to continue through the second half of the year, albeit with the persistent risk of localised lockdowns and continued uncertainty over the US platforms. The division is continuing to implement extensive corrective measures with major impacts on rents and payroll costs in particular.
“These initiatives, combined with the launch of its global transformation plan (LEAP), will enable Lagardère Travel Retail to maintain the assumption of an adverse impact on full-year 2020 recurring operating profit of fully consolidated companies (recurring EBIT) in the region of 20% to 25% of the decrease in its revenue.”
Group revenue totalled €2,088 million, down -38% like-for-like. Overall Lagardère reported a loss before finance costs and tax of €476 million in first-half 2020, compared to profit of €98 million in H1 2019.
