ANNUAL
REPORT
2018
FOCUS
STORY
UNIQUE
SHOPPING
EXPERIENCES –
EXCLUSIVES,
LIMITED
EDITIONS, AND
NOVELTIES
Read the full focus story on the DUFRY exclusives and
limited editions on page 30 – 35.
3
DUFRY GROUP – A LEADING
GLOBAL TRAVEL RETAILER
DUFRY AG (SIX: DUFN)
IS A LEADING GLOBAL
TRAVEL RETAILER OPERATING
OVER 2,300 DUTY-FREE
AND DUTY-PAID SHOPS
IN AIRPORTS, CRUISE
LINES, SEAPORTS, RAILWAY
STATIONS AND DOWNTOWN
TOURIST AREAS.
DUFRY EMPLOYS OVER
30,000 (FTE) PEOPLE. THE
COMPANY, HEADQUARTERED
IN BASEL, SWITZERLAND,
OPERATES IN 65 COUNTRIES
ON ALL SIX CONTINENTS.
ANNUAL
REPORT
2018
CONTENT
1 MANAGEMENT REPORT
Dufry at a Glance 6 – 7
Highlights 2018 8 – 9
Message from the Chairman of the Board of Directors 10 – 12
Statement from the Chief Executive Officer 14 – 17
Organizational Structure 18
Board of Directors 20 – 21
Global Executive Committee 22 – 23
Dufry Investment Case 24 – 25
Dufry Strategy 26 – 79
Dufry Divisions 46 – 67
Sustainability 80 – 97
Community Engagement 98 – 103
2 SUSTAINABILITY REPORT
3 FINANCIAL REPORT
Report from the Chief Financial Officer 106 – 110
Financial Statements 111 – 222
Consolidated Financial Statements 112 – 211
Financial Statements Dufry AG 212 – 221
4 GOVERNANCE REPORT
Corporate Governance 223 – 244
Remuneration Report 245 – 259
Information for Investors and Media 260 – 261
Address Details of Headquarters 261
5
1 Management Report
DUFRY ANNUAL REPORT 2018
DUFRY
AT A GLANCE
TURNOVER
IN MILLIONS OF CHF
GROSS PROFIT
IN MILLIONS OF CHF
MARGIN
9,000
8,400
7,800
7,200
6,600
6,000
5,400
4,800
4,200
3,600
3,000
2,400
1,800
1,200
600
0
5,200
4,800
4,400
4,000
3,600
3,200
2,800
2,400
2,000
1,600
1,200
800
400
0
69 %
68 %
67 %
66 %
65 %
64 %
63 %
62 %
61 %
60 %
59 %
58 %
57 %
56 %
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
EBITDA¹
IN MILLIONS OF CHF
NET EARNINGS
IN MILLIONS OF CHF
1,060
1,020
960
900
840
780
720
660
600
540
480
420
360
300
240
180
120
60
0
220
200
180
160
140
120
100
80
60
40
20
0
– 20
– 40
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
¹ EBITDA before other operational result
6
DOWNTOWN & HOTEL SHOPS
3 % BORDER,
3 % CRUISE LINERS
& SEAPORTS
NET SALES BY PRODUCT CATEGORY 2018
2 % LITERATURE & PUBLICATIONS
2 % ELECTRONICS
5 % OTHER
32 % PERFUMES
& COSMETICS
12 % TOBACCO
GOODS
13 % LUXURY
GOODS
NET SALES BY DIVISION 2018
1 % DISTRIBUTION
CENTER
22 % NORTH
AMERICA
22 % SOUTHERN
EUROPE AND AFRICA
16 % WINE
& SPIRITS
18 % FOOD,
CONFECTIONERY
& CATERING
19 % LATIN
AMERICA
23 % UK AND
CENTRAL EUROPE
13 % EASTERN EUROPE, ASIA,
MIDDLE EAST AND AUSTRALIA
NET SALES BY CHANNEL 2018
NET SALES BY MARKET SECTOR 2018
4 % RAILWAY STATIONS & OTHER
3 % BORDER,
DOWNTOWN & HOTEL SHOPS
3 % CRUISE LINERS
& SEAPORTS
39 % DUTY-PAID
90 % AIRPORT
61 % DUTY-FREE
7
65 Present in
In line with its geographic diversification
strategy, Dufry has further expanded its
footprint.
65 countries
IMPORTANT
CONCESSIONS
ADDED IN ASIA
2018 marked an important year for the
expansion of our operations in Asia
with openings in Hong Kong, Malaysia
and Australia.
DIGITAL
INITIATIVES
Dufry continues to drive
its digital initiatives in order
to further engage with
customers through a multi-
channel approach.
1 Management Report
DUFRY ANNUAL REPORT 2018
HIGHLIGHTS
2018
CHF 8.7
BILLION
RECORD
TURNOVER
Record turnover of CHF 8.7
billion in 2018, driven by like-
for-like growth and contribution
from new concessions.
BOM
FULLY
IMPLEMENTED
By year-end 2018, Dufry finalized the
implementation of the new Business
Operating Model (BOM) as expected.
8
CHF 370.8
MILLION
EQUITY FREE
CASH FLOW
In 2018 Dufry generated
record Equity Free Cash Flow
of CHF 370.8 million.
EXPANSION
IN THE CRUISE
BUSINESS
Dufry successfully expanded its presence
into the cruise channel, by adding 16 new
ships to the business.
COOPERATION
WITH BRAND
OWNERS
Dufry moved one step further in its
cooperation with brand owners by
increasing the number of Dufry exclusive
products. See more on page 30.
CHF 600.6
MILLION
CASH RETURNED TO
SHAREHOLDERS
After over a decade focusing its growth strategy on
acquisitions, Dufry started returning cash to shareholders
via dividend payment and a share buyback program.
9
1 Management Report
DUFRY ANNUAL REPORT 2018
10
MESSAGE FROM
THE CHAIRMAN
OF THE BOARD
OF DIRECTORS
DEAR SHARE-
HOLDERS
In the financial year 2018, Dufry delivered resilient re-
sults, despite a challenging market environment and
volatile currency developments in some key
markets. Thanks to the implementation of
the new Business Operating Model (BOM)
initiative and driving our digital strategy,
Dufry is well prepared to tackle its next
strategic steps ahead. Equally important,
we have reduced leverage considerably
and as a result started returning cash to
shareholders through dividend payment
and a share buyback program in 2018.
Last but not least, the IPO of Hudson on
February 1, 2018, set the basis to stra-
tegically develop our North American
business.
Record levels
of turnover
and EBITDA.
From a performance perspective,
turnover climbed by 3.7 % to
CHF 8,684.9 million, resulting in a
new all-time high. Our geographic
diversification strategy has once
more proven effective, generating
positive organic growth of 2.7 %
despite adverse trading conditions
in some key markets such as Spain,
Brazil and Argentina. EBITDA contin-
ued to grow, reaching CHF 1,040.3 mil-
lion and achieving a record high free
cash flow of CHF 617.1 million.
Operationally, Dufry focused on the im-
plementation of the BOM initiative, pro-
453,000 m²Dufry operates
over 453,000 m²
of retail space.
viding a solid base for operational excellence. With the
completion of the BOM and the implementation of our
digital initiatives, we are now ready to move further in
the strategic development of Dufry.
Finally, we successfully executed the initial public
offering (IPO) of our North American business unit
under the name of Hudson Ltd. in February 2018. While
Dufry continues to own the majority of this division,
the strategic flexibility provided by the listing facili-
tates the capturing of additional opportunities in the
North American travel concessions market.
Over CHF 600 million
returned to
shareholders.
Consistent with our priorities on the operational side,
we also deleveraged considerably in 2018 and reduced
net debt by a total of CHF 400.8 million, mainly due to
the strong free cash flow generation of CHF 617.1 mil-
lion and the proceeds from the Hudson IPO.
In 2018, we also started to return cash to our share-
holders. As an ongoing element of our revised capital
allocation strategy, shareholders approved the pay-
ment of a dividend of CHF 3.75 per share for the finan-
cial year 2017, resulting in a total payback of CHF 198.7
million. Secondly, we executed a one-off CHF 401.9
million share buyback program of 3.3 million shares
completed at the end of October, which we intend to
propose for cancellation at the 2019 Annual General
Meeting. Through both initiatives, in 2018 we returned
a total of CHF 600.6 million to our shareholders. In ad-
dition, Dufry bought 877,666 treasury shares for
CHF 120.8 million in the first quarter of 2018, which will
be kept as treasury shares.
For the financial year 2018, the Board of Directors’
proposal to the shareholders will be a dividend of
CHF 4.00 per share. This dividend level will allow us to
maintain the flexibility to further reduce debt or allo-
cate capital into M&A. In this context and as outlined
in our strategy, our focus will be on the highly frag-
mented Asian market, where we are seeking opportu-
nities to execute small and mid-size acquisitions.
Our market capitalization at December 31, 2018,
amounted to CHF 5.0 billion. Daily trading volumes on
all platforms reached CHF 101.4 million, confirming the
good liquidity of our shares. The SIX Swiss Exchange
remains the most important trading venue for Dufry
shares, despite the fragmentation of our trading vol-
umes onto other stock exchanges. As is our tradition,
we have maintained a continuous dialogue with our
shareholders and the financial community in close to
1,200 meetings, conference calls and emails in 2018.
Besides our long-term shareholders, such as Travel
Retail Investments, Qatar Investment Authority and
Richemont, in 2018, we also welcomed new and former
shareholders such as Franklin Mutual Advisors and GIC
Asset Management, both with participations of above
5.0 %. Together these major shareholders represent ap-
proximately 38 % of our share capital and continue to
strongly support Dufry through active participation.
Long-term and
new shareholders
supporting Dufry.
In 2018, we continued to develop the Board of Direc-
tors: Ms. Lynda Tyler-Cagni and Mr. Steve Tadler were
both elected by shareholders as new members and
they contribute to the strategic discussion with their
11
1 Management ReportDUFRY ANNUAL REPORT 2018 our shops at 34 airports around the world and reached
an audience of over 55 million people traveling through
these hubs in 2018.
I thank our management and employees for the im-
mense amount of work they have done and the posi-
tive changes implemented in 2018. Their persistence
and motivation has built a solid base for the further
successful development of Dufry. I also thank our sup-
pliers, landlords and business partners for their ongo-
ing support and trust in our longstanding relation-
ships. We also extend our thanks to our shareholders
and bondholders who repeatedly foster our common
vision to further develop Dufry as a WorldClass.World-
Wide company.
Sincerely,
Juan Carlos Torres Carretero
wealth of experience. Dufry’s Board of Directors has
evolved considerably and we are very pleased to have
increased the proportion of women on the Board as
well as counting on a broad representation from dif-
ferent geographies, resulting in a dynamic combina-
tion of experienced long-standing board members and
the fresh points-of-view of members who have joined
over the past few years.
Always cognizant of changing market environments and
dynamics, we announced a new simplified organiza-
tional structure in early January 2019 that will allow us
to be more agile and generate additional efficiencies.
Further extended
CSR engagement
and reporting.
As part of our commitment to further develop CSR re-
porting, in 2017 we presented our first CSR report in
accordance with the Core Option of the Global Re-
porting Initiative (GRI) Standards.
In 2018, we revised and disclosed the Dufry Code of
Conduct and we have established a new Supplier Code
of Conduct that we have started to share with our
major suppliers. 82 % of these suppliers, representing
40 % of our sales, have already acknowledged the Code.
We have started to extend the dialogue in 2019 with
more brand partners in order to increase its reach.
Moreover, we have widened the spectrum of our report-
ing by including more operations, as well as increasing
the granularity of our KPIs.
Ongoing community
engagement.
Concerning our community engagement, we continued
to support disadvantaged children around the world
and assist communities in markets where we operate.
It is now the 9th year that we have supported the fund-
ing of SOS Children’s Villages initiatives in Brazil, Russia
and Mexico. In 2018, we endorsed community projects
in many other parts of the world such as Haiti, Greece,
Korea, Turkey, the United Kingdom, Switzerland, the
United States and Australia.
Last but not least, we renewed our support for the
United Nation’s Global Goal awareness-raising cam-
paign #YouNeedToKnow. We deployed the campaign in
12
1 Management ReportDUFRY ANNUAL REPORT 2018 13
1 Management Report
DUFRY ANNUAL REPORT 2018
14
STATEMENT
OF THE CHIEF
EXECUTIVE
OFFICER
DEAR ALL
In 2018 we faced challenging conditions in some of
our main markets. Turnover reached CHF 8,684.9
million versus CHF 8,377.4 million in 2017, a growth
of 3.7 %, and EBITDA grew by 3.3 % to CHF 1,040.3
million in 2018 from CHF 1,007.1 million one
year earlier. Free cash flow reached CHF 617.1
million, 32.1 % higher than in 2017.
While in the first semester of the year, we saw
good organic growth in almost all locations
and global growth reached 5.5 %, we experi-
enced a deceleration in the second half of
2018 in some of our key markets, particu-
larly in South America and Spain. As a re-
sult, and despite the adverse conditions in
the year under review, Dufry continued to
grow organically by 2.7 % in the full year
2018. Growth in Spain slowed down, driven
by a shift in tourist flows from Spain to
other Mediterranean destinations, and in
Latin America, currency devaluations –
notably in Brazil and Argentina – affected
the purchasing power of these important
nationalities. Conversely, we performed
well in a significant number of other mar-
kets, with strong growth in Turkey and
most markets in the Middle East, Asia
and Australia, as well as North America
showing a very robust development.
Overall, 2018 confirmed once more that
geographical diversification helps to
mitigate risks from external factors.
In addition, we saw a remarkable ac-
celeration in new concession wins in
several channels. Dufry added impor-
tant new contracts in airports, cruise
2,300 Dufry is a real global player
operating over 2,300 shops
throughout all six continents.
lines and ferries, and signed agreements to run
duty-free shops in locations such as Hong Kong and
Perth, and on Holland America Line, Norwegian
Cruise Line and P&O Ferries vessels.
Business Operating
Model fully
implemented.
Business Operating Model fully implemented
By year-end 2018, we finalized the implementation of
the new Business Operating Model (BOM) as expected.
The BOM is aimed at standardizing processes, proce-
dures and IT systems, introducing best practices
across the Group and in general at further aligning
and standardizing the way we work as a company. This
setup allows for fast response to changing market re-
quirements, while securing efficient coordination
across the whole organization. By implementing the
program, we secured the delivery of the expected
CHF 50 million in efficiencies, of which CHF 40 million
are already included in the 2018 results, while the re-
maining CHF 10 million will be reflected in 2019.
Resilient cash flow generation confirmed
The 2018 business year is a good example of our ca-
pability to generate resilient operational cash flows
despite challenging conditions. In 2018 we reached
a new record, with free cash flow amounting to
CHF 617.1 million and an equity free cash flow of
CHF 370.8 million, almost the double recorded in the
previous year. This is a remarkable performance and
it allowed us to further reduce our net debt during
2018 by CHF 400.8 million in total.
Dufry executed a significant number of global
marketing initiatives
In order to drive organic growth through our oper-
ations, we have intensified bilateral collaboration
with our most important global brand partners. In
particular, Dufry has been fostering the introduc-
tion of exclusive products, limited editions and nov-
elties. By developing products sold only in travel
retail – or increasingly exclusively in Dufry shops –
we can create that sense of uniqueness and individ-
uality, that raises brand value, drives sales and
provides customers with memorable experiences.
Ultimately, it is a great way to differentiate from on-
line or high street retail.
Resilient strong cash
flow generation.
Securing future business through the expansion
and refurbishment of retail space
In 2018, we successfully secured future business by
further increasing our retail space, extending impor-
tant concessions and winning new contracts, thus
once more demonstrating our leading position in the
industry.
The first major highlight among our new contracts is
our important expansion in Asia, where we won the
concession to operate duty-free shops at the new
West Kowloon train station. Operated by MTR, this ex-
press railway connects Hong Kong with Mainland
China (Shenzhen) through its high-speed rail network.
Furthermore, we opened the much-anticipated down-
town operation in Genting Highlands, an integrated re-
sort located northeast of Kuala Lumpur. Last but not
15
1 Management ReportDUFRY ANNUAL REPORT 2018 least, we added another operation to our portfolio in
Australia with the duty-free stores at Perth Airport,
which allows us to increase our footprint in the South-
ern Hemisphere.
Another step towards
our Asia expansion.
Secondly, in line with our strategy, we considerably ex-
panded our cruise ship and ferry business with the ad-
dition of 16 new ships and a total of 48 shops. This in-
cludes shops on ten Holland America Line vessels, the
duty-free shops on board the BLISS (Norwegian
Cruise Line) as well as on the Carnival Inspiration of
Carnival Cruise Lines. Moreover, Dufry signed a con-
tract to operate shops on board 15 P&O Ferries
crossing the English Channel as well the Northern and
the Irish Seas.
Adding new locations to our global footprint is impor-
tant when it comes to offering our brand partners a
global window-display to showcase their products and
brands. The newly won concessions well reflect our
strategy to consider multiple channels with captive
traveler or visitor audiences, which may go beyond our
presence in airports.
Overall, we expanded our gross retail space in 2018 by
26,800 m2, with Latin America and Asia, the Middle East
and Australia accounting for the largest portion of
this, followed by North America and then Southern
Europe and Africa. Moreover, we currently already
have 19,800 m2 of signed space that will open in 2019
and 2020.
Despite headwinds in certain markets in 2018, Dufry
has a strong strategic positioning with a broad port-
folio of high-quality concessions across many markets
in a sector with positive fundamentals. Our focus con-
tinues to be the delivery of solid long-term results for
our shareholders.
Digital Strategy – Enhancing customer experience
to drive sales
Dufry’s digital strategy aims at driving sales by using
digital technology to increase the number of touch-
points and customer engagement, as well as providing
employees on the shop floor with digital tools to bet-
ter serve and interact with customers to improve their
shopping experience. Besides an intensified market
research effort, our digital strategy is built on three
major elements that allow us to connect with our cus-
tomers from the moment they plan their trip until they
get back to their home airport.
Important contract
wins and extensions
across channels.
Improving
communication
with customers
through digitalization.
The second key element of our 2018 business devel-
opment was the early renewal and extension of exist-
ing contracts. After already renewing important op-
erations in the UK in 2017, in the year under review
Dufry successfully extended its Gatwick concession
until 2025. The Hudson team was also successful re-
newing important concessions, such as Pittsburg for
an additional 10 years, LaGuardia for 4 years and Boston
for an additional 10 years, to mention a few.
Moreover, we continued to deploy our shop refurbish-
ment plan, as this is one of the most effective means
of driving sales within a given retail space. The total re-
tail space refurbished in 2018 included over 34,000 m2
in over 90 shops across all our divisions. In this con-
text it is worth mentioning the refurbishments carried
out in Malaga, Antalya, Toulouse, Heraklion, London
Heathrow T3 (New Generation Store), Glasgow, Bali,
Cancun T3 (New Generation Store) and Atlanta.
In 2018 we progressed well with each element and
made some significant steps with the rollout of our dif-
ferent work streams. The cornerstone of our digital
strategy is the new generation store. After a first
wave of implementations of the concept in 2017 in
Melbourne, Madrid and Cancun T4, we continued the
rollout in Zurich, Heathrow T3 and Cancun T3. The new
generation stores provide a stronger shopping expe-
rience as the shops communicate with customers in
different languages and adapt promotions and mar-
keting campaigns to match the customer profiles and
nationalities present at the airports at any given time
of the day.
The new generation store also includes the employee
digitalization element, which consists of tablets to
better serve customers with product information and
the sending of personalized promotions to holders of
16
1 Management ReportDUFRY ANNUAL REPORT 2018 our customer loyalty program “RED by Dufry” app,
present at the airport. We have considerably intensi-
fied the rollout of RED by Dufry in the year under
review and it is currently available in 200 locations.
Finally, in order to allow customers to order online and
pick-up their goods when departing or upon arrival, we
have further expanded our Reserve & Collect service
network to 153 airports around the globe. Last but not
least, at the end of 2018, we also launched our new on-
line platform Forum by Dufry, which connects all of
our digital dots and adds emotion and experience with
content provided by brands, bloggers and influencers,
highlighting the attractiveness of the travel retail
channel. The Forum provides access to our Reserve &
Collect websites as well as to RED by Dufry, complet-
ing the circle.
One of the key advantages of travel retail is that, by
definition, our customers come to us. Unlike the high
street, we do not need to attract customers to our lo-
cations, they are there to travel. As such, our digital
strategy does not seek to replace the physical shop
and personal interaction. Quite the opposite, those re-
main to be key elements, while digital initiatives con-
tribute for an enhanced experience and facilitate our
communication with the customer.
Thank you
2018 proved to be a challenging year for Dufry, but we
delivered resilient results. Besides managing the daily
business, the teams made a major effort implement-
ing the BOM throughout the whole year – a task that
involved countries, divisions and headquarters alike
and requested a tight collaboration. I would therefore
like to thank all our colleagues and teams across all
functions and operations for their strong contribution
and their engagement in accomplishing our common
goals set for the past year.
I also want to thank our suppliers, landlords and busi-
ness partners for their ongoing support in further
developing Dufry. We have seen the level of collabo-
ration intensifying along the value chain of travel
retail, which we consider to be key to our mutual
success, also going forward. We are looking forward
to continuing to develop this path of collaboration and
will strongly support related initiatives by suppliers
and landlords.
Last but not least, I thank our Board of Directors and
shareholders for their ongoing support, trust and con-
tributions in making Dufry even more WorldClass.
Worldwide.
Best regards,
Julián Díaz González
Full impact of strategic initiatives in 2019
We faced difficult external conditions in some regions
in 2018, but remain optimistic about Dufry´s ability to
deliver mid- and long-term sustainable growth. The sit-
uation in 2019 remains uncertain, but we are confident
that the consolidation of our BOM and the global digital
and marketing initiatives launched in 2018, will – along
with the reorganization announced at the beginning of
2019 – support the acceleration of our organic growth
in 2019, despite the strong Q1 2018 comparables.
New organization announced in January 2019
In January 2019 we announced a new organization to
reflect developments made thanks to the BOM. As this
process has now been completed and the setup of the
local operations has been aligned, we can further sim-
plify our organization, drive market agility with full
customer focus, generate additional efficiencies at
headquarter level, and accelerate organic growth.
Changes include the regrouping of the former divi-
sions Southern Europe & Africa and UK & Central Eu-
rope into the new division Europe & Africa. Moreover,
the new structure will also further integrate the com-
mercial and corporate teams at divisional and head-
quarter level. We also plan to invest further in sales
staff and sales incentive programs. In the context of
the new organization, the Divisional CEOs will join the
Global Executive Committee.
17
1 Management ReportDUFRY ANNUAL REPORT 2018 OUR ORGANIZATIONAL STRUCTURE – GLOBAL EXECUTIVE COMMITTEE
Group Chief Executive Officer
Julián Díaz González
Deputy Group Chief Executive Officer
Chief Financial Officer
José-Antonio Gea
Andreas Schneiter
(until March 31, 2019)
Yves Gerster
(as of April 1, 2019)
Global Chief Corporate Officer
Luis Marin
Group General Counsel
Pascal Duclos
Chief Executive Officer
Europe, Africa and Strategy
Eugenio Andrades
Global Marketing
and Digital Innovation Director
Javier González
Chief Executive Officer
Asia Pacific and Middle East
Andrea Belardini
Chief Executive Officer
Central and South America
René Riedi
Chief Executive Officer
North America
Roger Fordyce
18
1 Management ReportDUFRY ANNUAL REPORT 2018 19
BOARD OF
DIRECTORS
MEMBERS
1
2
3
1 Juan Carlos Torres Carretero
2 Julián Díaz González
3 Jorge Born
4 Claire Chiang
4
20
1 Management ReportDUFRY ANNUAL REPORT 2018 5 Heekyung Jo Min
6 Andrés Holzer Neumann
7 Steven Tadler
8 Lynda Tyler-Cagni
6
7
5
8
21
1
4
2
3
1 Julián Díaz González
2 Andreas Schneiter
3 José Antonio Gea
4 Luis Marin
GLOBAL
EXECUTIVE
COMMITTEE
MEMBERS
As per December 31, 2018
22
1 Management ReportDUFRY ANNUAL REPORT 2018 5 Pascal C. Duclos
6 Eugenio Andrades
7 Javier González
6
5
7
23
1 Management Report
DUFRY ANNUAL REPORT 2018
DUFRY’S
INVESTMENT
CASE
MARKET
LEADER
Dufry is the undisputed market leader in the travel
retail industry.
