LAGARDÈRE SERVICES : TRAVEL FOR GROWTH! INVESTOR DAY LAGARDÈRE
Paris – 28 May 2014 INVESTOR DAY – Paris - May 28th, 2014 AGENDA
. A new Lagardère Services
. An attractive market on which Lagardère Services is well positioned
. A sustained growth exceeding expectations
. A widely demonstrated operational excellence
. An ambitious Vision for the future
2 LAGARDÈRE SERVICES IN A SNAPSHOT
Lagardère Services IFRS key financials (€m, 2013)
3,745 96
1,493 60
2,252 58
HO costs Sales -22 & non-core
Recurring EBIT
Source: Lagardère Services 3 INVESTOR DAY – Paris - May 28th, 2014 AN AMBITIOUS TRANSFORMATION STRATEGY ANNOUNCED IN 2012
Source: Lagardère Services Investor Day June 12, 2012 4 INVESTOR DAY – Paris - May 28th, 2014 IN DISTRIBUTION, NEW INVESTORS SEEKED TO DEVELOP AND REINVENT THE BUSINESS
. LS Distribution can be further developed and reinvented. It requires investments Lagardère Services is not ready to consent since its strategic focus is Travel Retail
. Lagardère Services initiated a process in 2013 to find investors willing to support this project
. Process is progressing according to plan
5 INVESTOR DAY – Paris - May 28th, 2014 IN TRAVEL RETAIL, €328M ADDITIONAL SALES SINCE 2011 FROM INTERNAL GROWTH1 Non-exhaustive Warsaw airport Lille station Frankfurt station . 10-year contract . 5 PoS to be opened: . 1,000 sqm food court . 3,000 sqm to be Eric Kayser, Marks & opened in May 2013 opened in early 2015: Spencer, Subway, . Kamps, Burger King, Aelia Duty Free, Trib’s, So! Coffee Rustichelli, etc. Armani, Longines, Ralph Lauren, etc.
Los Angeles Shenzhen’s new terminal airport
. 7 PoS opened in 2013 . 13 mono-brand or to be opened in luxury fashion boutiques opened in 2014: Petrossian, March 2014: Hugo James Beach, Cantina Boss, Versace, Laredo, Ill Forks, etc. Montblanc, etc. +€328m
ADP Singapore
2 airport . SPP Core DF +14% . Sales Fashion +95% . Sales +46%
JV with SNCF Malaysia Duty Free & Luxury . JV established in . Lonely Planet opened Travel Essentials 2014 in March 2013 . 300 PoS to be . Discover Malaysia modernized opened in May 2013 Foodservice
1. Internal growth being defined as life-for-like growth and growth from tenders won 2. Sales Per Passenger Source: Lagardère Services 6 INVESTOR DAY – Paris - May 28th, 2014 IN TRAVEL RETAIL, €258M ADDITIONAL SALES SINCE 2011 FROM EXTERNAL GROWTH1 Non-exhaustive
Gerzon Coffee Fellows
. 12 PoS in Schiphol . c. 20 PoS in train airport over 2,400 stations in Germany sqm . Exclusive master- . Key development in franchise in Travel Luxury Fashion Retail
Airest2
. c. €200m sales in over 200 PoS in 11 countries, mainly in airports Unimex
. Key development in . c. €20m sales in 2010 Foodservice . 15 PoS in Prague airports Rome Duty Free . Consolidation of our operations in Czech . €3.4bn over 14 years Republic . 8 PoS in Rome airports over more +€258m than 4,800 sqm . Strategic entry in Italy
DFS NZ
Duty Free & Luxury . PoS at Gold Coast, Adelaide, and four airports in NZ Travel Essentials . On-line sales platform . Consolidation of our Foodservice operations in Pacific
1. External growth being defined as growth deriving from acquisitions of companies. Including Retail Spain and Duty Free Switzerland 2. Airest also operates in Duty Free & Luxury Source: Lagardère Services 7 INVESTOR DAY – Paris - May 28th, 2014 GROWTH PROFILE ON TRACK AT MID-PLAN
Guidance June 2012 Achievements (From 2011 to 2016) 2011 - 20132
Sales1 +10% +10.5% per annum CAGR 2011 - 2013
Ebitda1 margin +0.5 pt to +1.0 pt +0.3 pt over five years after two years