Over 20 % market share in airport retail, and
more than twice the size of its next competitor.
GLOBALLY
DIVERSIFIED
CONCESSION
PORTFOLIO
Dufry is the most diversified
travel retailer with operations
on all six continents, covering
65 countries and over 400
locations.
Geographic diversification
allows Dufry to capture global
growth trends of the travel
retail industry and in most cases
mitigate potential local events.
Exposure to single contracts
and markets has been reduced
significantly over the years.
400 Over 400
locations
operated
by Dufry
worldwide
UNIQUE WINDOW
DISPLAY FOR
GLOBAL BRANDS
Global player, with over 2,300 shops
operated in 65 countries on six continents.
Offering global brands a unique market
access and window display.
24
7 YEARS
Over 7 years of remaining
average concession
lifetime, across a highly
diversified portfolio
LONG-TERM
CONCESSION
PORTFOLIO
Long-term concession portfolio further
enhanced through new important
concessions, such as Hong Kong, Perth,
Kuwait etc.
Solid partner for landlords and airport
authorities.
Dufry is a reliable partner delivering
outstanding results for airports through
a vast offering of unique shop concepts.
5 %5 % p.a. average global
FAST GROWING
INDUSTRY
passenger growth expected
for the next 5 years
Average expected industry passenger
growth of 5 % p.a. in the coming years will
drive Dufry’s organic growth.
Affluent customer base, with above average
spending power.
STRONG FREE
CASH FLOW
GENERATION
Free cash flow of CHF 617.1 million
in 2018.
Low capital intensity of the business
allows for strong cash generation
and fast deleveraging.
GLOBAL
“PURE PLAY”
IN A GROWING
INDUSTRY
Dufry is the only listed global “pure
play” to participate in the growing
travel retail industry.
Dufry’s organic growth to be further
fueled mainly by increasing passenger
numbers and net new concessions.
25
OUR
STRATEGY
GROW PROFITABLY
AND CREATE
LONG-TERM VALUE
It only took slightly more than a decade for Dufry to
emerge from a small company with CHF 950 million
turnover to the leading player in travel retail, an in-
dustry with a turnover of USD 69 billion in 2018. Our
leading position today with CHF 8.7 billion turnover is
the result of remarkably rapid expansion. Through a
combination of organic growth and acquisitions, we
have reached a market share of 13 % in travel retail.
And when looking more specifically at airport retail,
which accounts for 90 % of our business, we increased
our share from 3 % in 2005 to over 20 % today.
Focusing on customer experience and retail
excellence generates value for all stakeholders
Dufry, and travel retail in general, is at the center of
three very important and distinct industries: retail,
travel locations and consumer goods. Addressing the
different requirements of our stakeholders and align-
ing their respective interests is critical in order to
generate value for all. Our approach can be summa-
rized in a simple way: we focus on offering the best
services to our customers.
This clear focus ultimately creates a winning formula
for all stakeholders: to customers, by providing an
unrivalled shopping experience, to suppliers, by show-
casing their brands to a fast-growing group of afflu-
ent customers, to landlords, by fully exploring the
commercial potential of a travel location and to share-
holders, by creating value through generating cash
and profits.
For our customers, we aim to create memorable shop-
ping experiences by constantly improving our shops
and developing best-in-class retail formats, and by im-
plementing innovative cross-channel marketing initia-
tives. Our team of sales representatives will always
receive travelers with their biggest smile, introducing
them to the world of travel retail and providing them
26
with detailed product information – increasingly sup-
ported by digital technology.
Equally important for Dufry is to offer travelers an
unparalleled sense of place: This includes local prod-
uct offerings, as customers increasingly want to
complete their travel experience by bringing home
memories, as well as internationally recognized
brands that are well known and much liked. Our
shops combine the well-known assortment of global
brands and products with a special local touch which
differentiates our shops worldwide, wherever they
may be – at airports, seaports, ships, railway stations
or borders – and irrespective of whether they are
duty-free or duty-paid. For a selection of our main
retail concepts please refer to pages 36 through 45
of this report.
Providing
memorable
experiences.
Demographics play a big role in our business and
changes in customer profiles and preferences can oc-
cur rapidly. For this reason, Dufry sets high priority on
consumer intelligence, extrapolated from internal op-
erational information and through external research.
We constantly track customer behavior at our shops
and use our market insights to continuously fine-tune
our offering and not only match but exceed the expec-
tations of our clients.
To suppliers we offer access to the largest footprint in
the ever more attractive travel retail channel, through
our more than 2,300 shops in over 400 locations in
65 countries. Our shops offer suppliers an unrivalled
1 Management ReportDUFRY ANNUAL REPORT 2018 worldwide window display to promote their brands and
products to an affluent consumer segment.
Dufry works closely with brands to offer customers a
unique product selection at the best price, giving spe-
cial attention to novelties, exclusives and limited edi-
tions, which make the channel even more attractive.
Please find out more in the Focus Story on page 30.
Landlords get the highest productivity from their re-
tail areas, maximizing their revenues when working
with Dufry. We offer a full range of retail concepts
which are adapted and customized to the specific
location. Moreover, Dufry provides access to the most
comprehensive portfolio of global and local brands. In
a nutshell, landlords benefit by optimizing their over-
all business and by offering attractive commercial
spaces to their passengers.
Geographic diversification to maximize
opportunities and mitigate risks
Dufry is today not only the market leader in travel
retail, but also by far the most diversified player in the
industry with operations in 65 countries on all six con-
tinents. Geographic diversification is of key importance
to our strategy for a number of reasons: first, it is the
best way to benefit from the ever growing number of
travelers worldwide; second, as a global organization,
we can efficiently develop new business opportunities
anywhere; third, major global brands can offer their
products via a truly global travel retailer and fourth, it
is a very effective approach to mitigating risks.
Diversification
remains a key aspect
of our strategy.
Our global presence allows us to quickly and better
evaluate new projects almost anywhere, capitalizing
on the expertise of our local teams. This local perspec-
tive helps us to accurately evaluate opportunities,
gives us a clear understanding of the local market
characteristics and allows us to closely collaborate
with landlords and other local business partners to ef-
fectively develop new businesses.
Moreover, being geographically diversified consider-
ably mitigates risks generated by external impacts in
single markets or regions. This diversification is best
illustrated by the share of individual concessions in the
Group. With the largest concession accounting for
around 7 % of our business, and with the ten biggest
representing less than 35 % of 2018 sales, Dufry has
GLOBAL PRESENCE
A full list of locations is available
on pages 66 and 67.
27
1 Management ReportDUFRY ANNUAL REPORT 2018 limited its exposure to single contracts. Ultimately,
geographic diversification is key to offering our brand
partners a fine-meshed network of locations and
shops, which allows them direct engagement with a
growing number of customers through a window dis-
play in any given mature or emerging market.
Financial discipline focusing on returns
At Dufry, we have a disciplined financial approach to
all our projects, be they organic or acquisitions. We
carefully analyze every project or significant invest-
ment with detailed projections and with a focus on
minimum return requirements. This includes a careful
assessment of the initial investment needed to build
and set up the store as well as the cost structure, prof-
itability and cash flow generation of the business once
it is operational. This culture of giving importance to
returns and cost control has allowed us to grow our
business profitably and capture opportunities in many
different markets.
At Dufry, we traditionally have a sizeable project pipe-
line, allowing us to grow our retail space in different
channels, regions and sectors.
Despite the consolidation seen in travel retail over the
last years, the industry remains relatively fragmented,
with the top 10 players controlling just over half of the
market and the remaining market being covered by
small and medium sized operators. We expect to be able
to capitalize on M&A with small and mid-sized opportu-
nities that may arise, with a focus on Asia and the Mid-
dle East, or with bolt-on acquisitions that complement
our presence in existing markets.
Offering the best retail experience for international
and domestic travelers in multiple channels
Dufry currently generates about 61 % of its revenues
in duty-free and 39 % in duty-paid operations with
both sectors continuing to offer substantial growth
opportunities.
As part of our financial risk management, we minimize
business risks by implementing a highly variable cost
structure. These defensive characteristics help to pro-
tect the business in case of downturns, which usually
are local, thus providing a solid and resilient profile.
On the duty-free side, the airport channel is expected
to continue to be the largest and fastest growing part
of our business. We see additional potential in further
developing the cruise ship business, duty-free border
shops and downtown duty-free in selected markets.
Resilient cash
flow generation.
The combination of Dufry’s solid profitability and low
capital intensity results in a strong cash generation.
With the current size of the Group and the full imple-
mentation of our business operating model, we expect
to further improve our cash generation capacity.
Dufry’s growth path going forward
Supported by the growth of passenger numbers – the
most important driver of our business – organic growth
will continue to be an important driver of Dufry’s devel-
opment going forward and we will focus on driving sales
through the implementation of best-in-class shop con-
cepts and new digital technologies, which will be com-
plemented with proven marketing and promotion activ-
ities that we have used and fine-tuned over the years.
Furthermore, we expect to grow through additional re-
tail space, be it through expanding in existing locations
or by winning new contracts in airports where we don’t
currently operate or in other channels.
Passenger growth
is a key driver
in travel retail.
The duty-paid sector has considerable development
potential in airports as well, since the expected growth
of domestic passengers is similar to the one for inter-
national travelers. Furthermore, this sector is even
more fragmented than duty-free, thus offering attrac-
tive new expansion opportunities.
We continue to actively foster the expansion of our
successful duty-paid retail concepts, Hudson and
Dufry Shopping, which have already been implemented
in several markets and which have the potential to be
deployed further. Hudson is a well-established conve-
nience store concept that has been very successful
in North America over the past 30 years and that we
have deployed in 17 countries so far since 2009. Dufry
Shopping is a duty-paid concept that offers a high
quality assortment of international brands in an exclu-
sive setting, similar to a duty-free travel retail store,
but that targets domestic passengers.
28
1 Management ReportDUFRY ANNUAL REPORT 2018 We originally piloted Dufry Shopping in Brazil in 2014,
expanding to 7 locations across the country and the
immediate success has led us to a strategic decision
to roll out this concept into other countries. The first
Dufry Shopping store outside Brazil was opened in
2017 at Las Vegas McCarran International Airport.
Based on the positive results with 8 Dufry Shopping
locations in 2 countries so far, we are convinced that
this concept can be successfully rolled out to other
markets globally.
Our strategy is supported by strong and resilient
industry fundamentals
Travel retail is a fast growing industry driven by ongoing
growth in traveler numbers. The increased demand from
passengers to travel is the reason why this attractive
retail channel keeps growing and displays different
dynamics to high street retail.
Global passenger numbers are currently expected to
grow by at least 5 % per annum, which translates to a
potential of over 400 million new customers for the
industry every year. Industry specialists expect this
trend to continue, thus providing a resilient driver for
travel retail going forward. The growth potential is fur-
ther increased by the development of innovative com-
mercial concepts with landlords and brands. Dufry’s
ambition is to deliver excellence in execution while
driving change in the way travel retail operates. We be-
lieve that being the market leader also means being at
the forefront of this development.
ate further value through a more efficient business.
Thus the use of digital and online technology is chang-
ing our business in three major areas: how we commu-
nicate with our customers, how we sell products, and
how we organize our processes internally and in the
value chain.
Capitalizing
on digital
opportunities.
Specifically, this means that we will be further increas-
ing personalized communication with customers at
home, during their whole journey, and in particular when
they are at the airport close to our shops. We are also
digitalizing the shops to increase conversion rates and
to simplify in-store processes, such as product consul-
tations, payments, individual promotions etc. Lastly, we
will further improve customer service and individualize
product offers for specific customer profiles.
LONG-TERM PASSENGER FORECAST
IN BILLIONS OF PASSENGERS
Seizing the opportunities digitalization brings
As in the case with many other industries, digitalization
is changing the way business is done in travel retail. At
Dufry, we are excited about the possibilities and oppor-
tunities that new technologies offer. Therefore, digita-
lization is a key element in our strategy going forward.
For Dufry, digital technologies are tools, which support
and evolve a strong business model to the next level, to
continuously improve our offer to the travelers we wel-
come in our shops. As customers come to our stores,
while they are waiting to board their plane or train, or
while they enjoy their stay on a cruise liner, in a casino
or hotel, they enjoy strolling through the attractive re-
tail spaces and take away memorable shopping experi-
ences. Sales are often generated by impulse decisions
and/or immediate needs, which protect travel retail
from the direct competition of online platforms.
24
20
16
12
8
4
0
To attract customers to our stores we want to provide
a superior customer experience; and in addition cre-
Source: ACI 2018 / World Airport Traffic Forecast 2018 – 2040.
2018
2022
2027
2032
2037
2040
29
1 Management ReportDUFRY ANNUAL REPORT 2018 FOCUS
STORY
UNIQUE
SHOPPING
EXPERIENCES –
EXCLUSIVES,
LIMITED
EDITIONS, AND
NOVELTIES
30
1 Management ReportDUFRY ANNUAL REPORT 2018 IN THE PAST TWO YEARS DUFRY HAS
STRONGLY ENGAGED WITH BRANDS TO
CREATE DUFRY EXCLUSIVE PRODUCTS,
LIMITED EDITIONS AND LAUNCH NOVELTIES
THROUGH ITS GLOBAL NETWORK OF
TRAVEL RETAIL SHOPS. BRANDS INCREASINGLY
RECOGNIZE THE POWER OF THESE
STRATEGIC MARKETING PARTNERSHIPS
AND THE UNIQUE OPPORTUNITY
TO POSITION THEIR PRODUCTS
TO AN AFFLUENT AUDIENCE
WHILE OFFERING THEM
MEMORABLE
EXPERIENCES
THROUGH
THE TRAVEL
RETAIL
CHANNEL.
BVLGARI JUST
FOR DUFRY
This high-class ladies’ back-
pack by Bvlgari is exclusive
in a multiple sense. It has
been created specially for
Dufry, it’s a very limited
edition and it is sold only
at World Duty Free’s London
Heathrow T5 shops. The
backpack has been designed
for millennials and is tai-
lored to match the taste
of British, Chinese and
Middle Eastern
customers
in particular.
31
1 Management Report
1 Management Report
DUFRY ANNUAL REPORT 2018
DUFRY ANNUAL REPORT 2018
FOCUS
STORY
UNIQUE
SHOPPING
EXPERIENCES –
EXCLUSIVES,
LIMITED
EDITIONS, AND
NOVELTIES
JOHNNIE LIKES
TO WALK
WITH DUFRY
An exclusive black label triple cask
Johnnie Walker edition for Dufry
finished in three different casks
that previously held: Bourbon,
Caribbean pot still rum and Scotch
whisky. The Triple Cask Black Label
blend is distributed globally, is
made for the younger generation,
and features notes of sweet vanilla
and ginger aromas.
CHOCOLATE FREY
RETURNS TO TRAVEL RETAIL
AS DUFRY EXCLUSIVE
Switzerland’s No. 1 chocolate manufacturer and iconic brand
returns to the travel retail channel with a tempting product
assortment including the “Frey Mahony 400 g Orange”,
which will be marketed exclusively in Dufry shops in EMEA,
Asia and the Americas as of the first quarter 2019.
32
TORRES 15 – A BRANDY
NOVELTY & EXCLUSIVE
FOR THE FIRST YEAR
TOBLERONE TINY – CRUNCHY
ALMOND AS LIMITED AND
DUFRY-EXCLUSIVE EDITIONS
Toblerone Tiny Crunchy Almond – one of the brand’s most success-
ful flavors is now available in a new light blue and golden bag sold
only at airports and containing 34 single wrapped snack-size pieces.
On top of this – a Dufry exclusive edition – the brand has produced
the Tiny Mix – Crunchy Almond, a 225 g pack with a unique assort-
ment of this range.
A NEW JOY
BY DIOR
Torres 15 is a tribute to Miguel Torres Carbó, who
rebuilt the winery after it had been destroyed in the
Spanish civil war. The packing features unique buildings
in Barcelona and targets an international audience.
Its incomparable character makes this brandy very
versatile, to be enjoyed in many ways including with
ice, diluted with water, with soft drinks or in cocktails.
Joy is an excellent example
how perfume brands
develop new fragrances
to approach new consumer
segments and profiles
by complementing their
range with innovations.
This new Eau de Parfum,
illuminated by the vibrant
smile of flowers and citrus
fruits, was one of the
key novelties at Dufry
stores in 2018.
33
30 %Depending on the category, up to 30 % of Dufry’s
sales come from promotions, novelties, Dufry and
Travel Retail exclusives, and special editions.
Boosting the attractiveness
of Travel Retail
The newest trends in customer behavior
and shopping habits show that today’s
customers want to enjoy memorable
shopping experiences that must increas-
ingly provide a sense of individuality
and exclusivity and tailor-made offers.
Exclusive products, Limited Editions and
Novelties and the related experiences are
exactly the drivers that brands of all cat-
egories can use to best fulfill this wish,
while fostering the attractiveness of
travel retail as an aspirational shopping
environment. There is no better place
then travel retail and airport environ-
ments to engage with affluent custom-
ers and help them experience a brand’s
“spirit” in an attractive atmosphere. By
developing products sold only in travel
retail – or increasingly exclusively in
Dufry shops – we can create that
sense of uniqueness and individ-
uality, which increases brand
value and drives sales. And it is
ultimately a great way to avoid
comparisons with online or high-
street offers.
Each brand follows its own
strategy to drive sales
One size fits all would be the
wrong approach. That is why
Dufry gathers market feedback
and presents the brands with in-
dividual opportunities on how to
improve product and brand po-
sitioning. Creating a limited edi-
tion to drive sales in the summer
months, or filling a price gap be-
tween a 10-year-old whisky and the top
range bottle aged 18 years. Launching
a seasonal flavor to tempt chocolate
connoisseurs or introducing a premium
limited edition series to enter high price
levels. Or attracting the attention of
style-savvy shoppers with a unique back-
pack from an iconic brand, for the ulti-
mate fashion accessory. This is the real-
ity of several brand partners’ creativity,
already successfully displayed and avail-
able in Dufry’s duty-free shops.
Our ultimate
goal is to create
memorable
experiences.
Multichannel experiences through
activations and story-telling
The combination of physical stores and
digital channels including social media
or other digital content platforms – such
as the new Forum by Dufry – forum.shop-
dutyfree.com – create the perfect multi-
channel experience for all the senses.
Forum by Dufry features contributions
from bloggers and influencers, inspires
with real customer experiences and tells
brand stories, to attract travelers to
the shop floor and enable them to “see
and share the experience” in person. The
aligned multichannel approach is the best
way to attract travelers to the shop floor
and engage with them – to ultimately
drive sales.
34
1 Management ReportDUFRY ANNUAL REPORT 2018 Limited edition
experimental wine
JEAN LEON CF-15
IS A 100 % CABERNET
FRANC ARTISAN
AND CERTIFIED
ORGANIC WINE
WITH LIMITED
PRODUCTION.
THE GRAPES COME
FROM OLD VINES
PLANTED IN 1974
AT AN ELEVATION
OF 260 METERS,
ARE MANUALLY
HARVESTED AND
CARRY THE ORIGIN
LABEL “DO PENEDÈS”.
DUE TO ITS LIMITED
AVAILABILITY THE
WINE IS SOLD IN
DUFRY SHOPS IN THE
SPANISH AIRPORT
STORES INCLUDING
THE ISLAND
DESTINATIONS.
3535
GENERAL
TRAVEL
RETAIL
SHOPS
The general travel retail shop concept is
the most commonly used at airports. It
carries a large assortment and covers the
full range of product categories, such as
perfumes & cosmetics, food & confectionery,
wines & spirits, watches & jewelry, fashion
& leather, tobacco goods, souvenirs, elec-
tronics and others.
General travel retail shops are typically
located in central areas with high passen-
ger flow, mostly in airports, but can also
be implemented in seaports and other
locations. In airports, both departure and
arrival areas can be fitted with this shop
concept. As of December 31, 2018, Dufry
operated over 800 as general travel retail
shops. In the duty-free segment, these
shops can be identified as carrying the
name of several retail brands in our port-
folio, including Dufry, Nuance, World Duty
Free, and Hellenic Duty Free among others.
In 2017, Dufry opened its first three
new generation stores in Madrid (Spain),
Melbourne (Australia), and Cancun
(Mexico), followed in 2018 by one in Zurich
(Switzerland), a second one in Cancun and
one in Heathrow T3 (UK). The new genera-
tion store is an innovative evolution of the
general travel retail shop as it increases
the level of communication with the con-
sumer, by making use of digital technology.
36
37
DUFRY
SHOPPING
Dufry shopping offers domestic passen-
gers a similar shopping experience in a
duty-paid environment to the one offered
to international travelers in a classic
duty-free shop, with a wide assortment
of different product categories and a
brand positioning that is similar to that
of the duty-free stores. In this context,
Dufry Shopping fulfills more a convenience
aspect as there are a number of countries
where domestic travelers account for
the majority of passengers, specifically in
large countries such as China, the United
States and Brazil, where this concept can
offer additional potential.
The concept was first introduced in Brazil,
in 2014 and was quickly expanded to 7 other
locations in the country. In 2017, we de-
buted the concept in the United States, with
the opening of a Dufry Shopping store at
Las Vegas McCarran International Airport.
38
39
BRAND
BOUTIQUES
Brand boutiques enhance the traveler’s
experience and allow the creation of
an exciting shopping mall environment.
Dufry is a partner of choice for global
brands to showcase their products in
dedicated retail spaces and to mirror
their high street image. To best meet each
location’s traveler profile, we design these
shops as standalone boutiques or integrate
them as a shop-in-shop in our general
travel retail stores. Brand boutiques exist
in both duty-free and duty-paid areas and
as of December 31, 2018, Dufry operated
over 140 brand boutiques, among which
are included: Armani, Burberry, Bally,
Bottega Veneta, Bvlgari, Cartier, Clarins,
Chloe, Coach, Ermenegildo Zegna, Etro,
Gucci, Hermès, Hugo Boss, Jimmy Choo,
Jo Malone, Lacoste, LaPrairie, Lindt,
L’Occitane, Longchamp, MAC, Mango,
MaxMara, MCM, Michael Kors, Montblanc,
Omega, Polo Ralph Lauren, Salvatore
Ferragamo, Swatch, Swarovski, Tory Burch,
Tumi, Victorinox, Victoria’s Secret and
others. See also selection of brands on
page 73.
40
41
CONVENIENCE
STORES
Our convenience stores offer a wide as-
sortment that passengers may want or
need when traveling. The range includes
soft drinks, confectionery, packaged food,
travel accessories, electronics, personal
items, souvenirs, newspapers, magazines
and books.
Within this concept, we are using different
brands according to the passenger profile
and the location. “Hudson” is our most im-
portant brand in the convenience segment
with a strong recognition from and highly
valued by passengers. As “The Traveler’s
Best Friend”, our goal with Hudson is
to provide passengers with anything they
may need during their journey.