1. Proportional view 2. LS travel retail pro-forma perimeter i.e. including Retail in Spain and Duty Free in Switzerland 8 INVESTOR DAY – Paris - May 28th, 2014 BEYOND FINANCIAL GUIDANCE, A TRULY GLOBAL TRAVEL RETAILER
Global reach: 30 countries, 150 airports Largest integrated Travel Retailer LS travel retail presence in airports Largest Travel Retailers by sales1 (As of April 30th, 2014) (€bn, 2013) Estimates 3.9
3.8
1.2 1.5 0.2
2.1 0.8
2.5 2.4
2.0 0.2
2.2
1.7 Duty Free & Luxury Top 100 airport in terms of PAX volume Other airport 0.2 1.3 Travel Essentials Foodservice
1. LS travel retail consolidated sales @100% Source: Lagardère Services, ACI, The Moodie Report 9 INVESTOR DAY – Paris - May 28th, 2014 AN EXPERIENCED TEAM TO FURTHER GROW IN TRAVEL RETAIL
Emmanuel Vincent de PLACE ROMET COO LS travel retail COO LS travel retail ASPAC EMEA
Luc Frédéric Dag Frédéric MANSION RENAULT RASMUSSEN CHEVALIER CFO EVP HR Chairman & CEO EVP Strategy & Communication
10 INVESTOR DAY – Paris - May 28th, 2014 AGENDA
. A new Lagardère Services
. An attractive market on which Lagardère Services is well positioned
. A sustained growth exceeding expectations
. A widely demonstrated operational excellence
. An ambitious Vision for the future
11 INVESTOR DAY – Paris - May 28th, 2014 TRAVEL RETAIL: A HIGHLY SPECIALIZED NICHE IN THE RETAIL WORLD
Café Leffe, Tours railway station
The Fashion Gallery, Changi airport
Traveler
hubiz, Warsaw metro station Brand
A multi-channel and multi-category industry
Source: Lagardère Services 12 INVESTOR DAY – Paris - May 28th, 2014 A €88BN MARKET
Travel Retail market size Estimates (€bn, %, 2013) S = €88bn S = €88bn
Foodservice 9% 24% RoW €35bn, 40% 32% 40% 37% €27bn, 31% Travel Essentials 12% 55% €13bn, 14% 54% ASPAC 30% 35% €32bn, 36% Duty Free & Luxury Fashion 64% 60% €40bn, 46% 45% Europe 37% 37% 27% €29bn, 33%
Airports Stations Others1 Airports Stations Others1 €37bn €14bn €37bn €37bn €14bn €37bn 42% 16% 42% 42% 16% 42%
1. Incl. ferries, inflight, downtown stores for Duty Free & Luxury, highways, hospitals, museums for Foodservice Source: Lagardère Services 13 INVESTOR DAY – Paris - May 28th, 2014 AN ATTRACTIVE INDUSTRY THANKS TO SOUND DRIVERS FUELLING TOP LINE GROWTH
Travel Retail PAX1 SPP2 market growth = growth x growth
Stores Category Nationality Travel Retail PAX commercial = x growth + + mix market growth growth effectiveness
Growth over + the past + + + + 10 years 7% - 10% p.a.
Expected growth over + the next + + + + 10 years 5% - 8% p.a.
1. Number of passengers 2. Spend per passenger Source: Lagardère Services 14 INVESTOR DAY – Paris - May 28th, 2014 SOUND DRIVERS FUEL TOP-LINE GROWTH (1/2) PAX GROWTH ILLUSTRATION
Sound long-term air traffic perspectives Global trends supporting rail traffic Air traffic evolution Length of high-speed railway lines (billions of passengers, 2013 - 2021) (thousands of km, 2012 - 2022)
CAGR 0,4 2.1 7.5 4% 0,3 1.2 5% 0,9 World 18 9 15 42 5.3 0,5 1.8 2% RoW 0.8 North 1.5 +138% America 2.4 7% ASPAC 1.4
2012 actual 2.1 3% Europe 1.6 Under construction Planned 2013 2021
Source: Lagardère Services, ACI, Frost & Sullivan May 2013 15 INVESTOR DAY – Paris - May 28th, 2014 SOUND DRIVERS FUEL TOP-LINE GROWTH (2/2) SPP GROWTH ILLUSTRATION
Category growth Commercial effectiveness Nationality mix
Heathrow Terminal 2 Top 10 spending nationalities – Weight in airport1 metrics (share of total international pax and of core duty-free sales, 2010 - 2013)
28% 20%
Berlin Hauptbahnhof 5% 6%
2010 2013
PAX Core Duty Free sales
1. Aéroports de Paris, Aeroporti di Roma, Prague Vaclav Havel airport, Nice airport Source: Lagardère Services 16 INVESTOR DAY – Paris - May 28th, 2014 LAGARDÈRE SERVICES WELL POSITIONED TO BENEFIT FROM INDUSTRY GROWTH
LS travel retail consolidated sales @100% breakdown by channel and business line (€bn, %, 2013) 2% S = €2.9bn
Foodservice €0.2bn, 7% 9% 25% Travel Essentials 36% €1.5bn, 52%
91% 59% Duty Free & Luxury Fashion 62% €1.2bn, 41%
16%
Airports Stations Others €1.8bn €0.6bn €0.5bn 60% 22% 18%
Source: Lagardère Services 17 INVESTOR DAY – Paris - May 28th, 2014 ATTRACTIVE INDUSTRY TRIGGERING HIGH RETURN, YET WITH VERY DIFFERENT P&L PROFILES
An Infrastructure Manager (IM) has a duty-free contract to Illustrative tender / a subsidiary running the duty-free to outsource…
Option A Iso-IRR Option B The IM favors high rents spread The IM favors cash now against over contract duration lower rents in the future Travel retailer key financials Travel retailer key financials Variable rent Variable rent (in percent of sales) (in percent of sales) Cumulated rent Cumulated rent (in €) (in €)
Capex & downpayment Capex & downpayment (in €) (in €)
EBITDA EBITDA (in percent of sales) (in percent of sales)
ROCE ROCE (in %) (in %)
Lagardère Services is rebalancing its development strategy and targets all kind of options Low High Source: Lagardère Services 18 INVESTOR DAY – Paris - May 28th, 2014 GROWING SOPHISTICATION REQUIRED TO SEIZE GROWTH AND MAINTAIN PROFITS
Marketing Operations
SNCF: 300 PoS, the vast majority to be refitted within 18 months
Business development …and more!
Abu Dhabi Airports unveils upcoming tender, Feb. 2014
Source: Lagardère Services 19 INVESTOR DAY – Paris - May 28th, 2014 LAGARDERE SERVICES’ INTEGRATED BUSINESS MODEL: A DIFFERENTIATING MODEL DELIVERING TOP LINE GROWTH
& a local …delivering A central development adaptation… growth Consolidated sales @100% (€bn, % CAGR, 2011-13) Duty Free core Aelia Duty Free, L’Occitane business BuY Paris +15% Fine Food & So Chocolate Fauchon Confectionery Luxury Fashion & The Fashion 0.9 1.2
Duty Duty Free & Hermès Accessories Gallery, Eye Love .Develop 2011 2013 .Partner with
News & Relay, hubiz Casino centrally key Convenience landlords +7% areas of Gifts & Lonely Discover expertise Souvenirs Planet .Select, adapt Travel Travel 1.3 1.5
Essentials Electronics & and operate Tech2Go FNAC .Partner with Media locally global brands 2011 2013 Quick Service Trib’s, Rustichelli & McDonalds Restaurant Mangione +41% Full Service The Flame Café Leffe Restaurant 0.2 So! Coffee, 0.1
Foodservice Bars & Cafés Starbucks deCanto 2011 2013 proprietary partner brands concepts Source: Lagardère Services 20 INVESTOR DAY – Paris - May 28th, 2014 POSSIBLE INDUSTRY CONSOLIDATION, ESPECIALLY IN DUTY FREE Estimates Top Travel Retailers’ relative size vs. LS travel retail (Base 100 for LS travel retail, 2013 pro-forma1)
Travel Essentials Foodservice Duty Free & Luxury Travel Retail Top 5 market share 19% 27% 23% 32%
Value of relative market share
125 100 1,000 311
123 53 53 560 198 High 100 36 36 354 191
93 100 168
79 9595 162 …
Low …
#10 49 #9 100
1. Airest and Gerzon acquisitions fully consolidated Source: Lagardère Services 21 INVESTOR DAY – Paris - May 28th, 2014 AGENDA
. A new Lagardère Services
. An attractive market on which Lagardère Services is well positioned
. A sustained growth exceeding expectations
. A widely demonstrated operational excellence
. An ambitious Vision for the future
22 INVESTOR DAY – Paris - May 28th, 2014 STRONG GROWTH OF TRAVEL RETAIL OVER THE PERIOD Lagardère Services IFRS consolidated sales (€m,%, 2011 - 2013)
+0.6%
3,724 3,745
1,041 936 Distribution 1,493 1,737 40% 47% Integrated 557 -14% 696 Retail
2,252 1,986 60% 53% +13%