Hudson is a successful, very flexible con-
cept operated at airports within interna-
tional and domestic areas, as well as in
other channels such as railway stations
and other transit locations. Hudson shops
are carefully designed and facilitate
orientation through whimsical, color-coded
signage to attract customers’ attention
to four distinct selling areas: Media,
Marketplace, Essentials and Destination.
North America is home to most of our
convenience stores, with almost 550 shops.
In addition, we operate 135 convenience
stores outside North America.
42
43
SPECIALIZED
SHOPS
Specialized shops and theme stores are
shop concepts that offer products from
a variety of different brands belonging to
one specific product category or which
convey a sense of place. We use this con-
cept often for products such as watches &
jewelry, sunglasses, electronics, spirits,
food, destination products, and in locations
where we see potential for a shop to carry
a broad product range relating to one
specific theme. As of December 31, 2018,
Dufry operated over 670 shops under the
Specialized Shops / Theme Stores concept.
Examples of the shop concept names in-
clude “Colombian Emeralds International”;
a dedicated watches & jewelry format used
in the Caribbean market, “Do Brasil” for
local Brazilian goods, “Kids Works” with its
wide selection of toys, dolls, games, books
and apparel for children and “Tech on
the Go” focusing on the needs of the tech-
oriented traveler offering electronics and
accessories.
Further examples are “Sun Catcher”
for sunglasses, “World of Whiskies” and
“Tequileria” for a selection of finest single
malt or blend whiskies and tequilas,
“Master of Time” for luxury watches and
jewelries, “Temptation” and “Timebox” for
fashion watches and accessories, “Sound &
Vision” for multi-brand electronics, “Travel
Star” for luggage and travel aid products
and finally “Atelier”, a women’s leather
accessories store.
These shops can be located in airports,
seaports, on-board cruise liners, as well
as in hotels or downtown locations.
44
45
1 Management Report
DUFRY ANNUAL REPORT 2018
SOUTHERN
EUROPE
AND AFRICA
46
ATHENSCASABLANCANICEGRANADABARCELONATHESSALONIKITOULOUSE VERONAKOSFLORENCEALICANTEMAPUTOGENOVAHERAKLIONKRYSTALLOPIGILA PALMALANZAROTEMYKONOSCAIRONIKIJEREZIBIZAKALAMATAKARPATHOSCORFUBERGAMOACCRACHANIASANTIAGO DE COMPOSTELAMALTAMALAGAMARRAKECHMILANNAPLESTENERIFEFUERTEVENTURAMADRIDALGIERSMURCIAMYTILINIPIRAEUSSAMOSSANTORINILAS PALMAS DE GRAN CANARIASEVILLAKAYSERI BILBAOPROMACHONASANTALYARHODESPIZAVALENCIAPOINTE-À-PITREPALMA DE MALLORCA Changing patterns in the world’s most important
tourist destination
Dufry is the market leader in the Mediterranean, which
is the world’s most important touristic region. More-
over, Dufry is the main duty-free operator in important
popular destinations such as Spain and Greece. We are
also present in France, Italy, Turkey, Malta, as well as in
Morocco and Egypt. With this portfolio, Dufry captures
major travel flows in this key geographical area.
The division, headquartered in Madrid, also manages
all African operations of Dufry in Cape Verde, Egypt,
Algeria, Ghana, Ivory Coast, Kenya, Morocco and
Nigeria as well as our partnership in Portugal. In total,
the division comprises 130 locations in 15 countries
in Southern Europe and Africa.
2018 saw some changes in tourist flows in the region.
Spain, after a number of years of strong growth, ex-
perienced a relatively stable number of tourists, but a
change in the mix of nationalities.
While Spain was negatively affected by the change in
travel patterns, this was partially compensated in
other locations, particularly in Turkey. After a very
challenging environment in 2016, Russian travelers re-
turned to our Antalya operation in 2017, and in 2018,
the business finally swung back to its full potential,
with a strong increase of Western European travelers
visiting Turkey.
Elsewhere in the division, performance was strong in
Italy, France, Malta and Kenia.
In 2018 we continued expanding and improving our
business in the region. In Malaga, Spain, we refur-
bished all the main stores, covering 2,900 m2 of retail
space. Important renovations have also been imple-
mented in Antalya, Turkey (3 stores – 1,700 m2), Tou-
louse, France (main store – 1,700 m2) and Heraklion,
Greece (main store intra-EU – 1,600 m2).
PORTION OF TURNOVER 2018
KEY REPORTED DATA 2018
DISTRIBUTION
CENTERS
NORTH
AMERICA
Number of shops
Sales area in m²
Employees in FTE
21 % SOUTHERN
EUROPE AND
AFRICA
406
105,006
5,437
LATIN
AMERICA
EASTERN EUROPE,
MIDDLE EAST, ASIA
AND AUSTRALIA
TURNOVER
1,854 IN MILLIONS
OF CHF
UK AND
CENTRAL
EUROPE
47
1 Management ReportDUFRY ANNUAL REPORT 2018 1
1
1
TOULOUSE | TOULOUSE-BLAGNAC INT. AIRPORT
Dufry inaugurated a new duty-free store at
Toulouse-Blagnac Int. Airport, under a walk-through
concept, with a total retail area of 1,700 m².
48
2
MALTA | MALTA AIRPORT
Dufry extended its contract with the airport, which included
an increase in space and a remodeling of the current walk-
through departures store, as well as an arrivals store and a
last-minute shop. The main departures store covers around
1,400 m².
2
3
4
3
MALAGA | MALAGA COSTA DEL SOL AIRPORT
Our shops have gone through a major renovation, which
included new features such as a dedicated service totem
for RED by Dufry clients.
4
CASABLANCA | MOHAMMED V INTERNATIONAL AIRPORT
The departure store located in Casablanca’s Mohammed V
International Airport, Morocco, offers 800 m² of retail space.
49
1 Management Report
DUFRY ANNUAL REPORT 2018
UK AND
CENTRAL
EUROPE
EDINBURGH
BIRMINGHAM
CARDIFF
BASEL-MULHOUSE
STANSTED
JÖNKÖPING
LONDON
NORRKÖPING
NORWICH
SKELLEFTEÅ
SHERWOOD FOREST
STOCKHOLM VISBY
LIVERPOOL
BELFAST
SUNDSVALL
MANCHESTER
NEW CASTLE
ÖSTERSUND
HAMBURG
ZURICH
GLASGOW
WHINFELL FOREST
KALMAR
HELSINKI
WOBURN FOREST
50
Solid performance and important retail
development
Headquartered in London, the division comprises all
our operations in Central Europe, including the United
Kingdom, Sweden, Finland, Switzerland and Germany.
It features operations in 58 locations in 6 countries
and a broad variety of customer nationalities from ma-
ture and emerging markets with both tourist and busi-
ness travelers.
In 2018, the division reported an ongoing good sales
performance in the United Kingdom, driven by a steady
growth in the number of passengers and ongoing im-
provement in the spend per passenger.
Switzerland, excluding Geneva, also posted good
growth, due to a combination of the refurbishment and
introduction of the New Generation Store concept in
Zurich along with growth in passengers.
In the year under review, Dufry further secured its
strong footprint in the United Kingdom. After renew-
ing important operations in 2017, such as Aberdeen,
Glasgow and Liverpool, in 2018 Dufry renewed its
Gatwick concession until 2025.
We have also renovated several operations within
the division including several important operations in
the United Kingdom. Among the main developments
and highlights are: London Heathrow Terminal 3, with the
launch of Dufry’s sixth New Generation Store (2,500 m2);
Glasgow, where we refurbished the main shop (1,400 m2);
and Liverpool, also with a full renovation of the main
store (900 m2). At Zurich airport, we have further
enhanced our New Generation Store concept.
Among the most recent new contracts wins in this
Division is a long-term contract with P&O Ferries for
15 ships connecting the UK with France, Belgium, the
Netherlands and Ireland, as well as an agreement to
expand Dufry’s convenience store offering at Zurich
Airport by adding a new concession for 5 additional
Hudson shops, spread across the terminals.
PORTION OF TURNOVER 2018
KEY REPORTED DATA 2018
DISTRIBUTION
CENTERS
NORTH
AMERICA
SOUTHERN
EUROPE AND
AFRICA
Number of shops
Sales area in m²
Employees in FTE
239
70,605
4,384
LATIN
AMERICA
EASTERN EUROPE,
MIDDLE EAST, ASIA
AND AUSTRALIA
TURNOVER
1,974 IN MILLIONS
OF CHF
23 % UK AND
CENTRAL
EUROPE
51
1 Management ReportDUFRY ANNUAL REPORT 2018
1
1
2
1
ZURICH | ZURICH INTERNATIONAL AIRPORT
The New Generation Store and renowned Brand Boutiques
feature the most up-to-date shop layouts in a fresh
new look, delivering a WorldClass shopping experience
to customers and offer 7,000 m² of retail space.
2
NORWICH | NORWICH AIRPORT
Dufry added Norwich to its portfolio in 2018. The new
walkthrough store, which covers over 200 m², offers
an extensive product mix across all categories and takes
the airport’s shopping experience to another level.
52
3
3
4
4
3
LONDON | LONDON HEATHROW AIRPORT
The New Generation Store at T3 features the
latest digital technology to boost customer
engagement across over 2,500 m² of retail space.
4
LIVERPOOL | LIVERPOOL AIRPORT
Dufry renewed its contract and expanded its main
duty-free retail space to 900 m², with an innovative
design showcasing the latest trends in travel retail.
53
1 Management Report
DUFRY ANNUAL REPORT 2018
EASTERN
EUROPE,
MIDDLE EAST
ASIA AND
AUSTRALIA
BURGAS
ST PETERSBURG
ASTANA
54
BELGRADE
VARNA
YEREVANBUSANBANGALOREKUWAITHONG KONGAMMANPERTHCOLOMBOMACAUMELBOURNEMOSCOWSHANGHAISIEM REAPCHENGDUKUALA LUMPURCANBERRASINGAPOREPHNOM PENHSHARJAHAQABAMARKA Important new wins, contract renewals and
renovations in a strategic region
Asia and the Middle East is a strategic growth area for
Dufry, as travel retail in the region is still fragmented
and the area features the highest current and pro-
spective passenger growth globally. With its presence
in 32 locations in 17 countries Dufry is already today
the most international travel retailer in that region and
features the highest number of operations.
Headquartered in Hong Kong, the division includes
several locations in Armenia, Bulgaria, Kazakhstan,
Serbia and Russia in Eastern Europe, as well as in the
United Arab Emirates, Jordan and Kuwait in the Mid-
dle East, in Australia, Hong Kong, Macao, Singapore,
Malaysia, Indonesia, Cambodia, India and Sri Lanka,
and also in China and South Korea in the Asia Pacific
region. Building on this well diversified portfolio, it is
our goal to further expand our presence in Asia.
The performance of the division continues to be very
strong. Driven by a strong increase in Chinese travel-
ers in the region, several operations even recorded
double digit growth in 2018, such as South Korea, Cam-
bodia, Indonesia, Australia, Jordan and Kuwait.
In 2018, we saw several important developments in the
division. In September, we opened our duty-free shops
at the new West Kowloon train station in Hong Kong,
from where the MTR, a high-speed train, connects with
Mainland China (Shenzhen). Furthermore, we opened
our downtown operation in Genting Highlands, a tour-
ist resort featuring casinos, shopping malls, and out-
door leisure activities located northeast of Kuala Lum-
pur. Last but not least, we strengthened our position
in Australia with the opening of a duty-free shop at
Perth Airport.
PORTION OF TURNOVER 2018
KEY REPORTED DATA 2018
DISTRIBUTION
CENTERS
NORTH
AMERICA
SOUTHERN
EUROPE AND
AFRICA
Number of shops
Sales area in m²
Employees in FTE
197
50,218
3,588
LATIN
AMERICA
13 % EASTERN
EUROPE, MIDDLE
EAST, ASIA AND
AUSTRALIA
TURNOVER
1,154 IN MILLIONS
OF CHF
UK AND
CENTRAL
EUROPE
55
1 Management ReportDUFRY ANNUAL REPORT 2018 1
2
3
1
SHANGHAI | SHANGHAI HONGQIAO AIRPORT
Dufry opened a luxury Montblanc boutique located
in Terminal 2. Customers visiting the store will discover
the full Montblanc range of products.
2
KUALA LUMPUR | GENTING HIGHLANDS
The downtown shop is located in the Genting Highlands
resort in Kuala Lampur. The 1,146 m² store marks
an important development for Dufry, by giving it a
presence in a new Southeast Asian market.
56
3
4
3
HONG KONG | HONG KONG MTR RAILWAY STATION
The stores are located in the new state-of-the-art MTR railway
station in Hong Kong serving the High Speed Rail connecting
the island to Mainland China. The departures shop covers
1,200 m² while the arrivals shop covers 300 m².
4
SHANGHAI | SHANGHAI HONGQIAO AIRPORT
The Cartier boutique located in Terminal 2 is the first
to be opened with the new airport concept, which strikes
a subtle balance between tradition and modernity.
57
1 Management Report
DUFRY ANNUAL REPORT 2018
LATIN
AMERICA
58
BRASILIAGUADALAJARALIMABUENOS AIRESMONTERREYRECIFESÃO PAULOSANTIAGO DE GUAYAQUILCORDOBAMENDOZABELO HORIZONTEPONCESAN JUANPUERTO VALLARTALA PAZNATALCAMPINASMANAGUAMAZATLANBAHAMASANTIGUACANCUNLA ROMANAPUERTO PLATABELÉMCURITIBAGRENADACOZUMELFLORIANÓPOLISFORTALEZAST LUCIAGRAND TURKPUNTA DEL ESTEJAMAICAGUASAULERIO DE JANEIROSAMANASANTIAGO DE CHILESANTO DOMINGOACAPULCOSANTIAGOORANJESTADSALVADORBARBADOSMEXICO CITYMONTEVIDEOBOGOTA 2018 – A challenging year in Latin America
Division Latin America comprises all Dufry operations
in Central and South America as well as in the Carib-
bean. Dufry has had a very strong market position in
Latin America for years and the region includes some
of the most dynamic travel retail markets in the world.
The region continues to offer expansion opportunities,
not only in airport retail but also in other channels
such as border shops, cruise ships and downtown op-
erations.
Headquartered in Miami, USA, the division runs oper-
ations in Argentina, Brazil, Bolivia, Colombia, many
locations in the Caribbean, Chile, Dominican Republic,
Ecuador, Honduras, Jamaica, Mexico, Nicaragua, Peru,
Puerto Rico and Uruguay.
Within the division, we experienced two completely
different market situations in 2018: Central America,
including the Caribbean, had a solid performance that
was further supported by the substantial expansion of
our cruise business by 12 new ships, In South Ameri-
can markets, the overall economic situation was chal-
lenging, mainly driven by the strong currency devalu-
ations in several countries, such as Argentina and
Brazil, which led to the lower purchasing power of local
consumers in US Dollar terms.
Business development in the region included our Can-
cun operation in Mexico, where similar to the full ren-
ovation last year in Terminal 4, we fully refurbished the
main shop in Cancun T3 and implemented the second
new generation store at the airport, covering 1,800 m2
of retail space.
PORTION OF TURNOVER 2018
KEY REPORTED DATA 2018
DISTRIBUTION
CENTERS
NORTH
AMERICA
Number of shops
Sales area in m²
Employees in FTE
SOUTHERN
EUROPE AND
AFRICA
476
126,784
6,899
19 % LATIN
AMERICA
EASTERN EUROPE,
MIDDLE EAST, ASIA
AND AUSTRALIA
TURNOVER
1,617 IN MILLIONS
OF CHF
UK AND
CENTRAL
EUROPE
59
1 Management ReportDUFRY ANNUAL REPORT 2018 1
1
1
CANCUN | CANCUN INTERNATIONAL AIRPORT
The New Generation Store located in T3 covers over
1,400 m² and offers customers the world’s most
renowned brands and a strong sense of place, bringing
aspects from Mexican culture.
60
2
3
3
2
SÃO PAOLO | GUARULHOS INTERNATIONAL AIRPORT
Dufry launched the first Dior Beauty Boutique in
travel retail Americas. The boutique showcases a new
way to exhibit its products in Brazil.
3 NORWEGIAN CRUISE LINE “BLISS”
The ship offers a retail space of around 800 m²,
where Dufry operates all product categories including
fine jewelry.
61
1 Management Report
DUFRY ANNUAL REPORT 2018
NORTH
AMERICA
TULSA
DENVER ATLANTIC CITY
WASHINGTON
FORT LAUDERDALE
FRESNO
GREENVILLE-SPARTANBURG
BIRMINGHAM
DALLAS
HALIFAX
BURLINGTON
LAS VEGAS LOS ANGELES
HOUSTON JACKSON
HARRISBURG MOBILE OKALOOSA
MYRTLE
MIAMI
NEWPORT
NORFOLK
NASHVILLE
NEW ORLEANS
NEWARK
OMAHA
MANCHESTER
BOSTON
PHOENIX
NEW YORK
PITTSBURG RALEIGH
PHILADELPHIA
SAN DIEGO
ORLANDO
EDMONTON
ATLANTA
RICHMOND ROANOKE
ROCHESTER
ST LOUIS SANTA ANA
ALBUQUERQUE
SEATTLE SAN FRANCISCO
CLEVELANDTORONTO
VANCOUVER
TUCSON
ANCHORAGE
BALTIMORE
CALGARY
CHARLESTON
Hudson Group
Investor Relations
website
62
CHICAGO Year of strong growth and expansion in North
America
The North American travel retail market is another of
Dufry’s traditional core markets. Since the acquisition
of Hudson in 2008, the division has successfully ex-
panded the original duty-paid convenience business and
has grown its portfolio of concepts and retail formats.
550 convenience shops in North America, the ongoing
modernization of the airport infrastructure in the United
States offers considerable potential to further expand
with duty-free operations, as well with brand boutiques
and specialized shops. Hudson already successfully op-
erates all of these formats in North America, across
over 88 locations in both the US and Canada.
In 2018, we set another milestone in the successful his-
tory of Hudson, with its Initial Public Offering on the
New York Stock Exchange and trading of the HUD
shares since February 1, 2018. The separate listing of
our North American business allows us to develop this
market with a somewhat different focus compared to
the rest of Dufry. Due to the importance of food & bev-
erage (F&B) in North America, and the convergence of
retail with F&B in parts of the business, the strategic
development in North America should include a strong
F&B angle. Moreover, airports are increasingly looking
for so-called “master concessionaires” to operate both
travel retail and F&B operations and to act as unique
partners for the management of the airport’s commer-
cial area. In this North American specific market con-
text, the IPO gives strategic flexibility to Hudson, while
maintaining the benefits of being part of Dufry Group.
Dufry retains a 57% ownership in Hudson and we con-
sider the position in North America as strategic.
“Hudson” is the most recognized travel retail conve-
nience shop brand in the world. In addition to almost
The division performed very well in 2018, driven by a
combination of passenger growth and new openings
along the year.
In terms of retail development, highlights were the
800 m2 of space added to our existing duty-free busi-
ness in Las Vegas, the opening of seven new duty-paid
stores at Fort Lauderdale airport (800 m2) and the
opening of 7 travel essential, specialty retail and duty-
free shops at Raleigh-Durham airport (600 m2).
Important contracts were also signed in 2018: at
Boston Logan airport we concluded a contract exten-
sion for 10 years, which in addition provides a 36 % ex-
pansion over the current footprint. We also won a new
contract in Philadelphia to operate 11 stores covering
900 m2 of retail space.
To have an in-depth view of the performance of our
North American division please follow the QR code on
page 62 that will take you to the Hudson Group Inves-
tor Relations website and the Annual Report 2018.
PORTION OF TURNOVER 2018
KEY REPORTED DATA 2018
DISTRIBUTION
CENTERS
22 % NORTH
AMERICA
SOUTHERN
EUROPE AND
AFRICA
Number of shops
Sales area in m²
Employees in FTE
1,028
101,258
9,372
LATIN
AMERICA
EASTERN EUROPE,
MIDDLE EAST, ASIA
AND AUSTRALIA
TURNOVER
1,884 IN MILLIONS
OF CHF
UK AND
CENTRAL
EUROPE
63
1 Management ReportDUFRY ANNUAL REPORT 2018 1
2
1
RALEIGH | RALEIGH-DURHAM AIRPORT
Hudson opened during 2018 seven new shops across
more than 600 m² of retail space at Raleigh-Durham
Airport including different retail concepts, such as
specialty, travel essentials and duty-free.
64
2
FORT LAUDERDALE | FORT LAUDERDALE HOLLYWOOD
AIRPORT
The specialized shop brings a great selection of
sunglasses to customers, including iconic brands.
3
4
3 ATLANTA | ATLANTA AIRPORT
The airport features the world’s largest Hudson
store covering over 460 m².
4 VANCOUVER | VANCOUVER AIRPORT
The duty-free shop offers travelers a wide range
of the world’s best brands.
65
OVER 400 LOCATIONS WORLDWIDE
SOUTHERN EUROPE
AND AFRICA
Algeria
Algiers
Cape Verde
Sal
Santiago
Cote d’Ivoire
Abidjan
Egypt
Cairo
France
Calais
Fort-de-France
Nice
Pointe-à-Pitre
Toulouse
Ghana
Accra
Greece
Aktio
Alexandroupoli
Anchialos
Araxos
Asterion
Athens
Blue Galaxy
Blue Horizon
Blue Star I, II
Blue Star Delos
Blue Star Diagoras
Blue Star Naxos
Blue Star Paros
Chania
Corfu
Doirani
Elyros
Evzonoi
Hellenic Spirit
Heraklion
Igoumenitsa
Kafalonia
Kakavia
Kalamata
Karlovasi
Karpathos
Kastanies
Kastelorizo
Katakolo
Kavala
Kipoi
Kos
Kriti Ship
Krystallopigi
Limnos
Mertziani
Mykonos
Mytilini
Niki
Olympic Champion
Ormenio
Patmos
Patras
Piraeus
Prevelis
66
Promachonas
Rhodes
Sagiada
Samos
Santorini
Skiathos
Superfast I, II, XI
Symi
Thessaloniki
Zante
Italy
Bergamo
Florence
Genoa
Milan Central
Milan Linate
Milan Malpensa
Naples
Piza
Verona
Kenya
Nairobi
Malta
Malta
Morocco
Agadir
Casablanca
Dakhla
Essaouira
Fez
Marrakech
Nador
Oujda
Rabat
Tanger
Mozambique
Maputo
Nigeria
Abuja
Lagos
Spain
Alicante
Almeria
Asturias
Barcelona
Bilbao
Fuerteventura
Gerona
Granada
Ibiza
Jerez
La Coruna
La Palma (SPC)
Lanzarote
Las Palmas de
Gran Canaria (LPA)
Madrid
Mahon
Malaga
Murcia
Palma de Mallorca (PMI)
Reus
Santander
Santiago de Compostela
Sevilla
Tenerife Norte
Tenerife Sur
Valencia
Turkey
Antalya
Kayseri
Kutahya
UK AND CENTRAL EUROPE
Finland
Helsinki
Germany
Dusseldorf
Hamburg
Jersey
Saint Peter
Sweden
Jönköping
Kalmar
Karlstad
Landvetter
Luleå
Norrköping
Östersund
Stockholm Arlanda
Stockholm Bromma
Sturup
Sundsvall
Umeå
Visby
Switzerland
Basel-Mulhouse
Geneva
Zurich
United Kingdom
Aberdeen
Belfast
Birmingham
Bournemouth
Bristol
Cardiff
Doncaster
East Midlands
Edinburgh
Elvedon Forest Center Parks
Exeter
Folkestone
Glasgow Airport
Glasgow Prestwick
Kirmington
Leeds
Liverpool
London Gatwick
London Heathrow
London Luton
London Southend
London St. Pancras
Longleat Forest
Center Parks
Manchester
Newcastle
Norwich
Sherwood Forest
Center Parks
Southampton
Stansted
Whinfell Forest
Center Parks
Windsor
Woburn Forest
Center Parks
Cruise ships
Arcadia
Aurora
Ventura
Queen Elizabeth
EASTERN EUROPE, MIDDLE
EAST, ASIA AND AUSTRALIA
Armenia
Gyumri
Yerevan
Australia
Canberra
Melbourne
Perth
Bulgaria
Burgas
Varna
Cambodia
Phnom Penh
Siem Reap
China
Chengdu
Hong Kong
Macau
Shanghai
India
Bangalore
Indonesia
Bali
Jordan
Amman
Aqaba
Marka
Kazakhstan
Astana
Malaysia
Kuala Lumpur
Kuwait
Kuwait City
Russia
Moscow Domodedovo
Moscow Sheremetyevo
St Petersburg Pulkovo
Serbia
Belgrade
Nis
Singapore
Changi
South Korea
Busan
1 Management ReportDUFRY ANNUAL REPORT 2018
Sri Lanka
Colombo
United Arab Emirates
Sharjah
Cruise ships
Cruise Ships Joy GM
LATIN AMERICA
Antigua
Antigua
Saint Philip
Argentina
Bariloche
Buenos Aires Aeroparque
Buenos Aires Ezeiza
Cordoba
Mendoza
Aruba
Oranjestad
Bahamas
Bahamas
Great Exuma
Freeport
Barbados
Barbados
Christ Church
St. Michael
Bolivia
La Paz
Santa Cruz
Brazil
Belém
Belo Horizonte
Brasília
Campinas
Curitiba
Florianopolis
Fortaleza
Goiânia
Natal
Recife
Rio de Janeiro
Rio de Janeiro Galeão
Rio de Janeiro
Santos Dumont
Salvador
São Paulo Congonhas
São Paulo Guarulhos
Chile
Santiago de Chile
Colombia
Bogota
Dominican Republic
La Romana
Puerto Plata
Samana
Santiago
Santo Domingo
Ecuador
Santiago de Guayaquil
Grenada
Grenada
Honduras
Roatan
Jamaica
Jamaica
Montego Bay
Mexico
Acapulco
Cancun
Cozumel
Guadalajara
Guanajuato
Ixtapa
Los Cabos
Mazatlan
Mexico City
Monterrey
Puerto Vallarta
San José del Cabo
Netherlands
Bonaire
Nicaragua
Costa Esmeralda Airport
El Espino
Guasaule
Managua
Peñas Blancas
Peru
Lima
Puerto Rico
Ponce
San Juan
St Kitts & Nevis
St Kitts
St Kitts Bradshaw Airport
St Lucia
St Lucia
St Maarten
St Maarten
Trinidad & Tobago
Port of Spain
Turks & Caicos Islands
Grand Turk
Turks & Caicos Islands
Uruguay
Montevideo
Punta del Este
Cruise Ships
Carnival Inspiration
Carnival Sensation
Carnival Valor
Holland of America
Koningsdam
Holland of America
Maasdam
Holland of America
Nieuw Amsterdam
Holland of America
Nieuw Statendam
Holland of America
Oosterdam
Holland of America
Prinsendam
Holland of America
Rotterdam
Holland of America
Veendam
Holland of America
Westerdam
Holland of America
Zaandam
NCL Bliss
NCL Dawn
NCL Escape
NCL Gem
NCL Jade
NCL Jewel
NCL Pearl
NCL Sky
NCL Spirit
NCL Sun
Pullmantur Horizon
Pullmantur Monarch
Pullmantur Sovereign
Pullmantur Zenith
NORTH AMERICA
Canada
Calgary
Edmonton
Halifax
Toronto
Vancouver
USA
Albuquerque
Anchorage
Atlanta
Atlantic City
Baltimore-Washington
Birmingham
Boston
Burbank
Burlington
Charleston
Chicago
Chicago Midway
Chicago O’Hare
Cleveland
Corpus Christi
Dallas Fort Worth
Dallas Love Field
Denver
Des Moines
Detroit
Fort Lauderdale Hollywood
Fresno
Grand Rapids
Greater Rochester
Greenville-Spartanburg
Harrisburg
Houston
Houston George Bush
Houston William P. Hobby
Jackson
Las Vegas Hard Rock Cafe
Las Vegas Mc Carran
Las Vegas Palazzo
Los Angeles
Lubbock
Manchester Boston
Miami
Minneapolis
Mobile Bates Field
Myrtle Beach
Nashville
New Orleans
New York Empire State
New York Grand Central
New York JFK
New York LaGuardia
New York Penn Station
New York Port Authority
New York UN Gift Center
Newark
Newark Liberty
Newport News Williamsburg
Norfolk
Oakland
Okaloosa
Omaha
Ontario
Orlando
Orlando Sanford
Philadelphia
Phoenix
Phoenix Sky Harbour Airport
Pittsburgh
Portland
Raleigh
Richmond
Roanoke
Santa Ana
Salt Lake City
San Antonio
San Diego
San Francisco
San José
Seattle
St Louis
Stewart Newburgh
Tampa
Tucson International Airport
Tulsa Airport
Washington DC
Washington Dulles
Washington Ronald
Reagan Airport
CHANNELS
Airports
Border, Downtown &
Hotel Shops
Railway Stations & Other
Cruise Liners & Ferries
Seaports
67
1 Management ReportDUFRY ANNUAL REPORT 2018
CUSTOMERS
RETAILING
AT ITS BEST
Research on consumer trends around the world shows
that customers nowadays are looking for experiences
rather than just “buying a product”. To best accommo-
date this changing behavior and to meet our custom-
ers’ expectations, Dufry is investing in different initia-
tives to take airport and travel retail shopping to the
next level.
information in different languages is a considerable
challenge. Therefore, we have started to equip our
shop staff with tablet computers so that they can pro-
vide customers with extensive product information in
several languages. Going forward, we plan to also of-
fer payment services through the tablets without the
need to go to the tills.
Engage with customers through new generation
stores
In our strive to provide customers with a unique shop-
ping experience, our new generation store is the cor-
nerstone of our latest approach to retail. With the first
6 shops opened in Madrid, Melbourne, Cancun T3 and
T4, Zurich as well as in Heathrow T3, our customers can
experience a shopping environment which changes its
appearance several times during the day. Displays
appear in different languages and show the brands
that best fit the customer profile present at the air-
port at any given time of the day.
Retail at its best
Our aspiration is higher than just selling products. Our
well trained and motivated sales representatives will
help you navigate through a large variety of prestigious
brands to find the right product for you and to provide
you with the best service when visiting our shops.
Personally
engaging with
customers.
We welcome customers of more than 150 nationalities
to our shops every day and our wide assortment can
exceed 50,000 items in any given location. For this
reason, providing our customers the right product
68
Pre-order at home, collect at the airport
To provide convenience is another priority for Dufry,
this is why we want to engage with our customers well
beyond our shops. Even before they start their trip,
travelers can pre-order products through the inter-
net and collect them conveniently once at the airport.
Our “Reserve & Collect” service is already available in
153 locations in 39 countries around the world. New
locations are constantly added – the full list is avail-
able on our website under:
www.shopdutyfree.com
Constantly
enhancing
customer
service.
RED by Dufry
RED by Dufry is structured as a loyalty program but it
takes the idea one step further. RED works primarily
through a mobile application (app) and via the tradi-
tional earning of points the program offers exclusive
advantages such as discounts at Dufry stores and
specific airport benefits. Additionally, going forward
members of the program will become identifiable
through the app’s beacon technology once they are at
the airport and will receive personalized notifications
1 Management ReportDUFRY ANNUAL REPORT 2018 400 Dufry operates
in over 400 locations
in 65 countries
worldwide.
on promotions and offers tailored to their prefer-
ences. This allows Dufry to increase conversion of
travelers into customers and to attract them to the
shops. RED by Dufry is already live in 200 locations in
40 countries and is continuously expanded to further
operations worldwide. A full list of the locations where
RED by Dufry is implemented can be found here:
www.redbydufry.com
Forum – Connecting the digital dots
Forum is the new Dufry social media platform launched
in 2018 that provides stories from bloggers and influ-
encers, as well as background information from brands
and Dufry in an exclusive and glamorous environment.
Moreover, Forum by Dufry connects with our other
digital initiatives such as RED by Dufry and Reserve &
Collect and serves as a vehicle to connect with our po-
tential customers when they are planning their jour-
ney or even before. Forum is designed to support the
inclination to shop with us, to change customer per-
ception, and position Dufry shops as the place to find
the latest trends and launches for the main catego-
ries – visit Forum by Dufry at:
https://forum.shopdutyfree.com/en
Dufry’s focus on customer orientation
Our understanding of customer orientation goes beyond
the pure fulfilment of expectations and requests we
receive in our shops. A satisfied customer for us is a cus-
tomer that can also trust us when it comes to guaran-
tees, data security, privacy, product safety and other
aspects of our interaction with our customers .
True global return guarantee
Dufry is the only global travel retailer in the industry to
offer a true global return guarantee. No matter if you
purchased something in Melbourne, Bali, St. Peters-
burg, Barcelona, São Paulo, Las Vegas or elsewhere in
any of our shops in the world: if there is a problem with
any product that you purchased at a Dufry store, we
will replace, refund or exchange your product within
60 days of purchase. Dufry’s customer service repre-
sentatives, who can be reached in several languages by
phone, email or online chat, attended around 164,000
customers from 152 countries in 2018. Dufry’s cus-
tomer service team and policies guarantee full cus-
tomer satisfaction. That service is another example of
our commitment to an outstanding customer experi-
ence day-by-day.
Customer satisfaction & safety
Customer satisfaction and safety is our first prior-
ity. As a fundamental first step we ensure that all
products strictly comply with applicable legislation
and health and safety requirements. Dufry complies
with legal requirements at every location we operate
and take a proactive approach, working with govern-
ments and regulators to clarify any concerns. In this
context, Dufry, through active membership of the in-
dustry’s trade associations, has helped shape rele-
vant and robust Codes of Conduct for the travel re-
tail industry (e.g. UK Code of Conduct on disruptive
passengers, UK Code of Conduct on VAT, ETRC Code
of Conduct on Sale of Alcohol, DFWC Code of Con-
duct on Sale of Alcohol).
Customer Communications
In its advertising and marketing initiatives, Dufry
shows the same responsible stance that it shows in all
its other activities. We commit to comply with all reg-
ulations and rules in all our advertisements and pub-
lished communications in the countries where we op-
erate. We also expect the same behavior from our
suppliers when using the space that we make available
in our stores for advertising and promotions. When it
comes to product labeling, we request our suppliers
to comply with the regulations of all the locations
where the product is going to be sold. Given that our
69
1 Management ReportDUFRY ANNUAL REPORT 2018 200 Dufry’s loyalty program RED
by Dufry is already available
in 200 locations.
stores operate in an environment where we serve
many nationalities speaking different languages every
day, we are proactively engaged with our industry
trade associations to find off-the-label solutions.
Dufry commits to
comply with all adver-
tising and marketing
regulations.
Customer Privacy
Management and protection of customers’ private
data in the processes that involve the handling of client
information is an area of importance for Dufry. As
a requirement of customs authorities, airport author-
ities and for contractual reasons, the customer’s per-
sonal data is collected, processed and retained in ac-
cordance with the privacy statement listed on the
Dufry website or in the retail locations.
Additionally, in some countries, the company offers
Reserve & Collect and RED by Dufry services, for
which additional personal information from custom-
ers is needed to provide the with requested services
such as newsletters and marketing & advertising ma-
terials. In order to protect and ensure that customer
data is handled correctly, Dufry has a number of sys-
tems and security processes in place, including a ro-
bust IT security system, a data protection policy and
specific training for employees dealing with personal
information, as well as internal procedures and poli-
cies which follow relevant laws and regulations.
During 2018 Dufry completed a number of processes
to conclude the alignment of our operations in accor-
70
dance to the EU General Data Protection Regulation
(GDPR). Specifically, this work involved expanded doc-
umentation and information requirements, privacy im-
pact assessments and the right of individuals (mainly
customers, employees, partners and suppliers) to re-
quest access to, or to correct, delete, object to pro-
cessing of their own personal data and to request data
portability. All of this was completed ahead of the
GDPR implementation deadline of May 2018.
Customer data
protection is
important to Dufry.
In the case of the above-mentioned Reserve & Collect
and RED by Dufry services, the company applies high
security standards to safeguard and protect personal
data and to ensure compliance with the different le-
gal frameworks.
Moreover, the Group also undertakes internal Data
Protection Audits and intrusion tests, while quarterly
meetings are held to discuss and improve the protec-
tion of customers’ personal data. For any customer,
employee or third party who wishes to report a griev-
ance or who has questions regarding Dufry’s data pri-
vacy, there is a specific email address to contact the
company, and inquiries are coordinated by the Inter-
nal Audit, Loss Prevention and ERM department.
Dufry’s expertise recognized by the industry
In 2018, Dufry’s customer focus and retail excellence
has been recognized by different industry partners
again. A complete list of the 2018 awards is displayed
on our website:
www.dufry.com/en/company/our-awards
1 Management ReportDUFRY ANNUAL REPORT 2018 MORE THAN
50,000
items are available
in our portfolio
for our customers
to choose from.
NET SALES BY PRODUCT CATEGORY 2018
2 % LITERATURE & PUBLICATIONS
2 % ELECTRONICS
5 % OTHER
32 % PERFUMES &
COSMETICS
12 % TOBACCO
GOODS
13 % LUXURY
GOODS
16 % WINE &
SPIRITS
16 % FOOD,
CONFECTIONERY
& CATERING
71
SUPPLIERS
BENEFIT FROM A
UNIQUE GLOBAL
WINDOW DISPLAY
Dufry is by far the largest travel retail operator world-
wide offering suppliers a network of over 2,300 shops
in over 400 locations in 65 countries on 6 continents.
Dufry’s global footprint offers suppliers a unique op-
portunity to showcase their brands across the globe
in exclusive environments to captive audiences. We
operate in duty-paid and duty-free areas with access
to domestic and international travelers respectively,
and offer our customers both convenience products
and luxury shopping experiences. In 2018, over one
billion passengers passed through locations where
Dufry operates shops, making us the perfect ambas-
sador for global brands.
Working closely with brands
The travel retail industry has a number of elements that
are attractive to suppliers: it is a fast growing channel,
it has a captive and affluent audience, and it offers an
international and exclusive setting. This makes travel
retail an important window display for brands. Dufry
aims to be the preferred partner for global brands,
based on the scope of our global network, our superior
execution, and strong customer service.
Since 2015, we have intensified cooperation with our
suppliers and we increasingly partner with global
brands for more strategic initiatives, identifying oppor-
tunities for marketing campaigns, global promotions or
product launches, that also contribute to our turnover
by generating additional income. In this context, we of-
fer each brand a customized approach to create a joint
set of goals for the supplier and for Dufry, and together
we agree on specific actions and distinctive campaigns.
Both parties establish clear targets and evaluate the
effectiveness of their initiatives together.
Jointly increasing customer experience
In the recent few years we have seen a growing num-
ber of brand partners developing Dufry-exclusive
72
products, which together with novelties, limited edi-
tions and travel exclusives, considerably augment
and differentiate the customers’ shopping experi-
ence. Internal research also shows that personally
engaging with customers in the shop substantially
increases the spend per ticket – and what is a better
subject to talk about than an exclusive or a newly
launched product? In our Focus Story on page 30, we
feature some great examples of successful market-
ing initiatives with our brand partners.
Centralized procurement and logistics
With a focus on generating efficiencies, Dufry has
streamlined its key processes. Through our central-
ized procurement and logistic functions we have con-
siderably simplified the entire supply chain.
Our Global Category Managers act as key relation-
ship managers for brands and coordinate activities
with suppliers. They define brand plans with suppli-
ers and negotiate all contractual parameters. Dufry
has also centralized and simplified the ordering pro-
cess, by internally aggregating the orders from the
different retail operations and sending a consoli-
dated order to suppliers.
Accordingly, we have adapted our logistics organiza-
tion with three distribution centers in Uruguay, Swit-
zerland and Hong Kong which operate warehouses in
Hong Kong, Runnymede (UK), Barcelona (Spain) and
Miami (USA) and provide the timely shipping of goods
to our operations. The process benefits both Dufry
and suppliers, as it allows us to order and ship larger
volumes to the distribution centers, thus increasing
flexibility so that we allocate the optimal product
quantity to each country and shop and maximize
product availability.
1 Management ReportDUFRY ANNUAL REPORT 2018 BRAND UNIVERSE
1,000
Dufry works with over
1,000 of the most renowned
global and local brands.
73
1 Management ReportDUFRY ANNUAL REPORT 2018 AIRPORT
AUTHORITIES &
LANDLORDS
BENEFITTING FROM
COMPREHENSIVE
RETAIL CONCEPTS
Dufry is the partner of choice for airport operators
and other travel related landlords. We strive to create
value for landlords and Dufry alike, through our abil-
ity to deliver best-in-class retail concepts and our
deep understanding of our customers. The trust our
landlords have placed in us has allowed Dufry to be-
come the leader in travel retail, currently operating
over 2,300 shops in 65 countries located in airports,
seaports, railway stations, downtown areas, border
crossings, cruise liners & ferries, hotels and other lo-
cations with captive audiences.
Benefitting from the widest industry experience
Dufry shares a common goal with the facility owners,
which is to maximize returns on the available space and
to create a highly innovative and attractive shopping
experience for customers. Dufry’s extensive expertise
in all technical and regulatory aspects, its retail know-
how and its worldwide presence, are core competitive
advantages, as is its comprehensive range of attrac-
tive retail concepts and shop formats to satisfy any
need of a landlord in both duty-free and duty-paid en-
vironments. The in-depth understanding of customer
profiles is key to best designing these retail concepts
and to develop successful marketing initiatives. More-
over, in order to understand the latest trends in con-
sumer behavior, Dufry regularly carries out detailed
consumer research, thus generating insights that ul-
timately benefit landlords through increased sales and
profitability of their commercial space.
Partnerships create value for both travel retailers
and facility owners
The partnership between facility owners and retailers
is one of the most important aspects of travel retail.
Our many years of experience in the business show that
the closer both parties work together and align their
common goals, the higher the value generated. By join-
ing forces, we can create more inviting and attractive
74
commercial spaces that maximize spend from the pas-
sengers’ arrival at the airport until their boarding.
Dufry has a long-standing tradition of working to-
gether with landlords in different operations, be they
large or small, in emerging or developed markets,
in airports, or seaports, border shops or cruise lines.
Recent examples of refurbishments and expansions of
our shops confirm the value of coordinated strategies.
Projects developed at the airports of Antalya, Bali,
Cancun, Fort Lauderdale, Glasgow, Las Vegas, London
Heathrow T3, and Malaga are a few examples of how
Dufry and landlords can work together on the struc-
turing of passenger flows, improving the appearance
of commercial space and expanding retail offerings to
considerably increase sales.
6 New
Generation
Stores opened.
Dufry’s New Generation Store – up and running
Dufry’s New Generation Store concept makes exten-
sive use of digital technology to increase communica-
tion with passengers at the airport. The digital route
allows Dufry to approach potential customers in an
even more personalized way than ever before and to
flexibly adapt in-store communication during the day
to the changing nationalities and customer profiles,
enhancing the communication’s impact. The sense of
place of our shop designs, an important aspect for
landlords, is also secured in the new concept, as the
format provides for a high degree of customization.
Dufry knows how to perfectly match these require-
ments with efficient retail concepts, to best serve
travelers’ needs and to generate value for landlords
1 Management ReportDUFRY ANNUAL REPORT 2018 and Dufry alike. New Generation Stores have so far
been opened in Madrid, Melbourne, Cancun T3 and T4,
and Zurich as well as at London Heathrow T3.
Deployment of our digital strategy improves
conversion and boosts the visibility of operations
In 2018, Dufry accelerated the deployment of its dig-
ital strategy that essentially aims at converting more
travelers into customers, thus driving sales and ulti-
mately benefitting our landlords. Besides the New
Generation Stores, services such as Reserve & Collect
and above all the loyalty program RED by Dufry, pro-
mote our operations online on a world-wide scale,
through their global span and reaching travelers
across the world. This gives airports and their retail
offer additional visibility and exposure, thus promot-
ing them as attractive shopping locations. For a more
detailed description of our digital strategy and the
2018 achievements, please also refer to the strategy
chapter on page 26.
Dufry has a long-
term concession
portfolio.
Successful contract extensions secure
future business
In travel retail, concession contracts are the key busi-
ness driver for retail operators, as they provide the
right to sell their products at a given operation. In
2018, Dufry continued to successfully win new con-
tracts and to renew existing concession contracts,
NET SALES BY CHANNEL 2018
4 % RAILWAY STATIONS & OTHER
3 % CRUISE LINERS & SEAPORTS
3 % BORDER,
DOWNTOWN &
HOTEL SHOPS
some of them well before the previous expiry date,
thus extending the remaining average lifetime of its
portfolio, which is 7 years. Within our concession port-
folio, 25 % of our contracts have a remaining life-time
of one to two years; 23 % three to five years; another
30 % between six and nine years, and the final 22 %
have a remaining duration of ten years or more. On av-
erage, Dufry renews existing contracts that generate
between 8 % to 10 % of our sales every year, as well as
adding new contracts,
New shops added to our first-class concession
portfolio
In 2018, Dufry opened and expanded 192 new shops
adding 26,800 m² of retail space across all divisions. At
December 31, 2018, the entire concession portfolio of
the group included retail space of over 453,000 m².
Dufry’s concession portfolio is highly diversified and
well balanced across emerging and mature markets on
all six continents. This considerably reduces risks of
being exposed to single markets and operations; the
largest concession only accounts for approximately
7 % of turnover; while the 10 biggest concessions rep-
resent less than 35 %.
Focusing on investment returns
Dufry follows a disciplined approach on evaluating new
projects and opportunities. They are analyzed individ-
ually on a commercial and financial basis. The many
aspects of a project are put together including devel-
opment potential and analyzing initial investment re-
quirements, as well as the expected development of
passenger numbers and profile perspectives. Through
a strict evaluation of these criteria and our disciplined
approach to returns, we ensure that our concession
portfolio remains of the highest quality and that each
concession offers attractive returns for the Group.
This methodology is applied for all projects, irrespec-
tive whether we participate in a tender process, engage
in direct negotiations with airport authorities or per-
form acquisitions.
90 % AIRPORTS
75
1 Management ReportDUFRY ANNUAL REPORT 2018 INVESTORS
PARTICIPATING
IN THE GROWTH OF
TRAVEL RETAIL
Since its listing in 2005, Dufry has executed a con-
sistent strategy focusing on profitable growth and
cash generation to create sustainable value for
shareholders and bondholders alike. In the first
phase, the company accelerated growth through ac-
quisitions, and more recently shifted towards a more
organic growth profile.
Pure-player in the fast-growing travel retail
channel
The strong fundamentals of the travel retail industry –
fueled by a resilient long-term global passenger growth –
are a cornerstone of Dufry’s investment case. This, com-
bined with our track record of growth as well as an
attractive risk profile based on our geographical diversi-
fication, makes Dufry a compelling investment opportu-
nity. For a detailed view on Dufry’s investment case please
refer to page 24.
Over CHF 600 million
returned to
shareholders.