2011 2013
Source: Lagardère Services 23 INVESTOR DAY – Paris - May 28th, 2014 FOLLOWING LS DISTRIBUTION DISPOSAL, A PURE TRAVEL RETAIL PLAYER, WITH €2.4bn SALES, Lagardère Services IFRS consolidated sales after Distribution disposal (€m, 2013) 2013 after Other perimeter Distribution Total 2013 Distribution1 impacts2 disposal
1,493 (1,379) (114)
92
2,252 2,344
HO costs & non core 22 22
3,745 2,366
1. LS Distribution perimeter to be sold 2. Curtis in the US, Retail in Spain, Duty Free in Switzerland Source: Lagardère Services 24 INVESTOR DAY – Paris - May 28th, 2014 LS TRAVEL RETAIL CONSOLIDATED SALE @ 100% UP BY 26% OVER THE PERIOD, CONSISTENTLY WITH GUIDANCE Bridge LS travel retail1 IFRS consolidated sales to consolidated sales @100% (€m, 2013) Financial markets Travel Retail benchmark benchmark
255 2,853 254 2,598 2,344
+26%
IFRS LS Share of Proportional JV’s Sales @100% JV’s2 100% 2011 1,986 2,127 2,267 CAGR 8.6% 10.5% 12.2%
1. Including Retail Spain and Duty Free Switzerland 2. Relay@ADP, C-Store, Dutyfly SDA, Lyon Duty Free, La Réunion, Time Newslink Source: Lagardère Services 25 INVESTOR DAY – Paris - May 28th, 2014 INTERNAL GROWTH REMAINS THE MAIN DEVELOPMENT PATH, HOWEVER SUCCESSFUL ACQUISITIONS ARE ACCELERATING THE GROWTH LS travel retail consolidated sales @100% growth breakdown by nature (€m, 2011 - 2013)
258 2,853
328 149 Tenders won +26% 2,267 179 Existing contracts
56% 44% of total growth of total growth
2011 Internal growth1 External growth2 2013
1. Net of the contracts terminated over the period 2. Including Retail in Spain and Duty Free in Switzerland Source: Lagardère Services 26 INVESTOR DAY – Paris - May 28th, 2014 AN INTERNATIONAL PLAYER OPERATING ACROSS ALL GEOGRAPHIES AND ALL CHANNELS
LS travel retail consolidated sales @100% breakdown by geography and channel (€bn, %, 2013) S = €2.9bn Others1 €0.5bn, 18% 13% 15% (vs. 21% in 2011) 32% 3% Stations €0.6bn, 22% 27% (vs. 24% in 2011) 13%
82% Airports €1.8bn, 60% 61% 55% (vs. 55% in 2011)
Western Europe Emerging countries Americas €1.9bn €0.8bn €0.2bn 67% 27% 6%
1. Incl. ferries, inflight, downtown stores for Duty Free & Luxury, highways, hospitals, museums for Foodservice Source: Lagardère Services 27 INVESTOR DAY – Paris - May 28th, 2014 GROWTH FUELED BY THE FAST GROWING AND MORE PROFITABLE DUTY FREE & LUXURY AND FOODSERVICE BUSINESS LINES… LS travel retail consolidated sales @100% by business line (%, 2011 – 2014 B)
6% Foodservice +41% 8% + 13%
+ Travel Essentials 55% +7% 51% 46%
Duty Free & Luxury 39% +15% 41% + 41%
2011 2013 2014 B
Source: Lagardère Services 28 INVESTOR DAY – Paris - May 28th, 2014 … DRIVING A FAVORABLE MIX EVOLUTION
LS travel retail consolidated sales @100% by product category (%, 2011 - 2014 B)
Other 26% 24% 22%
Food & Beverage 7% 10% 17%
Print 16% 14% 11% Liquor 6% 6% 6%
Tobacco 25% 24% 20%
Fashion 5% 6% 11%
Perfume & Cosmetics 15% 16% 14%
2011 2013 2014 B
Source: Lagardère Services 29 INVESTOR DAY – Paris - May 28th, 2014 LS DISTRIBUTION DISPOSAL: A €50M IMPACT ON THE RECURRING EBIT BEFORE ASSOCIATES Lagardère Services IFRS Recurring EBIT before associates after Distribution disposal (€m, 2013) Other perimeter 2013 Total 2013 Distribution1 impacts2 Pro forma
60 (56) (4)
2
58 60
HO costs & non core (22) 6 2 (14)
96 46
1. LS Distribution perimeter to be sold 2. Curtis in the US, Retail in Spain, Duty Free in Switzerland Source: Lagardère Services 30 INVESTOR DAY – Paris - May 28th, 2014 LS TRAVEL RETAIL EBITDA INCREASED BY 31%, ABOVE GUIDANCE LS travel retail bridge to Normalized Operating Ebitda (proportional) (€m, %, 2011; 2013)