Capital allocation and dividend strategy
In 2018, Dufry revised its capital allocation and divi-
dend strategy. In this context, the company paid a
dividend of CHF 3.75 per share for the 2017 business
year, equal to a total of CHF 198.7 million. Going for-
ward, Dufry intends to pay out a dividend of at least
the same amount as in the previous year and target
40% of cash earnings. Moreover, in 2018 the company
executed a share buyback program, early completed
end of October, in which 3,304,541 Dufry shares were
bought in the market for an amount of CHF 401.9 mil-
lion in total. In 2018, Dufry has thus returned
CHF 600.6 million to its shareholders.
Member of the Swiss Leaders Index
With a market capitalization of CHF 5.0 billion as per
December 31, 2018, Dufry is part of the Swiss Leader
Index (SLI) on the SIX Swiss Exchange, which includes
the 30 biggest publicly listed companies in Switzerland.
Dufry’s share price started the year at CHF 145.15 and
after reaching a high of CHF 153.00 in January, closed
2018 at CHF 93.12.
Dufry’s trading volume continued to be very healthy
in 2018. Considering all major trading platforms,
Dufry’s average daily trading volume was approxi-
mately CHF 101.4 million. The SIX Swiss Exchange re-
mains our most important trading platform, where
the average daily volume of Dufry shares reached
CHF 37.2 million in 2018.
Our long-term shareholders, in particular Travel
Retail Investments, Qatar Investment Authority and
Richemont, represented 38 % of our share capital and
continue to support Dufry. We also saw former inves-
tors renewing their participation during 2018, such as
GIC Singapore, and we welcomed new large sharehold-
ers, such as Franklin Mutual, both disclosing above 5 %.
Dufry’s free-float is well balanced, with shares being
held by institutional investors in the most important
investor countries such as the United Kingdom, the
United States, and Switzerland.
Termination of the Company’s secondary listing
in Brazil
Dufry has had a secondary listing on the Brazilian
stock exchange B3 (former Bovespa) since 2010.
Through Brazilian Depositary Receipts (BDRs), Dufry
was an attractive equity opportunity in the local Bra-
zilian market, as it provided South American investors
a convenient alternative to invest in a global company
76
1 Management ReportDUFRY ANNUAL REPORT 2018
DAILY AVERAGE VOLUME
MILLIONS OF CHF
101.4
86.7
51.8
58.0
54.8
110
100
90
80
70
60
50
40
30
20
10
0
2014
2015
2016
2017
2018
Note: Includes trading on all Exchanges, of which CHF 35.6 million come
from the SIX Swiss Exchange.
SHAREHOLDER STRUCTURE
AT DECEMBER 31, 2018
37.4 % OTHER
SHAREHOLDERS
16.3 % GROUP
OF SHARE HOLDERS
LED BY TRAVEL
RETAIL INVEST-
MENTS SCA
5.0 %
COMPAGNIE
FINANCIERE
RUPERT
6.9 % STATE
OF QATAR
5.1 % FRANKLIN
RESOURCES INC.
5.1 % GOVERNMENT
OF SINGAPORE
3.3 % BLACKROCK, INC.
20.9 % HAINAN PROVINCE
CIHANG FOUNDATION
Note: Based on shares. For a complete overview of Shareholder
disclosures please refer to page 228.
On February 1, 2019, the Hainan Province Cihang Foundation
disclosed that it no longer held any Company securities or
financial instruments.
77
DUFRY AG SHARE PRICE AND TRADING VOLUME
SHARE PRICE
IN CHF
TRADING VOLUME
MILLIONS OF CHF
180
170
160
150
140
130
120
110
100
90
80
1,000
900
800
700
600
500
400
300
200
100
0
1/17
2/17
3/17
4/17
5/17
6/17
7/17
8/17
9/17
10/17 11/17 12/17
1/17
2/18 3/18 4/18 5/18 6/18
7/18 8/18 9/18 10/18 11/18 12/18
Dufry
SPI
Volume (all exchanges)
Source: Bloomberg
Note: SPI Index has been rebased to Dufry’s share price
MARKET CAPITALIZATION AND FREE FLOAT
BILLIONS OF CHF
6.4
6.8
7.8
5.2
5.0
3.5
3.7
4.0
2.9
3.0
9
8
7
6
5
4
3
2
1
0
2014
2015
2016
2017
2018
Free Float
Average Market Capitalization
78
1 Management ReportDUFRY ANNUAL REPORT 2018
South America, during which we met more than 520 in-
vestors in one-to-one or group meetings and many more
in presentations. Apart from meetings, the Investor Re-
lations team answered around 650 calls and emails in
2018. This results in a total of about 1,200 contacts with
investors and analysts, an increase of 33 % compared to
the previous year. For contact details for our Investor
Relations team, located in Switzerland and Brazil, please
see page 244 and page 261 of this Annual Report.
IFRS16 and its impact on Dufry’s financials
Starting in 2019, Dufry will adopt the new International
Financial Reporting Standard IFRS 16 (effective as of
January 1, 2019), which will substantially affect the ac-
counting of concession and rental agreements.
Given Dufry’s retail nature and the fact that it does not
own the real state where it operates, IFRS 16 will there-
fore result in significant changes to Dufry’s financial
statements.
The topic was presented at Dufry’s Capital Markets Day
in May 2018. Since then, the company has been updat-
ing the market on new developments and indications
regarding the expected impacts on the financial state-
ments. Dufry intends to host a further Capital Markets
Day in the second quarter of 2019 to keep the market
updated on the different reporting implications and on
the KPIs that the company will use going forward.
such as Dufry. At its highest levels, the BDRs repre-
sented close to 27 % of Dufry’s share capital.
Due to the reduced number of BDRs and low trading
volumes, Dufry decided to cancel its listing on B3. The
process, which was executed in the second half of
2018, was successfully concluded in December.
Strong fundamentals – solid investment
for bondholders
Since the issuance of its first senior note in 2012,
Dufry has been a well-established investment oppor-
tunity in the bond market, and this represents an im-
portant source of financing for the company. Our low
operating leverage and the strong and resilient cash
flow generation are characteristics welcomed by the
fixed income market.
Long-term
financing
in place.
Dufry has bank credit facilities in place totaling
CHF 1,250 million maturing in 2022 and CHF 1,500 mil-
lion maturing in 2023 (denominated in multiple curren-
cies); as well as senior notes, EUR 700 million 4.5 % ma-
turing in 2023, and EUR 800 million 2.5 % maturing in
2024. With this solid long-term financing structure,
Dufry has no debt maturity before 2022.
Dufry’s Senior Notes are currently rated by Standard &
Poors (BB) and Moody’s (Ba2).
Committed to fair and comprehensive
market communication
We are committed to open and transparent communi-
cations with the financial market to present our invest-
ment story and opportunities. We pursue a constant,
open dialogue with investors, analysts and the media
through direct phone and email exchanges, regular
roadshows and one-to-one meetings.
Senior management presents and discusses financial
performance on a quarterly basis and we provide the
financial community and media with in-depth reports
and information through press and analyst confer-
ences, conference calls and webcasts.
As part of our 2018 Investor Relations activities, senior
management and the Investor Relations team devoted
36 days to meeting investors directly through road-
shows and conferences in Europe as well as in North and
79
1 Management ReportDUFRY ANNUAL REPORT 2018 SUSTAINABILITY
REPORT
FOSTERING
STAKEHOLDER
DIALOGUE
Setting the scene
Beyond its commercial and financial goals, Dufry is
also committed to contributing to the travel retail in-
dustry and to society in general. In order to provide
more visibility on the efforts made by Dufry to further
develop our sustainability engagement, in 2016 we
began to increase the depth and breadth of Dufry´s re-
porting on sustainability issues. At that time, we com-
missioned a materiality assessment to EY (Ernst &
Young) that served to establish a detailed view on
which sustainability topics are material to our business
from both a company and a stakeholder perspective.
Based on the findings, in 2017 we prepared our first
Sustainability Report in accordance with the Global
Reporting Initiative (GRI) Standards, Core Option.
For 2018, we have taken the same approach, and ex-
panded the reach of our report by adding additional op-
erations to our sample data, which provides a broader
view of our business from a sustainability standpoint.
More detailed information may be found in the dedi-
cated sustainability section of our corporate website:
www.dufry.com/en/company/sustainability-dufry
Materiality Analysis
The materiality matrix serves to map the topics that
we consider most important for our stakeholders and
identifies the ones having the highest impact on our
business from a broad persective, and in particular
from a sustainability point of view.
When defining the matrix, Dufry followed a company
specific approach – rather than a pure sustainability
view – in order to optimally link the company strategy
and the broader company environment with the expec-
tations of our stakeholders. We based the list of topics
on a number of internal and external sources such as
our existing policies and regulations, publicly available
materiality assessments of peers and the SASB require-
80
ments (Sustainability Accounting Standard Board) as
well as the report of the Governance & Accountability
Institute. These topics, and the corresponding perfor-
mance indicators included in the GRI guidelines, have
been grouped into the three dimensions of our sustain-
ability strategy: Economic, Environment and Social.
We periodically revise the assessment made to ensure
it remains accurate and relevant for our business. We
have observed the increased importance of digital
themes, both for our stakeholders and our business,
but as this was already forecasted in our 2016 assess-
ment, our matrix remained unchanged.
Dufry’s materiality
matrix remained
unchanged.
Likewise, the group of relevant stakeholders included
in our materiality assessment remains valid. It includes
airports, customers, employees, investors (incl. share-
holders, bondholders and lending banks), public au-
thorities, society and suppliers.
Our Sustainability Goals
For Dufry success goes beyond commercial and finan-
cial performance. Operating over 2,300 stores in over
400 locations across 65 countries and with a work-
force of more than 30,000 employees, we understand
that our business activities also have an impact on the
societies of the countries where we operate. In addi-
tion, as the leading travel retailer, we aim to further
improve the overall traveler experience – in our shops
we welcome customers from over 150 nationalities ev-
ery day – and initiate growth opportunities that bene-
fit brands, airports and travelers alike. For these rea-
2 Sustainability ReportDUFRY ANNUAL REPORT 2018 MATERIALITY MATRIX
h
g
h
i
i
m
u
d
e
m
w
o
l
S
R
E
D
L
O
H
E
K
A
T
S
R
O
F
E
C
N
A
T
R
O
P
M
I
– Corporate governance /
– Products /
– Customer satisfaction /
– Financial performance /
– Services /
– Talent management /
– Brand and reputation /
– Digitalization /
– Growth strategy /
– Diversity and inclusion /
– Operations and security /
– Partnerships /
– Risk management and
compliance /
– Stakeholder engagement and
dialogue /
– Supply chain management /
low
medium
high
IMPORTANCE FOR DUFRY
= economic
= social
= environmental dimensions
Note: Within boxes topics are listed in alphabetical order
sons, we believe our goals are more articulate as we
aim to cultivate and enrich sustainability for all our
stakeholders.
In 2017, we identified the social assessment of our sup-
ply chain as one of the areas for development and ac-
cordingly drafted a Code of Conduct for Suppliers
during 2018, which we have started to share with our
most prominent partners. This is an on-going effort
that will continue in 2019. More details may be found
in the Social dimension section of this report.
Addressing the cultural transformation of Dufry has
also been an area of focus during 2018. With the intro-
duction of ONEDUFRY, a program aimed at mobilizing
our people to focus their minds, hearts and hands on
three core pillars – driving employee experience, driv-
ing customer experience and driving business results –
we continue with the global transformation process
of Dufry.
81
2 Sustainability ReportDUFRY ANNUAL REPORT 2018
Increasing the share of female representation in our
corporate governance bodies and managerial posi-
tions is another of our goals. In 2016, we launched an
initiative called women@dufry, bringing together fe-
male leaders across the business, in a variety of func-
tions and geographies. This group has the mission of
ensuring women’s advancement at Dufry, seeing tal-
ented women rise to top leadership positions within
the company, and helping employees to manage work,
family and life-balance topics.
We have made progress incentivizing women’s pro-
gression and today over 30 % of the staff selected for
our Talent Program are women. More details can be
found in the Social section of this report.
Moreover, Dufry has continued to develop its program
for fair compensation and gender pay gap reduction.
Through different initiatives across locations such as
the UK (one of Dufry´s largest operations) and Swit-
zerland, compensation schemes where analyzed and
remediation plans established if needed.
IMPROVEMENTS CARRIED OUT DURING 2018
COMPLIANCE AND DISCLOSURE
Update of the Dufry Code of Ethics, Sustainability and Integrity in Business Transactions
Disclosure of the Dufry Code of Conduct on the company website
Formal setup of compliance department reporting to general counsel;
member of group executive committee
Launch of two additional reporting channels (hot-line and dedicated website) for wrongdoings
GDPR implementation completed ahead of May 2018 deadline
Execution of dedicated trainings for employees dealing with personal information and customer data
SUPPLY CHAIN
Development & Finalization of Dufry Supplier Code of Conduct
Launch of supply chain surveillance with largest suppliers
Further improvement of logistics and supply chain with one order initiative
EMPLOYEES
Equal Salary Certification achieved in Switzerland
New mentoring program for Talent Management
Launch of ONEDUFRY initiative to further harmonize collaboration
through common values and principles
KPI’S
Extended number of operations included in HR data sample through leveraging Dufry Connect
(Global HR Platform)
Further details on these topics discussed can be found under the headings of the respective dimensions
on the subsequent pages, as well as on pages 69– 70 for customer and privacy related topics.
82
2 Sustainability ReportDUFRY ANNUAL REPORT 2018
ECONOMIC
DIMENSION
– Be profitable.
– Create shopping environ-
ments where people want
to buy.
– Support local economies
by buying local goods and
services, paying local taxes
and employing local staff.
ENVIRONMENTAL
DIMENSION
– Minimize our environmental
impact by operating an inte-
grated and efficient logistics
chain to transport products.
– Reduce our waste and energy
consumption.
SOCIAL
DIMENSION
– Maintain quality work envi-
ronments for our employees.
– Responsible procurement
practices.
– Support the communities
in which we live and work.
– Support individual social
projects, especially focusing
on helping disadvantaged
children and their families.
83
2 Sustainability ReportDUFRY ANNUAL REPORT 2018 ECONOMIC
Dufry operates in an industry that has shown solid and
resilient growth in the last decades – and which is ex-
pected to continue to grow. According to Generation
Research, a travel retail market research specialist, the
travel retail industry had a market value of USD 69.3 bil-
lion dollars in 2018, an 9.5 % increase on 2016, and it is
expected to reach USD 93.8 billion in 2022.
Within this prospective business environment, Dufry
follows a strategy of profitable growth – see also our
strategy section on pages 26 to 79 – in order to secure
a sustainable development for the company and all its
stakeholders.
Create best possible
shopping experiences
and environments.
As a retailer, our ambition is to create the best possi-
ble shopping environments to capture the interest of
travelers and to generate selling opportunities. We
closely cooperate with airport authorities and brand
suppliers for store design, passenger flows and allo-
cation of commercial space. This collaborative work
results in improved passenger services as well as more
visibility and opportunities for brands. Testament to
this collaboration, and just as a remarkable example,
is the London Heathrow Airport – where Dufry oper-
ates more than 60 % of the total retail by value. In 2018
again, Dufry’s retail in Heathrow has been recognized
by Skytrax, winning the accolade for Best Airport
Shopping in the world for the ninth consecutive year.
Taking the shopping experience to the next level
Dufry´s ambition is to remain best in class when it comes
to customer service. As reflected in our corporate
brand statement, WorldClass.WorldWide, at Dufry we
84
strive to provide our customers with the best retail ex-
perience in any store we operate. For the more detailed
aspects related to our customer services and approach,
please refer to the Customer Section on page 68.
Engaging with
customers through
digital technology.
In 2018, we continued investing in renewing, refurbish-
ing and upgrading our stores and to include additional
services that improve the passengers´ shopping expe-
rience. Complementing the physical construction of
the stores and the adoption of corporate best prac-
tices with our digitalization strategy has resulted in the
creation of “New Generation Stores”. As described in
the Strategy section of this Annual Report, these
stores make extensive use of digital technology to take
customer engagement to the next level by facilitating
the communication with the most relevant nationali-
ties of passengers in their own language and address-
ing the individual preferences of the different passen-
ger profiles. As well as generating a unique shopping
experience, digitalization within the store also sup-
ports sales staff when serving customers. So far, there
are New Generation Stores in the airports of Cancun,
London Heathrow, Madrid, Melbourne and Zurich.
Dufry has plans to extend this store concept to two
more locations in 2019 (Buenos Aires and Amman).
Moreover, in the attempt to further improve customer
engagement, Dufry enhanced its online Reserve & Col-
lect service, which is now available in 39 countries and
153 locations, to its loyalty program RED by Dufry cov-
ering 40 countries and 200 locations, as well as the
use of sales tablets for shop floor employees, now in
service in 30 countries across 60 locations.
2 Sustainability ReportDUFRY ANNUAL REPORT 2018 Another important component of our store renovations
is to create a strong sense of place, linking the shop-
ping environment to the country´s cultural heritage,
where they are located. One of the most remarkable ex-
amples is La Tequilería in our Cancun New Generation
Store. The powerful combination of state-of-the-art
store designs with local motives, together with a cu-
rated selection of local products on offer that are ac-
quired from local suppliers, results in unique shopping
spaces that invite customers to a full cultural immer-
sion in the destination.
Track record of
delivering successful
shopping concepts.
Industry recognition
Our ongoing strive to develop state-of-the-art shop-
ping environments and new services is also being rec-
ognized by the industry and sets new standards. Today,
Dufry has a proven track record in delivering success-
ful shopping concepts, specialized stores and market-
ing activations and some of the latest awards gained by
Dufry include the 2018 Moodie Davitt Report’s Dream-
store Award to both our Collection and Sunglasses
stores in Heathrow’s Terminal 5, an award where the
world’s brand owners rate the world’s travel retailers.
A detailed list of the awards won during 2018 is avail-
able under www.dufry.com/en/company/our-awards
STAKEHOLDER VALUE ALLOCATION 2018
6 % PUBLIC
AUTHORITIES
13 % BONDHOLDERS,
FINANCING BANKS
5 %
RETAINED
EARNINGS
& MINORITIES
76 % EMPLOYEES
Stakeholder Value Allocation by Dufry in 2018
The stakeholder value allocation corresponds to cor-
porate output less third-party inputs. The calculation
is based on Dufry’s EBIT plus personnel costs. It does
not comprise of values allocated to business stake-
holders, such as suppliers and landlords.
The value allocated reached CHF 1,546.6 million in 2018
(CHF 1,553.7 million in 2017). Out of this amount,
CHF 1,175.2 million was accrued to our employees in
form of remuneration and social security payments.
CHF 196.4 million was given as interest payments to
our bondholders and lending banks. Income taxes to
public authorities and communities in which the group
companies are located amounted to CHF 98.8 million.
The remaining amount was allocated to retained earn-
ings and local partners. In 2018, the Board of Direc-
tors revised the company’s capital allocation strategy
and proposed to the Annual General Meeting 2018 the
payment of a CHF 3.75 dividend per registered share
for the 2017 business year. Moreover, the Board of Di-
rectors approved a share buyback program to enhance
the value of shareholders’ equity. With these two ini-
tiatives, the company returned CHF 600.6 million of
capital to its shareholders. Further details of the div-
idend and the share buyback program can be found on
page 76.
Anti-corruption and anti-competitive behavior
Corruption is a worldwide phenomenon which is con-
sidered to be the cause of many negative economic,
social and environmental impacts. From a business
perspective, corruption distorts the functioning of the
market and undermines governance institutions and
in general the rule of law.
No-tolerance
approach to
curruption.
The subject of corruption is of considerable impor-
tance to Dufry as the Company expands its operations
to many countries with elevated corruption levels and
participates in many public procurement processes to
bid for airport, seaport and other concessions around
the globe each year.
Dufry prohibits bribery and corruption at all times and
in any form. We believe that in order to remain a solid
business leader, all business must be conducted ethi-
cally and in full accordance with all applicable laws,
rules, and regulations. Dufry requires all of its employ-
ees, managers and executives to behave at all times
85
2 Sustainability ReportDUFRY ANNUAL REPORT 2018 gal and Governance Department, enhanced third-party
due diligence procedures and expansion of Dufry’s
anonymous reporting channels, among others.
Dufry’s Compliance Department regularly evaluates
the content of Dufry’s training on Governance and
Corporate Policies. The efforts of the Compliance De-
partment are fully coordinated with, and supported by,
the CEOs of each Division and the respective HR De-
partments who help identify the individuals, including
new hires, who should receive the training.
New compliance
reporting channels
launched.
Dufry also undertakes to properly investigate all com-
plaints and prohibits retaliation or discrimination
against any employee who reports a concern made in
good faith. As of June 1, 2018, two new Group-wide re-
porting channels have been initiated to go along-side
the e-mail reporting channel integrity@dufry.com: (1) a
world-wide, toll-free hotline in 9 languages (English,
Spanish, Portuguese, French, Italian, Mandarin, Russian,
Greek and German) also accessible via local dial-in
numbers for all countries in which Dufry operates; and
(2) the online reporting website www.dufry-compliance.
com. These reporting channels ensure the integrity of
such investigations by acting as a centralized contact
point through which any wrongdoing or corruption con-
cerns can be reported directly to the Compliance De-
partment for further investigation. Unless the report is
made anonymously, the identity of any employee re-
porting such concerns or possible violations of Dufry’s
Code of Ethics, Sustainability and Integrity in Business
Transactions Policy is kept strictly confidential, unless
the disclosure of the identity is required by law.
with honesty, ethics and within the confines of appli-
cable law and in full compliance with Dufry’s Code of
Ethics, as well as its Sustainability and Integrity in
Business Transactions Policy. Where laws, rules or
customs exist that are different from the principles
set out in this Policy, Dufry managers, executives and
employees are required to follow whichever sets the
higher standard in this regard.
Dufry also wants its officers, managers and employ-
ees to fully respect the safeguarding of integrity and
fair dealing when performing their activities on behalf
of Dufry and to promote the sustainability, diversity,
decent work, human rights, anti-harassment and non-
discrimination standards adopted by the Dufry Group.
Dufry’s management operates a no-tolerance ap-
proach to both active and passive corruption and
seeks to minimize the circumstances in which corrup-
tion could occur in its global business development ac-
tivities and operations.
Dufry’s Code of Ethics, and the Sustainability and In-
tegrity in Business Transactions Policy outline the
types of conduct which are not permissible and im-
pose strict rules in relation to charitable contributions
and sponsorships as well as gifts, hospitality and en-
tertainment expenses and facilitation payments to
minimize the risk of corruption. In addition, the rules
require careful due diligence to be conducted on new
external partners Dufry is working with, including a
procedure that must be followed to vet all new minor-
ity partners, consultants for business development
projects, counterparties to M&A transactions and
other similar counterparties.
Dufry also conducts training of managers and relevant
employees on an ongoing basis. These training sessions
reflect the changes introduced in the modified Code of
Ethics, Sustainability and Integrity in Business Trans-
action Policy as of May 1, 2018, such as the formal es-
tablishment of a Compliance Department within the Le-
GOVERNANCE & CORPORATE POLICIES TRAINING
DIVISION
HQ
Southern Europe and Africa
UK and Central Europe
Eastern Europe, Middle East,
Asia and Australia
Latin America
North America
Total
86
Total Number of
Managers trained/
retrained in 2018
111
132
147
114
87
151
742
2 Sustainability ReportDUFRY ANNUAL REPORT 2018 Approximately 1.100 managers have been trained in to-
tal since the training started in 2012. These individuals
have been selected based on the following criteria:
1. community heads at Headquarters (Finance, Trea-
sury, Procurement, Business Development, Internal
Audit, HR, IT, Commercial, Marketing, Customer
Service);
2. heads of all Divisions;
3. local managers with exposure to business develop-
ment, external partners and third-party contrac-
tors;
4. managers with exposure to procurement negotia-
tions;
5. managers with exposure to government officials
such as airport authorities, customs or other pub-
lic authorities;
6. managers with signatory power or appointed as
directors or officers of a Dufry Group subsidiary;
7. Investor Relations managers;
8. all members of the Legal and Governance Depart-
ment;
9. all members of the Internal Audit Department; and
10. all HR managers worldwide.
As reflected in the chart on page 86, between July and
December 2018, 742 managers at Headquarters and
across all five Divisions have completed this training.
Dufry employees who are not included in the list above
are familiarized with Dufry’s governance and corporate
policies via a series of videos available through various
internal channels, including on the Group´s intranet –
Dufry Gate, the learning management system – Dufry
Connect, and its in-house television channel – Dufry TV,
among others. Additionally, all of Dufry’s corporate and
governance policies, including its Code of Ethics and its
Sustainability and Integrity in Business Transactions
Policy, are available to all Dufry employees, managers
and executive board members on Dufry Gate for their
reference.
87
2 Sustainability ReportDUFRY ANNUAL REPORT 2018 ENVIRONMENTAL
Dufry operates over 2,300 retail stores across 65 coun-
tries, where it sells products sourced from over 1,000
suppliers. For information on our divisional structure,
countries and major locations covered by each Division
please refer to pages 46 to 67. All the stores operated
can be categorized into one of five types, which are ex-
plained on pages 36 to 45.
Three Global
Distribution
Centers.
As a pure retailer, the company does not have any pro-
duction sites. However, Dufry consumes materials in
several parts of its supply chain, from materials used
to build stores and boxes and pallets used to transport
products, to office supplies and carrier bags given to
customers with every sale.
Transportation
As part of the strategic priorities set for the year with
the roll-out of the Business Operating Model, Dufry has
further improved its supply chain organization with the
implementation of One Order. As described in more de-
tail in the Suppliers and Strategy sections, One Order
principally aims to simplify our supply chain by further
centralizing logistics and warehousing, hence, reducing
operational costs and administrative tasks and ulti-
mately our impact on the environment. As a result of
this process, our three Distribution Centers (Switzer-
land, Uruguay and Hong Kong) operate 3 major ware-
housing centers: Barcelona (Spain) serving 81 delivery
points in Division 1 (Southern Europe & Africa) and
Division 2 (UK & Central Europe) with the exception of
UK – served by Runnymede – and some countries from
Division 3 (Eastern Europe, Asia, Middle East & Austra-
88
lia); Hong Kong (China) serving most countries from
Division 3 (Eastern Europe, Asia, Middle East & Austra-
lia); and Miami (US) serving Division 4 (Latin America) and
partially Division 5 (North America). These three main
logistics centers receive the long-haul and major ship-
ments and organize the further dispatch of the goods
to the retail entities. Through the high efficiency in our
logistics chain, we ensure that the environmental impact
of transporting the goods is kept to a minimum.
CO2 emission
Reducing CO2 emissions is one of Dufry’s concerns.
Whenever possible, the transport of goods is done by
shipping on sea, thereby choosing the most CO2-effi-
cient means of transportation. Through the reconfigu-
ration of goods in our Global Distribution Centers and
regional logistics platforms, we reduce intercompany
transportation of the goods to a minimum. Distribution
to the individual shop locations is usually done by road
whereby Dufry outsources the transportation to spe-
cialized national or international logistics partners, who
partly have their own environmental strategies in place.
Dufry has retail
shops in 22 of
44 carbon neutral
airports worldwide.
Further actions to reduce the CO2 emissions are in the
area of business travel, we advise our employees to
consider alternatives to traveling such as the use of vir-
tual meeting systems (video conferencing, conference
calls, computer live-meetings, Skype-for-business) or
reducing travel frequencies by optimizing each trip. In
addition, Dufry employees are also encouraged to use
2 Sustainability ReportDUFRY ANNUAL REPORT 2018 public transport systems not only for business trips but
also for their daily journeys to and from work. In spe-
cific locations the company grants contributions to em-
ployees using public transport for commuting.
According to Airport Carbon Accreditation (airportcar-
bonaccreditation.org), the airport industry accounts
for about 5 % of the air transport sector’s total carbon
emissions. The organization, launched in 2009, currently
has 249 accredited airports in its program, which are
spread across 68 countries worldwide. In 2018, based
on information by Airport Carbon Accreditation 71 of
these airports have actively reduced the CO2 emissions
under their direct control, and 44 airports have achieved
carbon neutrality. Dufry has retail shops in 22 of these
44 carbon neutral airports, including Dallas Fort Worth,
Athens, Antalya, London-Gatwick, Helsinki, Milan-
Malpensa, Manchester and Stockholm airports just to
name a few. Queen Alia in Amman, Jordan, and London
Stansted airports, where Dufry is the main retail oper-
ator, joined the carbon neutral airports list in 2018.
Waste and Recycling
Avoiding any waste in the first place or recycling it, if it
occurs, is an effective way to save valuable resources.
In the European Distribution Center packaging mate-
rial, which mainly consists of cardboard, paper, plastic
film, wood as well as electronic and plastic consum-
ables such as neon lamps and PET, are sorted into dif-
ferent containers and sent for recycling. The recycling
process is outsourced to specialized service providers.
In the shops, the waste produced by our operations is
mostly packing material handled through the landlord’s
waste disposal system and recycled accordingly where
possible. Dufry actively collaborates with the airport’s
sustainability teams where possible, as is the case at
London Heathrow airport, to contribute and further im-
prove recycling systems and /or reduce energy con-
sumption.
We have observed
a decrease in the
number of bags
in main operations
last years.
The reduction in the consumption of shopping bags is
another area where Dufry is seeking sustainable solu-
tions by replacing traditional plastic bags with reusable
bags and/or advising its retail staff to ask customers if
they need a bag and by increasing its bag assortment
to several sizes so that packaging relevant to the size
of the products purchased is used, with less plastic
waste. As a result, we have observed a decrease in the
number of bags used per transaction in our main oper-
ations in the last years. Investigating alternatives to re-
duce the number of bags and the impact of each indi-
vidual bag is however an ongoing improvement objective
for Dufry.
Regarding cartons and pallets used to transport and
protect products, Dufry ensures these are reused as
much as possible and therefore consumption of new re-
sources is also reduced.
Lastly, in the offices, the reduction of paper consump-
tion is one of our ongoing challenges. Dufry has put in
place local initiatives to reduce paper and other office
material consumption, including tips to reduce the
amount of paper used such as printing double sided,
avoiding the printing of the legal text on the bottom of
emails, and encouraging people only to print when nec-
essary. The adoption of IT solutions, such as the Dufry
Connect, which is being rolled-out to staff across all lo-
cations, is also helping to reduce the amount of paper
used in day-to-day work of our staff. Local initiatives,
including the Dufry Award for the Best Initiative in Di-
vision 1, where the Turkish team developed an induction
app for new joiners also work on that objective of re-
ducing paper consumption.
Energy consumption
For the most part our travel retail shops are operated
in premises and buildings such as airports or seaports,
ships, train stations, and downtown resorts, which are
owned by third party landlords. Thus, a large portion of
the utilities consumption, such as energy or water
sourcing and usage in the shops cannot be directly
changed or influenced by Dufry as these factors are
predetermined by the landlords and the building con-
struction. The highest influence in energy efficiency can
be taken when Dufry is designing or re-designing stores.
As public spaces, airports have to provide well-lit facil-
ities and naturally this is a substantial part of their en-
ergy consumption. The main focus thereby is on substi-
tuting traditional lighting for more energy-efficient
lighting systems (e.g. LED) on ceiling and furniture dis-
plays, and on using A-rated electronic devices (e.g. air
conditioning, refrigerators) in our stores, resulting in a
significant drop in the energy consumption (and asso-
ciated CO2 emissions). The same concept of using lat-
est energy-efficient technologies also applies for our
Basel headquarters, division offices and the regional
operations centers.
89
2 Sustainability ReportDUFRY ANNUAL REPORT 2018 SOCIAL
Socio-Economic Compliance
Having operations in 65 countries also means comply-
ing with different national and supranational regula-
tions. For this reason, from a global perspective, Dufry’s
position towards regulations necessarily needs to go
beyond the compliance and statutory requirements of
the norms and have a more holistic and ample ap-
proach. In this regard, Dufry has a number of initiatives
and control mechanisms in place that permit the com-
pany to monitor and ensure compliance with national
and international laws and follow respective ethical
standards.
Supplier Social Assessment
Dufry is aware of its responsibility beyond its own di-
rect activities and strives to ensure that suppliers of
goods and services behave responsibly towards soci-
ety and the environment. To ensure this, Dufry expects
suppliers and business partners to comply with the law,
stipulated contract conditions and international best
practices in respect of human rights, the environment,
health and safety, as well as labor standards.
82 % of top suppliers
have acknowledged
our Supplier
Code of Conduct.
As a step forward towards achieving a more sustainable
supply chain, in 2017 Dufry developed its Supplier’s
Code of Conduct, with the purpose of ensuring that our
suppliers across all product categories have in place
accepted business standards, as described by the UN
Global Compact, regarding:
– Ethics and integrity
– Labor and employment practices and working
conditions
– Environmental compliance and sustainability
– Product safety and security
This code of conduct, together with the Dufry Code of
Ethics – available on the sustainability section of our
corporate website – and the Corporate Governance
and Remuneration reports included in the annual re-
port, demonstrate how Dufry assumes its responsibil-
ity concerning social, ethical and environmental stan-
dards and how we put into practice the principles of
sustainable development in our day-to-day work.
As we expect all of our suppliers and business partners
to comply with the principles included in Dufry
Supplier´s Code of Conduct, and ultimately to replicate
these standards further down their supply chain, in
2018 we have in a first step proactively shared the Code
with our top suppliers – who account for approx. 40 %
of our sales. Out of the suppliers reached, we have re-
ceived acknowledgement of our code from 82 % of
them. During 2019 we will extend the reach and engage
with more of our suppliers from all product categories.
Caring about our Employees
We encourage our employees to work together with a
focus on our customers, our partners and our compa-
ny’s goals every day. We take pride in the professional-
ism of our teams, their outstanding commitment to first-
class service to our customers, their team spirit and the
close collaboration with our business partners. This
builds a strong base for Dufry’s ongoing success and
makes Dufry a unique place to work and partner with.
Dufry offers attractive working environments, interest-
ing tasks, fair and competitive wages – which include in-
90
2 Sustainability ReportDUFRY ANNUAL REPORT 2018
EMPLOYEES BY DIVISION
NORTH
AMERICA
14 %
UK AND
CENTRAL
EUROPE
31 %
SOUTHERN
EUROPE
AND AFRICA
18 %
LATIN
AMERICA
23 %
12 %
2%
HEADQUARTERS
AND DISTRIBUTION
CENTERS
EASTERN
EUROPE, MIDDLE
EAST, ASIA AND
AUSTRALIA
EMPLOYEES BY GENDER
FEMALE
65 %
35 %
MALE
91
OVERVIEW EMPLOYEE STRUCTURE 2018
FTEs
Headcounts
Southern Europe
and Africa
UK and Central
Europe
Eastern Europe,
Middle East, Asia
and Australia
5,437
8,860
4,384
5,466
3,588
4,039
HQ
584
618
Latin
America
6,899
7,486
North
America
9,372
10,137
Total
30,264
36,606
centive plans based on objectives both for office and
store staff – and a general working atmosphere based
on mutual respect and appreciation for each individual.
Some of our locations have been recognized locally for
the quality of the working conditions offered. An exam-
ple of that is Dufry Americas, based in Miami (Florida –
USA), recognized as a Top Workplace by Sentinel for
three consecutive years (2015 – 2017) and Florida´s Best
Companies award in 2017.
We foster employee development by supporting a broad
range of in-house as well as external training and de-
velopment opportunities.
We also strongly believe that regularly reviewing and
discussing the professional development together with
an individual employee is an important aspect to a
long-term, successful employer-employee relationship.
Therefore, it is important for us to build a constructive
dialogue between each individual employee and manager
on goals, priorities and personal development. Our staff
members receive an annual performance review aimed
at evaluating their performance and identifying further
personal development potential for next career steps.
Mentoring program
As part of the talent program, in 2018 Dufry launched a
global mentoring program with the aim of transferring
the skills and knowledge of Dufry’s experienced profes-
sionals to talented professionals within our organization.
More than 30 members of our senior leadership team,
that represent 30 % of Dufry´s top management, have
volunteered to act as mentors. Mentees have applied and
have been assigned to mentors based on individual aspi-
rations, identified areas of growth and personal interests
to ensure mentees make the most of the program. This
first mentoring program will span for the whole of 2019
and, if successful, will be extended to more profession-
als across the Group. The program will help participants
(mentors and mentees) to gain sharper focus on what is
needed to grow professionally and personally, to dem-
onstrate strengths and explore their potential, better
address their priorities, overcome challenges, develop
leadership skills, increase career networks, and under-
stand how to achieve a good work-life balance.
92
Grown to an organization with over
30,000 employees worldwide
In the past four years, our workforce has increased by
84 % from 16,423 employees at the beginning of 2014 to
30,264 people (FTE) by the end of 2018. The two acqui-
sitions of Nuance in 2014 and World Duty Free in 2015
and their timely integrations have not only changed our
footprint in the market and have made Dufry the undis-
puted market leader in travel retail, they have also
meant a lot of transformation and integration in terms
of our human resources projects.
Overall, our total workforce remained stable during
2018 with 30,264 people (FTE) working for the group at
December 31, 2018 compared to 29,879 at year-end 2017.
Dufry’s unique cultural diversity
Our workforce comprises colleagues from more than
130 nationalities across all functions and Divisions. This
has been a consistent situation for many years and we
continue to believe that this broad cultural diversity
represents a unique competitive advantage. We also
view it as a key element in the successful development
of our Group and in the implementation of our long-
term growth strategy.
Our staff in each
country is pre-
dominantly made
up of local people.
For our employees, our company represents a truly in-
ternational working environment with colleagues from
across the world and interesting career opportunities.
The staff in our local shops in each country is predom-
inantly local. Dufry’s presence in 65 countries around
the world make us an important employer in many lo-
cations, many of them being located in emerging mar-
kets. This, in addition to bringing know-how on operat-
ing a business, contributes to local development and
wealth beyond the community engagement projects
(see also page 98).
2 Sustainability ReportDUFRY ANNUAL REPORT 2018 DUFRY RETAIL TRAINING AND DEVELOPMENT PROGRAMS
SALES TRAINING
PROGRAMS COVERAGE
2018
2017
2016
2015
Out in Front
Dufry + 1
427 retail managers
4,794 sales professionals
357 retail managers
5,656 sales professionals
392 retail managers
3,424 sales professionals
227 retail managers
1,431 sales professionals
6,924 sales professionals
7,300 sales professionals
9,015 sales professionals
6,680 sales professionals
Trainer Certificates
177 trainer certificates
193 trainer certificates
166 trainer certificates
751 trainer certificates
ONEDUFRY – Transforming corporate culture
ONEDUFRY is the continuation of a cultural transfor-
mation process that started after the acquisitions of
Nuance and World Duty Free in 2014 and 2015 respec-
tively. These acquisitions did not just transform the di-
mension of the company, but also the way of working
and doing business. The integration of the three com-
panies into one served to extract the best practices and
know-how and the creation of ONEDUFRY, a program
aimed at harmonizing values and principles, both at
store and office levels. The initiative pursues mobilizing
our people to focus their minds, hearts and hands on
three core domains: driving employee experience, driv-
ing customer experience and driving business results.
ONEDUFRY to
harmonize
values and principles.
Unlike the Business Operating Model, which aims to
standardize processes, ONEDUFRY focusses on our val-
ues and makes them visible anywhere in the 65 coun-
tries we are present.
Therefore, ONEDUFRY is aligning training and develop-
ment programs, appraisals and recognitions programs,
competency frameworks, etc. all with the single objec-
tive of ensuring a consistent way of operating and fos-
tering the same attitude of doing business across the
different geographies.
Roll-out of the HR digital platform across the Group
During 2018 Dufry continued to roll out its Human
Resources information system “Dufry Connect”, a tool
that supports HR and line managers to manage people,
development and careers at Dufry in a more consistent,
automated and efficient way. The system implementa-
tion, which started in 2016 with the staff holding Global
functions, continued with the roll-out in key operations
in the Divisions during 2017. As part of the standardiza-
tion of processes included in the implementation of the
Business Operation Model (BOM), more locations at
country and Division levels have been added.
Dufry Connect has the triple purpose of assisting man-
agers in guiding their teams, helping employees to bet-
ter control their development and professional careers
and enabling HR to manage employee data easily.
From a practical standpoint, this tool provides a more
consistent approach to processes such as recruiting or
performance reviews, replacing the use of excel or pa-
per documents for a more robust online system that
can be updated and progressed, as and when needed.
Beyond the improved employee management processes,
Dufry Connect´s learning feature, the platform´s central
point for managing all learning materials, offers staff a
library of self e-learning modules categorized by specific
roles, or per function, as well as instructor-led courses
that permit staff to self-design their training paths and
to easily access training modules through a web browser,
regardless of where the employee is located.
Talent Management
Dufry ensures that future and long-term management
needs are being addressed by an optimal balance of
promoting internal high-level personnel and hiring ex-
ternal talent (for example in new countries where we
start operations). Dufry operates a global, systematic
process to identify high-potential talent in the organi-
zation and to develop them toward key roles in our busi-
ness model.
The talent pipeline
We strongly believe that talent management and suc-
cession planning are key activities for a sustainable
business. Accordingly, we develop new and existing can-
didates to get ready for more senior managerial roles
and we carry out yearly reviews of the quality of our tal-
ent pipeline at two levels:
– The first level concentrates on a limited number of
candidates that already have management experi-
ence and that will be able to take over one of the se-
nior positions in our organization. At year-end 2018,
this pool of talented individuals included 70 high-po-
tential managers. With these managers, we address
and safeguard succession in specific key manage-
ment positions.
93
2 Sustainability ReportDUFRY ANNUAL REPORT 2018 – The second level focuses on our stores. Amongst the
top-performing store personnel and supervisors, we
have identified 42 “Retail talent” employees as of
year-end 2018, on whose development we will focus,
in order to ensure a quality store management suc-
cession pipeline.
Training and professional development
Dufry carries a strong Learning and Development port-
folio, both at local and global level. In terms of global
programs, our flagship initiatives are “Dufry Sales
Academy” and “Step Ahead”, with which we strive to
provide our professionals with the tools, knowledge and
capabilities they need to perform well in their jobs and
develop to their full potential at Dufry.
The Dufry Sales Academy learning program includes
two sub-programs: Out in Front and Dufry + 1, both na-
tional award-winning programs. Out in Front was
launched in 2012 and is a dedicated program for our
sales professionals, shop managers and supervisors in
the retail operation. At the start of 2018, Out in Front
was running in 57 countries and has been expanded to
65 countries by year-end 2018. The learning program is
being implemented across all operations and a total of
177 retail managers were trained as trainers in 2018.
In 2018, we completed the delivery of our integrated
Dufry + 1 program to 6,924 team members and contin-
ued to educate new shop floor hires on our Dufry + 1
program across the entire Group in 65 countries.
The experimental learning format of both programs,
Out in Front and Dufry + 1, is delivered by a Dufry Cer-
tified Trainer. The number of trainer certificates was
177 at year-end 2018.
Step Ahead includes two programs, one focused on
management skills and the other on our operational
business processes, procedures & tools. Managers run-
ning important segments in our value chain, such as
commercial, logistics, procurement, marketing and re-
tail operations, partake in these various learning offer-
ings to achieve company performance outcomes and
run the company according to the Group’s perfor-
mance expectations.
The Management Skills programs launched in 2013 pro-
vide our managers with a formal education allowing
them to assess their current capabilities and improve
their role as a manager of teams. In 2018, 1.277 manag-
ers participated in our formal sessions covering several
topics from the Step Ahead Management Skills suite.
In the Step Ahead Operational program we educated
70 managers from various functions in 2018.
Articulating cultural transformation
with ongoing training
As part of the cultural transformation process
(ONEDUFRY) previously mentioned, a number of train-
ing sessions have been put in place in all Dufry loca-
tions. Taking the “train-the-trainer” approach, two dif-
ferent sessions have been designed to accommodate
the different needs and nature of their day-to-day work:
one for Office Leaders and an extended one for Store
Leaders. During 2018, 2,732 members of our staff were
educated in the values of ONEDUFRY and the behaviors
we expect from all our staff members. This represents
75 % of the total workforce targeted.
Zero-tolerance policy
on discriminatory
abuse.
Equal employment
Dufry fosters a culture of equal opportunity. Our HR
policy is to provide equal employment conditions and
to offer career opportunities without discrimination to
all our employees. We offer and promote working envi-
ronments where everyone receives equal treatment,
regardless of gender, color, ethnic or national origins,
disability, age, marital status, sexual orientation or re-
ligion. In addition, we adhere to local legislation and reg-
ulations in all the countries were we operate. Any kind
of child labor or forced labor is strictly forbidden and
clear recruitment procedures and regular workplace
controls ensure that this never happens at any location.
Anti-discrimination, diversity and ensuring equal op-
portunities are and have always been important social
and corporate issues for Dufry across all locations, es-
pecially (but not exclusively) in developing countries.
Many locations in which the Group operates still pose
challenges to guarantee equality. We monitor those
countries closely to ensure we provide equal opportu-
nities to all our staff.
We provide our employees with fair and competitive
wages based on an individual’s background and experi-
ence, their particular job within our organization, the
appropriate market benchmark in the respective coun-
tries and locations as well as her / his performance.
94
2 Sustainability ReportDUFRY ANNUAL REPORT 2018 We assess the remuneration structure of our employees
on a regular basis to make sure there is no discrimina-
tion related to any kind of diversity. In this context, we
also proactively engage in an internal forum – Women@
Dufry – where we address today’s challenges for women
in their work place in order to make sure that our female
employees can fully develop their potential and career
opportunities within the company. The forum is repre-
sented by selected female executives of the company
and HR management and is sponsored by the CEO.
Equal salary certification in Switzerland
Dufry achieved Equal Salary Certification for all func-
tions and operations based in Switzerland at the begin-
ning of 2019 thus demonstrating its commitment to di-
versity and inclusion in HR practices and initiatives.
Freedom of Association and Collective Bargaining
Dufry respects legally recognized unions and internal
forums created to represent their employees’ interests.
The Company’s policy on collective agreements is tai-
lored to each location in which it operates, as each lo-
cation is subject to its own specific laws and regula-
tions. As an example, the current practice in some of
the main Group operations is described below:
– In Brazil, there is a collective agreement in place
which covers core employee related topics such as
salary reviews, general allowances (meal, transport,
benefits, etc.), work contract restrictions / special
conditions, work shifts, vacations, health and safety,
contributions, gratifications, awards and require-
ments aiming employee’s guarantees.
– Greece also has a collective agreement in place rul-
ing the main employee topics.
– In Spain, Dufry has a collective agreement in place
that covers all employees in that country except se-
nior management. The agreement is negotiated be-
tween the Company and a committee made up of em-
ployee representatives and labor union members and
outlines conditions such as salary, holiday days and
health and safety in the workplace, among other hu-
man resources related matters.
– In the UK, Dufry has an employee forum – “Voice” –
made up of staff representatives. This forum was cre-
ated as a partnership between the company´s man-
agement and employees to influence and communicate
business change.