128 110 18 +31% 98 50 60
Recurring Depreciation & Normalized LS Share Normalized 2011 Ebit before Amortization operating of JV’s Operating associates Ebitda Ebitda IFRS1 (proportional)
4.9% 4.6% of sales2 of sales2
+33bps
1. Including Retail in Spain and Duty Free in Switzerland 2. Consolidated, proportional view Source: Lagardère Services 31 INVESTOR DAY – Paris - May 28th, 2014 INCREASING INVESTMENT SUPPORTING A FASTER DEVELOPMENT PATH
Annual LS travel retail consolidated sales Annual total capital expenditures incl. @100% growth acquisitions in LS travel retail (€m, % CAGR, 2006 - 2013) (€m, 2006 - 2013)
319 +12%
2,853 Financial Tangibles & Intangibles 241 +8% 2,267 104 89 €103m 78 78 10 58 49 30 48 2 32 21 5 5 94 1,552 78 44 57 59 46 43 57
2006 2007 2008 2009 2010 2011 2012 2013 2006 2007 2008 2009 2010 2011 2012 2013
Source: Lagardère Services 32 INVESTOR DAY – Paris - May 28th, 2014 CONTINUED INCREASE OF LS TRAVEL RETAIL MATURITY RATE AND ABOVE 90% RENEWAL RATE MAINTAINED LS travel retail consolidated sales @100% breakdown by contract maturity (%, 2011 - 2013)
€2.3bn €2.9bn
Below one year 8% 8%
37% Two to five years 44% Renewal rate exceeds 90%
55% Above six years 48%
2011 2013
Source: Lagardère Services 33 INVESTOR DAY – Paris - May 28th, 2014 FAVORABLE EVOLUTION OF BUSINESS LINE MIX EXPECTED LS travel retail consolidated sales @100% by business line (%, 2011 - 2016 E)
Foodservice 5% 15%
Travel Essentials 55% 40%
Duty Free & Luxury 40% 45%
2011 2016 E
Source: Lagardère Services 34 INVESTOR DAY – Paris - May 28th, 2014 FAVORABLE EVOLUTION OF CHANNEL MIX EXPECTED LS travel retail consolidated sales @100% by channel (%, 2011 - 2016 E)
Others 21% 16%
16% Stations 24%
68% Airports 55%
2011 2016 E
Source: Lagardère Services 35 INVESTOR DAY – Paris - May 28th, 2014 AGENDA
. A new Lagardère Services
. An attractive market on which Lagardère Services is well positioned
. A sustained growth exceeding expectations
. A widely demonstrated operational excellence
. An ambitious Vision for the future
36 INVESTOR DAY – Paris - May 28th, 2014 AGENDA
. A new Lagardère Services
. An attractive market on which Lagardère Services is well positioned
. A sustained growth exceeding expectations
. A widely demonstrated operational excellence
. An ambitious Vision for the future
37 INVESTOR DAY – Paris - May 28th, 2014 GREAT RESULTS ACHIEVED THANKS TO OUR STAKEHOLDERS’ SUPPORT What we discussed today
Source: Lagardère Services 38 INVESTOR DAY – Paris - May 28th, 2014 NUMEROUS NEW CONTRACTS CURRENTLY ADDRESSABLE
Illustrative
Duty Free & Luxury
Travel Essentials
Foodservice
Multiple categories And many others…
Source: Lagardère Services 39 INVESTOR DAY – Paris - May 28th, 2014 CONFIDENCE IN OUR ABILITY TO CAPTURE SOME OF THESE OPPORTUNITIES
Fantastic portfolio of Pure Travel Retailer concessions
Great operational Winning positioning expertise
Source: Lagardère Services 40 INVESTOR DAY – Paris - May 28th, 2014 AN INCREASED FOCUS ON GROWTH
External growth
Duty Free & Luxury
Restructure Grow / Transform Foodservice
Travel Essentials
Internal growth Surface reflecting sales size
Source: Lagardère Services 41 INVESTOR DAY – Paris - May 28th, 2014 GUIDANCE IMPROVED LS travel retail1 guidance (€m, %, 2011; 2013; 2016)
Guidance May 2014 2011 Guidance June 2012 2013 (From 2011 to 2016) (From 2013 to 2016)
10.5% 2 +10% +5% to +10% Sales CAGR per annum 2011 - 2013 per annum
pt Ebitda2 margin 4.6% +0.5 to +1.0 pt 4.9% +1.0 pt over five years vs. 2013
1. LS travel retail pro-forma perimeter i.e. including Retail in Spain and Duty Free in Switzerland 2. Proportional view 42