– In the US, there are a number of recognized trade
unions that Dufry engages with, including Unite Here,
Workers United, United Food and Commercial Workers,
Teamsters, Newspaper Guild andCulinary Workers.
Dufry World – The internal news magazine
for our employees
Dufry regularly reports on important news in its cor-
porate magazine “Dufry World”, which is published in
5 languages. This ensures that important trends in the
travel retail industry and developments of our Group
are communicated to our staff members in full. Every
issue of the magazine also portrays individual employ-
ees or teams and their personal stories within Dufry’s
global environment. Dufry World is issued 4 times per
year. Dufry World features also a section called the
“Wall of Fame” to pay tribute to individuals that have
gone beyond the ordinary either in their personal or in
their professional lives, leading by example the rest of
the Dufry employees.
“Wall of Fame”
to pay tribute to
Dufry employees.
In addition, all internal and external information is made
available on Dufry’s intranet “Dufry Gate”, also available
as a fully responsive online news channel called “my-
gate”, thus considerably extending the reach to addi-
tional employee groups in our locations. Mygate can
easily be accessed from desktop workstations as well
as through mobile devices.
Awards programs
Employee recognition is an important way to value em-
ployee and team achievements. With this is mind, In
2011, Dufry introduced the Dufry One Awards, a global
award recognizing locations across the world that have
taken initiatives to actively improve sales, efficiency or
performance, contributing to Dufry’s ambitions of best
serving customers and continuous growth and im-
provement.
95
2 Sustainability ReportDUFRY ANNUAL REPORT 2018 The Performance Award – A global award recognizing
locations globally that have taken initiatives to actively
improve sales, efficiency or performance, contributing
to Dufry’s ambition of continuous growth and improve-
ment. The 2018 awards went to:
– Division 1 – Marrakech, Morocco
– Division 2 – Astana airport, Kazakhstan
– Division 3 – Bali airport, Indonesia
– Division 4 – Rio de Janeiro airport, Brazil
– Division 5 – Toronto, Canada
The Customer Service Award – Open to all shops par-
ticipating in the global Mystery Shopper program, this
award recognizes individual shop performance across
the specific customer impact segments of the Mystery
Shop. The winners of the 2018 awards were:
– Antalya airport operation, Turkey
– South Tenerife airport operation, Spain
– Edinburgh airport, Main store, United Kingdom
– Ezeiza International airport in Buenos Aires,
Argentina, arrival store
– Sea Tac airport operation, Seattle, USA
The Best Initiative Award – A global award to recognize
individuals or teams that have demonstrated proactiv-
ity, taking initiative to solve a challenge, increase sales
or improve customer service. The 2018 awards went to:
– Division 1 – Antalya, Turkey
– Division 2 – Sweden
– Division 3 – Kuwait
– Division 4 – Brazil and the Beauty Americas team
in Miami for a joint project in Sao Paulo
– Division 5 – Vancouver, Canada
The winners of the 2018 awards were announced in May
and published in the employee corporate magazine,
Dufry World, as well as on the company´s intranet,
Dufry Gate.
Employee engagement
Measuring employee engagement and satisfaction
through regular surveys is an important tool to recog-
nize potential for improvements across the Group. Our
employee surveys are done systematically over specif-
ically defined cycles: we ensure that the surveys always
involve a substantial part of our more than 30,000 em-
ployees, and that they are carried out across the world,
involve all Divisions as well as the headquarters; and,
that over a certain timespan, all employees have been
involving in a survey. Applying this system results in reg-
ular surveys focusing on the action plans.
In 2016, we organized a global employee engagement
survey which included over 28,000 employees, includ-
ing staff of the – at that time – recently acquired World
Duty Free. Over 60 countries across all five Divisions
completed the survey with an overall response rate of
69 %. The engagement rate was 61 %, both of which are
excellent rates compared to the overall benchmark of
the survey system we use. During 2017, team leaders
across Dufry shared specific results from the survey
with their teams and co-worked to put together action
plans to improve engagement. The next survey will take
place during the first part of 2019 after completion of
the Business Operating Model project.
Our employee
surveys get excellent
response and
engagement rates.
Employee health & safety and airport security
practices
The majority of our workforce operates in airport, port
and cruise-ship environments, where as a basic pre-
requisite employees have to comply and follow the re-
spective airport’s, seaport’s or vessel’s safety rules as
these environments are highly regulated. On top of
this, Dufry has specific health & safety regulations for
its employees.
The health and safety of our employees is a top priority
at Dufry. We ensure work place safety by regular learn-
ing and training courses, among them courses in fire
safety and first aid to provide staff with knowledge for
the prevention and quick, correct reaction in cases of
emergencies. Dufry strives to achieve high occupa-
tional health & safety standards and actively encour-
ages compliance across the whole Group and among all
its business partners and sub-contractors. As a result,
Dufry has a number of different Health & Safety Poli-
cies throughout the organization. Regardless of the
specific requirements of each local legislation, there
are certain principles that all these policies adhere to,
including:
– Adherence to country, state and local health & safety
legislation and any other requirements
– Workplaces as safe and hazard-free spaces
– That employees have the necessary skills and
training to perform their duties
96
2 Sustainability ReportDUFRY ANNUAL REPORT 2018 – That employees have been informed of the
contents of the policy
– That all the elements and protective equipment
required for employees to carry out their job safely
have been provided
– That the Group has procedures in place in case
of emergency
In 2018, for the third year running, Dufry was awarded
with the RoSPA Gold Award by the Royal Society for the
Prevention of Accidents (UK), a recognition for compa-
nies that achieve a very high level of performance, dem-
onstrating well developed occupational health and
safety management systems and culture, outstanding
control of risk and very low levels of error, harm and loss;
www.rospa.com/awards/winners/2018/gold-awards/
Airport security practices
Due to the nature of our business, most of our staff is
located in an airport environment, either working in
stores, in airport offices and or in airport warehouses.
As part of the airport ecosystem, our staff has to adhere
and follow the security principles and processes estab-
lished at the airport where our stores are located. Most
of these regulations and policies are harmonized across
the world to ensure consistent levels of safety and
consumer protection. Worldwide safety regulations are
set by the International Civil Aviation Organization and
within Europe by the European Aviation Safety Agency.
In order to work in our stores, members of our staff need
to obtain the corresponding airport authorization, which
in most of the cases implies training courses on security
measures and procedures in the airport environment.
97
2 Sustainability ReportDUFRY ANNUAL REPORT 2018 COMMUNITY
ENGAGEMENT
Dufry places high importance on supporting charita-
ble causes as a way of giving back to society. We have
continued to be a sponsor of charitable organizations
and partnerships across the world in 2018, as was the
case for many years before. Dufry’s support comes
through by making direct donations to non-profit or-
ganizations and by encouraging employees to volun-
teer and participate in different projects. From partic-
ipating in charitable sports activities to raising money
with the sale of cakes baked by our employees, every
little effort helps. Moreover, we also contribute by giv-
ing visibility and spreading the reach of the different
institutions we work with.
In 2018, the main focus of our sponsorship programs
remained on supporting disadvantaged children, young
people and their families. They are often the weakest
members of our society and the ones that need our
support the most. We further provide help to charities
that take care of victims of natural disasters, and sup-
port cultural as well as sports events.
SOS Children’s Villages support programs in Brazil,
Mexico and Russia
Dufry and SOS Children’s Villages look back on nine
years of successful partnership, strengthening fami-
lies worldwide with the aim that no child should grow
up alone. Dufry started to sponsor a project with pre-
ventive care in Igarassu, Brazil, back in 2009. The con-
struction of a social center was a tangible example of
investing in the care for children and youth. Dufry has
been continuing to support the running costs and
training classes of the center ever since. In 2018, our
donation benefitted 468 infants, young children and
teenagers with their mothers and enabled them to join
family strengthening programs with child-minding and
day care centers. In addition, we financed the yearly
family-budgets, medical costs and school fees for 21
children in the SOS Children’s Village of Igarassu.
In Russia, Dufry has been supporting the running costs
of the SOS Children’s Villages center in Lavrovo since
2015. Lavrovo lies in the heart of Russia, about 350 kilo-
meters south of Moscow. In early 2016, SOS Children’s
Villages identified foster care as its priority form of child
upbringing in Russia. Dufry’s funding in 2018 supported
12 children during one year to receive a loving care and
the requirements to shape their own future.
The programs of SOS Children’s Villages in the social
center in Tehuacán, Mexico, ensured that mothers have
better opportunities to go to work and earn their own
income while counting on day care solutions for their
children. Fathers got rising awareness in educational
matters and are better involved in family responsibility,
improving the quality of family life for these families.
Dufry’s donations have been supporting the running
costs of the social center in Tehuacán since 2013. The
financial support covers expenses for food, school ex-
penditures, medical assistance and educational staff.
Dufry’s contribution in 2018 supported 1,076 beneficia-
ries. The program was terminated in 2018. As a follow-
up project within Mexico from 2019 onwards, Dufry will
support the family strengthening programs in Comitán.
Investing in the care
of children and youth.
Since 2013, Dufry runs an additional financing chan-
nel to the favor of the worldwide work of SOS Chil-
dren’s Villages by installing coin collection boxes in
various Dufry shops all over the world. Dufry and SOS
are evaluating new plans now to make the work of SOS
Children’s Villages even more tangible for Dufry shops,
co-workers and partners. Each coin or note is a little
milestone for the future of the children and youth at
the different SOS Children’s Villages projects.
98
2 Sustainability ReportDUFRY ANNUAL REPORT 2018 One Water – sustainable clean water service
for African communities
During 2018, World Duty Free / Dufry in the UK hit the
£ 2 million mark raised for The One Foundation since
the start of the partnership in 2006. World Duty Free
has been one of The One Foundation’s main commer-
cial supporters, selling the charity’s bottled “One
Water” and branded jute bags in all of its UK airport
stores. World Duty Free’s donations have helped to
bring clean, safe water to over 400,000 people in
Africa (mainly Rwanda and Malawi) so far.
Over the years, employees throughout World Duty
Free have been selected to go on trips to Malawi as
part of a staff incentive to celebrate stores that have
shown the most growth in terms of sales. Employees
that have been nominated to go on the trip are real
advocates for the brand, and the travels are a change
for them to see the work that One Water is doing.
These journeys to Africa are a great way to inspire our
staff to get involved and keep supporting the One Wa-
ter projects.
United Nations’ global campaign #YouNeedToKnow
Dufry continued supporting the United Nations’ cam-
paign #YouNeedToKnow, aimed at raising awareness
for their Agenda 2030 and the 17 Sustainable Devel-
opment Goals (SDGs) agreed by all 193 nations in 2015.
Since the collaboration started in 2016, Dufry has
helped to spread the word by giving visibility to the 17
SDGs and the #YouNeedToKnow campaign in 34 air-
ports where Dufry operates, reaching over 55 million
passengers during the activations.
The high diversity of airport users – from many differ-
ent nationalities – permits amplifying the reach of any
communication campaign. By using the in-store and
till screens or through interaction with passengers to
engage them to share the #YouNeedToKnow hashtag
on their social media, Dufry has collaborated in this
important mission of moving individuals to adopt more
sustainable habits in their day-to-day lives.
Compared to previous years, the campaign itself has
evolved. Out of the 17 SDGs, the UN has developed a
booklet “170 daily actions to transform our world”, that
offers examples of small and incremental – but also
fundamental – changes everyone can adopt to live re-
sponsibly and to be accountable to the next genera-
tion. The booklet was distributed throughout Zurich
airport during activities that took place in Jan-
uary 2018, just in time to grab the attention of attend-
ees of the World Economic Forum in Davos. These
170 daily actions are the core part of the activities that
Dufry plans to take to further airports in collabora-
tion with the UN, aside from internal initiatives to pro-
mote them amongst our own Dufry staff.
Kinder-Spitex and Foundation RgZ in the canton
of Zurich
Dufry continued its on-going support to Kispex (Kinder-
Spitex) by raising funds for this Zurich-canton based
charity. Kispex cares for acute and chronically ill chil-
dren, children with a cognitive and motor impairment
or after an accident, as well as children in their final
stages of life. Dufry’s donation served to partially cover
the over CHF 1 million budget that Kispex requires for
their activities. Money raised by Kispex through dona-
tions goes to fund the cover of additional missions in
crisis situations, more night-watches when parents are
particularly stressed, to finance assistance in hardship
cases where the insurance partners are not responsi-
ble for the costs, though the parents urgently need help
with the care of their child; and to support families in
acute situations when the caregiver, e.g. the mother or
father is ill and falls short in the care support.
In 2018, we also started to donate to Foundation RgZ,
which has been supporting the development, way of
life and social integration of children, teenagers and
adults with movement disorders, developments prob-
lems and mental and/or multiple disabilities, regard-
less of the severity, for more than 60 years. Around
260 employees foster, teach, support and engage
more than 2,700 children, young people and adults ev-
ery year in the greater area of Zurich. The services in-
clude eight early childhood intervention and therapy
centers for children, two schools for curative educa-
tion, two day care centers, a sheltered workshop, sev-
eral assisted housing apartments with social-educa-
tional support and one residential facility for adults.
Sponsoring children’s education in Haiti
During 2018, Dufry continued its support to the Hand
in Hand for Haiti Foundation with the sponsoring of
their Student Sponsoring Program. Hand in Hand for
Haiti runs the “Lycée Jean-Baptiste Pointe du Sable”
which was built as part of the collective response to
the humanitarian crisis in Haiti following the cata-
strophic earthquake of January 12, 2010. Located in
the village of Saint Marc, north of Port-au-Prince, the
school provides trilingual education in French, English
and Creole to pupils. Dufry’s donation in 2018 sup-
ported 25 students to receive free education and it
also covered the costs of meals, health services, uni-
forms, school supplies, and bus transportation to and
from the school.
99
2 Sustainability ReportDUFRY ANNUAL REPORT 2018 Rio de Janeiro, Brazil – Helping to build the future
of young teenagers
Since 1995, Dufry has been sponsoring a social pro-
motion program in Rio de Janeiro, offering free pro-
fessional education to 30 young people every year
from communities around Galeão Airport. Every day,
these teenagers go to the program where they partic-
ipate in various classes and education modules such
as English, computer classes, retail operations, pro-
fessional orientation, teamwork, leadership, rules of
etiquette, ethics and citizenship. Classes can be at-
tended by 16 to 20 year-old female or male teenagers.
The students also receive free meals, medical and den-
tal care, uniforms, school and educational material, as
well as transportation assistance. Dufry supports the
students with their career progression too, alerting
them to any job opportunities within Dufry’s organiza-
tion, or with external partners. Employability rates
usually reach high levels for those teenagers taking
part in the program. Since its beginning over 23 years
ago, the program has benefited almost 700 teenagers
in total.
Dufry employees are extremely proud to be involved
in this initiative and regularly participate as volunteers,
as well as acting as mentors to individuals taking part.
Every year, 60 volunteers from Dufry and other part-
ners are involved in this important social action.
Hudson Group supports Communities in Schools
in the United States
Hudson Group, Dufry’s North American business, con-
tinued its long-term partnership with Communities in
Schools (CIS), the largest and leading dropout preven-
tion group in the United States, in 2018 through its
fund raising program.
CIS and its over 160 local affiliates in the United
States. work directly inside schools, building relation-
ships that empower at-risk students to stay in school
and succeed in life. The organization works with nearly
1.5 million students and is proud of its success rate:
99 % of their students stayed in school and 93 % of
their seniors graduated or received a GED (General
Education Development credential). Funds for the CIS
organization are collected in Hudson and Hudson News
stores located in airports, bus and rail terminals with
counter-top boxes at registers.
Manchester HOME project
Opened in 2015, HOME is Manchester’s cultural orga-
nization founded by the merger of two of the city’s
long-standing arts venues – Cornerhouse, established
in 1985 and the Library Theatre Company, founded in
1952. World Duty Free’s partnership with the Greater
Manchester Arts Centre (HomeMcr) supports work
with local schools, youth centers and community cen-
ters in the Wythenshawe area (south of Manchester).
Since 2016, World Duty Free has funded workshops at
The Wythenshawe Community Workshop and projects
at the Wythenshawe Primary & Secondary School.
These projects provide opportunities to young people
and pupils to expand their horizons, build new skills,
and increase their confidence. The opportunity for
children and young people to take part in creative
workshops that help to develop a range of skills, are
fun, but most importantly, the projects give the group
a chance to maximize their potential for future train-
ing and employment.
Three years of continued support for Alzheimer’s
Research UK
Tragically, there are 50 million people worldwide living
with dementia, yet there are currently no treatments
available to clearly slow down or stop the diseases, like
Alzheimer’s, that cause it. Only through research will
the picture change.
Despite the crippling impact dementia has on families
and society, research into the condition is still ex-
tremely low compared to other serious conditions.
That’s why Alzheimer’s Research UK exists. It is Eu-
rope’s largest dementia research charity, funding pio-
neering dementia research to understand, diagnose,
reduce the risk and treat the condition. World Duty
Free has been supporting the Alzheimer’s Research UK
cause for the past three years.
Mind – a new charity partner in the UK for 2019
Dufry UK employees select the charity partner that
the company collaborates with every three years. Mind
was selected as Dufry’s charity partner for the 2019-
2021 period, starting as of January 1, 2019. Mind pro-
vides life-changing information, advice and support to
individuals suffering from mental health problems,
through online information, helplines and 130 local
Minds who deliver intensive face-to-face support such
as counseling and therapy. By sponsoring different ac-
tivities and with donations raised in the upcoming
three-year period, Dufry expects to finance part of the
funds that will be necessary to support over 20,000
people through the helpline, enable more than 10,000
people to attend group support sessions and provide
over 1,300 people struggling with mental health a
place in a 10-week wellbeing group.
Further donations and cultural events
Dufry supports many other social projects with local
activities in countries where it operates. In Spain,
100
2 Sustainability ReportDUFRY ANNUAL REPORT 2018 1
1
1
IGARASSU | BRAZIL
This SOS Children’s Villages project has been supported
by Dufry since 2009.
1
101
2 Sustainability ReportDUFRY ANNUAL REPORT 2018 2
3
2
IGARASSU | BRAZIL
Being taken care of in the SOS
Children’s Village of Igarassu.
102
3
COMITÁN | MEXICO
Dufry will begin supporting the SOS Children’s
Villages project in Comitán in 2019, as a follow-
up project on its earlier support for the social
center in Tehuacán.
In Korea, through different donations we support lo-
cal students with high school scholarships, English
classes for children of low-income families as well as
Korean language teaching for multicultural families. In
Jordan, SOS Children’s Villages was supported by
Dufry employees joining an entertainment trip for
orphans and adoptive parents. The activity benefitted
20 children and 6 mothers. In Indonesia, 15 Dufry em-
ployees provided mental and physical support to about
100 refugees who suffered from the Mount Agung vol-
cano eruption at a refugee campsite.
The annual sponsorship of cultural events also contin-
ued. Many local community events such as the Swiss
Indoors tennis tournament in Basel, the Mutua Madrid
Tennis Open and the Baloîse Session, a three week mu-
sic festival in Switzerland received our support.
Having a broad and worldwide network of travel retail
shops not only has an advantage for Dufry as the
leader in our industry, but it also gives us a unique op-
portunity to spread the support of social programs
worldwide: In many shops we maintain donation boxes
and encourage our customers to participate in sup-
porting specific local programs or victims of natural
disasters. The amounts collected every year are truly
surprising and we thank all participants for their gen-
erous donations. The charities that we pass them over
to welcome them greatly.
Last but not least, there is a long list of causes our
staff contribute to and help with their efforts, either
by baking cakes for selling, looking for sponsors for
sports challenges, or by helping colleagues and neigh-
bors affected by natural catastrophes. Dufry has of-
ten facilitated the communication and the celebration
of such events and in some cases, also contributed and
helped raising funds for these causes.
Dufry employees from Barcelona, Bilbao, Madrid,
Sevilla and Valencia operations participated in several
running events organized by Action Against Hunger in
the Intercompany Challenge in the months of Octo-
ber and November 2018. For every kilometer run by a
Dufry employee, the company funded 10 days of child
nutrition treatments. With their efforts on the track,
Dufry runners managed to raise over 5,600 days of
nutritional treatments, equivalent to covering the
treatment of 560 children with severe malnutrition.
Furthermore, Dufry also supported a paddle-tennis
tournament to raise funds for Project M1, a Spanish
NGO for the investigation of Multiple Sclerosis. Madrid-
based staff volunteered to organize the tournament,
which managed to attract over 150 participants and a
large number of attendees to the event.
In Turkey, Dufry entered a charity run with 41 employ-
ees. The aim was to raise awareness about the impor-
tance of education for children with autism and the
Dufry team managed to collect funds to support their
education. Dufry also collaborated with WWF and sup-
ported their Green Office program. The goal of this
program is to reduce the ecological footprint, combat
climate change, and promote sustainable lifestyles in
offices and beyond.
In Greece, Dufry continued its long-term partnership
with the Hellenic Red Cross, supporting their refugees
program by giving monetary support and donating
products in stock to the organization for their use in
lotteries and raffles to raise funds.
In Mexico, Dufry teamed up with Generation for a spe-
cial recruitment program. Worldwide, more than 75
million young people are unemployed. Many employ-
ers cannot find people with the skills they need for
entry-level jobs. In September 2018, Dufry Mexico
along with Generation Mexico worked in a special re-
cruitment program which created 25 jobs. The recruit-
ment program took place in “Los Reyes” a surrounding
area in Mexico City with a high level of unemployment.
A group of 25 young people was selected to receive a
three week intensive training program which included
sales techniques, retail insights and customer service.
After the training program the group of 25 took the
position of sales associates inside Dufry shops at
Mexico City International Airport.
In Australia, Dufry is a supporter of the Diamond Din-
ner for the Children’s Cancer Institute. In 2018, this
fundraising event once again brought together over
250 high-net worth individuals, celebrities and indus-
try leaders to support the work of the institute that is
wholly dedicated to childhood cancer.
103
104
FINANCIAL
REPORT
2018
DELIVERING
ON OUR
GOALS
DEAR ALL
Dufry delivered resilient results in 2018 despite chal-
lenging market conditions in certain geographies in
the second half of the year. Turnover came in at
CHF 8,684.9 million and grew by 3.7 % while EBITDA
reached CHF 1,040.3 million. Free cash flow before
interest and minorities grew as well and reached
CHF 617.1 million increasing by 32.1 %. Equity free cash
flow reached CHF 370.8 million, almost double the
CHF 187.8 million recorded in 2017.
One of the main achievements in 2018 was the imple-
mentation of the Business Operating Model (BOM). The
initiative started in 2016 with a complete analysis of
the group’s processes, procedures and organization.
Based on this work, we then defined a blueprint of
best practices and standardized organization struc-
ture, which were implemented country by country
along 2017 and 2018. The implementation of the
BOM generates efficiencies of CHF 50 million, of
which CHF 40 million are already reflected in the
2018 results, with the remaining CHF 10 million to
be delivered in the financial year 2019.
The healthy growth in cash flow generation, for
both free cash flow before interest and minori-
ties and equity free cash flow, is evidence that
Dufry can deliver a robust operational perfor-
mance even in sub-optimal market conditions.
As such, the cash generation levels achieved
in 2018 are a good proxy for the future and
showcase the true and resilient potential of the
company.
In 2018, Dufry started to return cash to
shareholders. After a series of acquisitions
between 2006 and 2015, Dufry consistently
de-leveraged over the past years and in 2018
reached its target leverage range of 2 to 3
times net debt/EBITDA. As a consequence,
106
3 Financial Report
DUFRY ANNUAL REPORT 2018
3.7 % Turnover grew
by 3.7 % and reached
CHF 8,684.9 million
we revised our capital allocation strategy to include
both, investing in further growth and returning cash
to shareholders through regular dividend payments.
In 2018, the dividend payout was CHF 3.75 per share,
totaling CHF 198.7 million. Additionally, in the year, we
ran a share buyback program, in which we bought back
shares in the value of CHF 401.9 million, which has an
accretive effect in earnings per share in 2018 and 2019.
The Board of Directors will propose to the Annual
General Meeting of Shareholders in May 2019 to cancel
these shares.
In February, 2018, we successfully floated our North
America division at the New York Stock Exchange,
under the name Hudson Ltd for proceeds of USD 714
million. The listing was done to provide additional
strategic flexibility to our North American business
to expand beyond the travel retail business into air-
port food and beverage operations and master con-
cessions.
In 2018, Dufry terminated its Brazilian Depositary
Receipt (“BDR”) Program and canceled the registra-
tion as a foreign issuer in Brazil. This decision was
taken based on the low liquidity of Dufry’s BDRs and
aimed at reducing costs and operational complexities.
TURNOVER
Turnover grew by 3.7 % reaching CHF 8,684.9 million
in 2018, from CHF 8,377.4 million in 2017 and including
an FX translation effect of + 1.0 %. Organic growth
contributed 2.7 %, of which net new concessions
added 1.7 %.
Turnover in Southern Europe and Africa reached
CHF 1,854.0 million in 2018, from CHF 1,857.8 million
one year before. Organic performance in the division
was – 2.6 % in the full year 2018. The Spanish business
was negatively impacted by a change in the mix of
passengers towards lower spending nationalities. On
the other hand, Turkey benefited from the shift and
posted good performance. Other locations such as
Italy, France, Malta and Kenia, all posted good growth.
UK and Central Europe’s turnover grew to CHF 1,974.2
million in the year, versus CHF 1,945.1 million in 2017,
with organic growth in the division reaching 0.3 %. The
growth along most part of the year in the region was
largely impacted by the closing of operations in Geneva
as of October 2017. Excluding such impact, organic
growth reached + 3.4 %.
In the UK, the main operation in the Division, perfor-
mance was solid during the whole year, supported by
a stable growth in passenger numbers as well as
refurbishments and marketing initiatives. Switzerland,
excluding Geneva, also posted good growth, due to
a combination of the refurbishment and introduction
of the New Generation store concept in Zurich along
with growth in passengers.
Turnover in Eastern Europe, Asia, Middle East and
Australia amounted to CHF 1,153.6 million in 2018,
from CHF 1,011.4 million in 2017. Organic growth was
double-digit at 15.1 %. The opening of operations in
Hong Kong and Perth were key to maintaining organic
growth at high levels, despite the higher comparables
since the third quarter.
Eastern Europe had a good performance in the year,
although the performance slowed in the second half.
In the Middle East, operations in Jordan, Kuwait,
Sharjah and India continued to grow solidly. The
growth trend in Asia remained strong during 2018
although there was some slowdown in the second half
of the year due to stronger comparables. We saw
a solid performance in operations such as Cambodia,
107
3 Financial Report
DUFRY ANNUAL REPORT 2018
Macau, South Korea and Indonesia. Australia posted
double digit growth in the year, supported by the open-
ing of the New Generation Store in Melbourne.
increase is due to the effect of the minimum annual
guarantee of the Spanish contracts and another 10
basis points due to new operations outside the airport
channel.
Latin America’s turnover went to CHF 1,617.0 million
in 2018 versus CHF 1,694.0 million one year earlier.
Organic growth for the year stood at – 3.5 %. Most
operations in South America faced challenging condi-
tions driven by a strong devaluation of local curren-
cies. Brazil and Argentina were the most impacted
locations with the Brazilian Real and the Argentinean
Peso devaluing 15 % and 70 % respectively in the year.
Other operations in South America also saw a slow-
down in performance as a knock-on effect from the
two key countries above, especially in the second half
of the year.
Central America and Caribbean had a good perfor-
mance along the year, further supported by a strong
development of the cruise business, where we started
operations on board of a number of new ships.
Turnover in North America reached CHF 1,884.4 million
in 2018 from CHF 1,771.5 million in the previous year.
The Division delivered a good organic growth, totaling
6.8 % in 2018.
This performance was driven by a combination of
passenger growth and new openings along the year.
The duty-paid concept delivered a solid performance
throughout the year. Growth in the duty-free opera-
tions was resilient as well until the third quarter. During
Q4 2018, organic growth slowed slightly down to 4.7 %,
mainly driven by the change in the Chinese passenger
profile resulting in a lower spending and impacting the
duty-free business in the region.
RESILIENT FINANCIALS IN A VOLATILE YEAR
Gross profit
Gross profit grew by 4.4 % and reached CHF 5,195.7
million in 2018 versus CHF 4,978.6 million in 2017. Gross
margin improved by 40 basis points, which comes
partly from a mix effect and mainly as a result of
further renegotiations of terms and conditions with
local suppliers, supported by a contribution from the
acceleration of several brand plan initiatives, resulting
either in better terms or higher compensation from
suppliers.
Selling expenses
Selling expenses, which include concession fees,
reached CHF 2,580.5 million in 2018 from CHF 2,430.
million in 2017. As a percentage of turnover, they went
to 29.7%, from 29.0% in 2017. About one third of the
108
Personnel and general expenses
Personnel expenses reached CHF 1,175.2 million in
2018 versus CHF 1,135.0 million one year earlier. As
a percentage of turnover they were flat, reaching
13.5 % in 2018.
General expenses stood at CHF 403.5 million in the
year to December from CHF 404.8 million in 2017.
Measured as a percentage of turnover, it was 4.6 %,
20 basis points lower than in 2017.
EBITDA
EBITDA grew by 3.3 % and stood at CHF 1,040.3 million
(CHF 1,007.1 million in 2017). EBITDA margin was 12.0 %
in 2018, the same level seen in 2017.
Depreciation, amortization, impairment
and linearization
Depreciation reached CHF 202.3 million in 2018, com-
pared to CHF 158.9 million in 2017. Amortization and
impairment stood at CHF 369.6 million in 2018, com-
pared to the CHF 423.9 million reported in 2017. The
amount in 2017 includes CHF 64.7 million related to the
impairment charges.
Linearization amounted to CHF – 47.7 million in 2018.
Linearization is a non-cash item related to the Spanish
business and originates from the difference between
the average minimum guarantee (MAG) over the full
concession period and the effective MAG payable in the
period. This item also includes the reduction in con-
cession payments granted based on an upfront pay-
ment (prepaid lease) related to the Spanish contracts.
EBIT
EBIT went to CHF 371.4 million in 2018 from CHF 418.7
million in the last year. Other operational result (net)
was CHF – 49.3 million in 2018, mainly due to costs
related to openings and closings of operations. In 2017,
other operational result was positive CHF 53.3 million,
mainly related to the release of provisions.
Financial result
Financial result, net, reached CHF 137.2 million in 2018
from CHF 216.8 million in 2017. The improvement of
CHF 79.6 million is due to the refinancing concluded
in Q4 2017, lower debt levels in 2018 and refinancing
related one-off charges in 2017 of CHF 41.6 million.
3 Financial Report
DUFRY ANNUAL REPORT 2018
Taxes
Income tax reached CHF 98.8 million in 2018, versus
CHF 91.0 million in 2017. The impact from deferred tax
income was slightly lower in 2018, totaling CHF 27.1
million compared to CHF 29.2 million in 2017.
a result, we improved our financial performance again,
strengthened the balance sheet, extended our matu-
rity profile, reduced interest costs, and reverted back
to our target leverage.
Net earnings
Net earnings reached CHF 135.4 million, 22.1 % higher
compared to 2017. Net Earnings to equity holders were
CHF 71.8 million in 2018, compared to CHF 56.8 million
seen in 2017.
Cash earnings, which add back acquisition-related
amortization, reached CHF 379.2 million in 2018 versus
CHF 367.9 million in 2017. Cash EPS in 2018 grew by
6.9 % and reached CHF 7.31, versus CHF 6.84 in 2017.
Cash flow and debt
Free cash flow before interest and minorities reached
CHF 617.1 million in 2018, compared to CHF 467.0 mil-
lion in 2017. Apart from the EBITDA generation, net
working capital management led it to only a slight
negative of CHF 4.1 million, with Capex further reduced
to CHF 251.1 million in 2018 from CHF 283.5 million in
2017, now standing at 2.9 % of turnover and comparing
to 3.4 % a year earlier.
Equity free cash flow reached CHF 370.8 million in 2018,
almost double of the CHF 187.8 million reported in
2017. Besides the growth in free cash flow, the reduc-
tion in interest costs connected to the refinancing
executed in 2017, contributed to the result.
In terms of capital structure, we focused on cash gen-
eration and deleveraging since the acquisition of WDF
in 2015. In 2018, we continued to reduce net debt to
CHF 3,286.1 million at the end of December 2018 com-
pared to CHF 3,686.9 million one year earlier. Our main
covenant, net debt / adjusted EBITDA, stood at 3.20x
as per December 31, 2018, thus leaving a comfortable
headroom to the agreed maximum threshold of 4.0x.
With the conclusion of the BOM, the strong cash flow
generation and the balance sheet being in good shape,
we are now in a strong position for further develop-
ment going forward. The deployment of the digital
strategy and our retail skills will create new opportu-
nities to grow existing businesses and to win new
contracts and we can also look again at external growth
with small and mid-sized acquisitions. At the same time,
we will continue to return cash to our shareholders via
a dividend payment.
In 2019, we will implement the new lease accounting
standard IFRS 16, which in the case of Dufry will have
a significant impact on the presentation of its financials.
Due to the capitalization of fixed lease and concession
components, Dufry will adapt the structure of its
financials, and especially the income statement. Dufry’s
cash flow is the least impacted by the change, there-
fore being the better way of measuring performance.
Dufry’s main KPI’s therefore will include: organic
growth, free cash flow and equity free cash flow.
Fundamentally positive outlook
We have seen an ongoing improvement of our sales
performance in the first weeks of the year, which con-
firms a positive outlook for the 2019 business year,
although there is overall low short-term visibility for
the global political and economic environment. More-
over, traveling continues to be a mega trend long-term
and in that context travel retail remains an attractive
sector.
I would like to thank our shareholders, bondholders,
banks, analysts and key advisors for their trust in
Dufry and their support throughout the year to con-
tribute to Dufry’s success.
A LOT DONE IN 2018; MORE TO COME IN 2019
Kind regards,
In 2018, we reached a number of milestones. From
a financial perspective, we showcased for the first
time the true cash generation potential of the company,
with an equity free cash flow of CHF 370.8 million. On
the operational side, we finalized the implementation
of our new Business Operating Model (BOM) in 2018.
2018 concludes an important era for Dufry: in the last
years we focused to integrate two large acquisitions,
to generate synergies and to adapt our organization,
processes and systems to benefit from the enlarged
size as well as our position as industry leader. As
Andreas Schneiter
109
3 Financial Report
DUFRY ANNUAL REPORT 2018
CONSOLIDATED INCOME STATEMENT
CONTINUING OPERATIONS
Net sales
Advertising income
Turnover
Cost of sales
Gross profit
Selling expenses
Personnel expenses
General expenses
Share of result of associates
EBITDA 1
Depreciation, amortization and impairment
Linearization
Other operational result
Earnings before interests and taxes (EBIT)
Interest expenses
Interest income
Foreign exchange gain / (loss)
Earnings before taxes (EBT)
Income tax
Net earnings from continuing operations
ATTRIBUTABLE TO
Equity holders of the parent
Non-controlling interests
Net profit to equity holders adjusted for amortization
in respect of acquisitions
Basic earnings per share
Cash earnings per share 2
Weighted average number of outstanding shares in thousands
IN MILLIONS
OF CHF
2018
IN %
IN MILLIONS
OF CHF
2017
IN %
100.0 %
40.6 %
59.4 %
29.0 %
13.5 %
4.8 %
0.0 %
12.0 %
7.0 %
0.7 %
(0.6 %)
5.0 %
3.1 %
(0.4 %)
(0.1 %)
2.4 %
1.1 %
1.3 %
8,455.8
229.1
8,684.9
(3,489.2)
5,195.7
(2,580.5)
(1,175.2)
(403.5)
3.8
1,040.3
(571.9)
(47.7)
(49.3)
371.4
(196.4)
64.7
(5.5)
234.2
(98.8)
135.4
71.8
63.6
379.2
1.38
7.31
51,868
100.0 %
40.2 %
59.8 %
29.7 %
13.5 %
4.6 %
0.0 %
12.0 %
6.6 %
0.5 %
0.6 %
4.3 %
2.3 %
(0.7 %)
0.1 %
2.7 %
1.1 %
1.6 %
8,164.7
212.7
8,377.4
(3,398.8)
4,978.6
(2,430.1)
(1,135.0)
(404.8)
(1.6)
1,007.1
(582.8)
(58.9)
53.3
418.7
(259.6)
35.4
7.4
201.9
(91.0)
110.9
56.8
54.1
367.9
1.06
6.84
53,781
1 EBITDA is earnings before interest, taxes, depreciation, amortization, linearization and other operational result
2 Adjusted for amortization of acquisitions
110
3 Financial Report
DUFRY ANNUAL REPORT 2018
FINANCIAL
STATEMENTS
2018
CONTENT
Consolidated Financial Statements
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Most important subsidiaries
Report of the statutory auditor
112
113
114
115 – 116
117 – 118
119 – 205
206 – 207
208 – 211
Financial Statements Dufry AG
Income statement
Statement of financial position
Notes to the financial statements
Report of the statutory auditor
212
213
214 – 219
220 – 221
111
111 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
112CONSOLIDATED INCOME STATEMENTFOR THE YEAR ENDED DECEMBER 31, 2018 IN MILLIONS OF CHFNOTE20182017Net sales7 8,455.8 8,164.7 Advertising income 229.1 212.7 Turnover 8,684.9 8,377.4 Cost of sales(3,489.2)(3,398.8)Gross profit 5,195.7 4,978.6 Selling expenses8(2,580.5)(2,430.1)Personnel expenses9(1,175.2)(1,135.0)General expenses10(403.5)(404.8)Share of result of associates18 3.8 (1.6)EBITDA 1 1,040.3 1,007.1 Depreciation, amortization and impairment11(571.9)(582.8)Linearization(47.7)(58.9)Other operational result12(49.3) 53.3 Earnings before interet and taxes (EBIT) 371.4 418.7 Interest expenses13(196.4)(259.6)Interest income13 64.7 35.4 Foreign exchange gain / (loss)(5.5) 7.4 Earnings before tax (EBT) 234.2 201.9 Income tax14(98.8)(91.0)Net earnings 135.4 110.9 ATTRIBUTABLE TOEquity holders of the parent 71.8 56.8 Non-controlling interests 63.6 54.1 EARNINGS PER SHARE ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENTBasic earnings per share 24.4 1.38 1.06 Diluted earnings per share 24.4 1.38 1.05 1 EBITDA is earnings before interest, taxes, depreciation, amortization, linearization and other operational result 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
113IN MILLIONS OF CHFNOTE20182017Net earnings 135.4 110.9 OTHER COMPREHENSIVE INCOMEChanges in the fair value of equity investments at FVOCI15(0.3)–Remeasurements of post-employment benefit plans15 10.6 11.0 Income tax14, 15(1.8)(1.0)Items not being reclassified to net income in subsequent periods, net of tax 8.5 10.0 Exchange differences on translating foreign operations15(74.3)(64.9)Net gain / (loss) on hedge of net investment in foreign operations15 17.1 54.7 Changes in the fair value of interest rate swaps held as cash flow hedges15–(1.6)Share of other comprehensive income of associates15, 23 0.3 0.3 Income tax on above positions14, 15––Items to be reclassified to net income in subsequent periods, net of tax(56.9)(11.5)Total other comprehensive income, net of tax(48.4)(1.50)Total comprehensive income, net of tax 87.0 109.4ATTRIBUTABLE TOEquity holders of the parent 21.7 50.0 Non-controlling interests 65.3 59.4 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED DECEMBER 31, 2018 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
114CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAT DECEMBER 31, 2018IN MILLIONS OF CHFNOTE31.12.201831.12.2017ASSETSProperty, plant and equipment16 644.3 667.9 Intangible assets17 3,516.8 3,929.1 Goodwill17 2,601.5 2,669.0 Investments in associates18 35.6 33.9 Deferred tax assets29 138.4 133.3 Net defined benefit asset31 4.8 –Other non-current assets19 259.6 338.6 Non-current assets 7,201.0 7,771.8 Inventories20 1,062.7 1,022.9 Trade and credit card receivables21 62.6 82.5 Other accounts receivable22 474.1 508.5 Income tax assets 50.3 40.1 Financial instruments at fair value through other comprehensive income33 1.7 –Cash and cash equivalents 538.2 565.0 Current assets 2,189.6 2,219.0 Total assets 9,390.6 9,990.8 LIABILITIES AND SHAREHOLDERS’ EQUITYEquity attributable to equity holders of the parent23 2,898.8 3,130.1 Non-controlling interests25 442.9 226.1 Total equity 3,341.7 3,356.2 Financial debt26 3,766.3 4,165.1 Deferred tax liabilities29 425.9 466.8 Provisions30 82.4 103.3 Employee benefit obligations31 33.4 39.4 Other non-current liabilities 62.8 112.9 Non-current liabilities 4,370.8 4,887.5 Trade payables 640.4 644.6 Financial debt26 58.0 86.8 Income tax payables 64.8 58.1 Provisions30 54.8 68.8 Other liabilities28 860.1 888.8 Current liabilities 1,678.1 1,747.1 Total liabilities 6,048.9 6,634.6 Total liabilities and shareholders’ equity 9,390.6 9,990.8 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
115CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED DECEMBER 31, 2018ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENTIN MILLIONS OF CHFNOTEShare capitalShare premium Treasury sharesEmployee benefit reserveHedging & revalu-ation reservesTrans- lation reservesRetained earningsTOTALNON-CON-TROLLING INTERESTSTOTAL EQUITYBalance at January 1, 2018 269.4 4,259.3 (12.5)(26.9)–(265.5)(1,093.7) 3,130.1 226.1 3,356.2 Profit of the period–––––– 71.8 71.8 63.6 135.4 Other comprehensive income / (loss)15––– 8.8 (0.3)(58.6)–(50.1) 1.7 (48.4)Total comprehensive income / (loss) for the period––– 8.8 (0.3)(58.6) 71.8 21.7 65.3 87.0 TRANSACTIONS WITH OR DISTRIBUTIONS TO SHAREHOLDERSDividends to shareholders–(198.7)–––––(198.7)–(198.7)Dividends to non-controlling interests––––––––(76.2)(76.2)Purchase and sale of treasury shares24.3––(522.6)––––(522.6)–(522.6)Profit on disposal of treasury shares–––– 0.2 0.2 – 0.2 Assignment of treasury shares–– 14.3 –(14.3)–––Share-based payments–––––– 26.2 26.2 5.0 31.2 Tax effect on equity transactions14–––––– 4.0 4.0 1.3 5.3 Total transactions with or distributions to owners–(198.7)(508.3)––– 16.1 (690.9)(69.9)(760.8)CHANGES IN OWNERSHIP INTERESTS IN SUBSIDIARIESGain on sale of 42.6 % of Hudson Ltd6, 25–––––– 439.5 439.5 206.4 645.9 Other changes in participation of non-controlling interests25(1.6)(1.6) 15.0 13.4 Balance at December 31, 2018 269.4 4,060.6 (520.8)(18.1)(0.3)(324.1)(567.9) 2,898.8 442.9 3,341.7 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
116CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED DECEMBER 31, 2018ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENTIN MILLIONS OF CHFNOTEShare capitalShare premiumTreasury sharesEmployee benefit reserveHedging & revalu-ation reservesTrans- lation reservesRetained earningsTOTALNON-CON-TROLLING INTERESTSTOTAL EQUITYBalance at January 1, 2017 269.4 4,259.3 (15.0)(36.7) 1.6 (250.4)(1,166.2) 3,062.0 208.6 3,270.6 Profit of the period–––––– 56.8 56.8 54.1 110.9 Other comprehensive income / (loss)15––– 9.8 (1.6)(15.1) 0.1 (6.8) 5.3 (1.5)Total comprehensive income / (loss) for the period––– 9.8 (1.6)(15.1) 56.9 50.0 59.4 109.4 TRANSACTIONS WITH OR DISTRIBUTIONS TO SHAREHOLDERS:Dividends to non-controlling interests––––––––(57.3)(57.3)Assignment of treasury shares24.3–– 2.5 –––(2.5)–––Share-based payments24–––––– 22.5 22.5 – 22.5 Tax effect on equity transactions14––––––(0.5)(0.5)–(0.5)Total transactions with or distributions to owners–– 2.5 ––– 19.5 22.0 (57.3)(35.3)CHANGES IN OWNERSHIP INTERESTS IN SUBSIDIARIES:Changes in participation of non-controlling interests23––––––(3.9)(3.9) 15.4 11.5 Balance at December 31, 2017 269.4 4,259.3 (12.5)(26.9)–(265.5)(1,093.7) 3,130.1 226.1 3,356.2 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
117CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED DECEMBER 31, 2018IN MILLIONS OF CHFNOTE20182017CASH FLOWS FROM OPERATING ACTIVITIESProfit before taxes 234.2 201.9 Depreciation, amortization and impairment11 571.9 582.8 Loss / (gain) on sale of non-current assets 6.9 7.8 Increase / (decrease) in allowances and provisions 25.5 (50.6)Loss / (gain) on foreign exchange differences 5.4 (2.4)Linearization of concession fees(29.6)(3.2)Other non-cash items 25.2 20.0 Share of result of associates18(3.8) 1.6 Interest expense13 196.4 259.6 Interest income13(64.7)(35.4)Cash flow before working capital changes 967.4 982.1 Decrease / (increase) in trade and other accounts receivable 93.7 (30.8)Decrease / (increase) in inventories20(57.0)(127.7)Increase / (decrease) in trade and other accounts payable(40.8) 10.8 Dividends received from associates18 5.7 4.9 Cash generated from operations 969.0 839.3 Income taxes paid(132.8)(124.2)Net cash flows from operating activities 836.2 715.1 CASH FLOW USED IN INVESTING ACTIVITIESPurchase of property, plant and equipment 16(201.7)(205.3)Purchase of intangible assets17(53.8)(80.7)Purchase of financial assets(2.1)–Purchase of interest in associates18(3.3)(1.0)Proceeds from sale of property, plant and equipment 4.4 2.5 Proceeds from sale of financial assets 0.1 –Interest received 29.5 27.1 Net cash flows used in investing activities(226.9)(257.4) 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
118IN MILLIONS OF CHFNOTE20182017CASH FLOW FROM FINANCING ACTIVITIESProceeds from issuance of notes– 923.2 Transaction costs for financial instruments27(12.0)(26.9)Proceeds from bank loans27 163.1 3,078.5 Repayment of loans and senior notes 227(478.2)(4,097.9)Proceeds from (repayment of) loans receivable27 0.1 (4.1)Proceeds from loans payable 0.7 1.0 Dividends paid to shareholders of the parent23(198.7)–Dividends paid to non-controlling interest23(70.1)(57.3)Purchase of treasury shares24(549.8)–Proceeds from sale of treasury shares 27.4 –Net contributions from / (purchase of) non-controlling interests 1 671.1 0.3 Interest paid (169.9)(218.1)Net cash flows used in from financing activities 2(616.3)(401.3)Currency translation on cash 227(19.8) 57.8 Decrease / Increase in cash and cash equivalents(26.8) 114.2 CASH AND CASH EQUIVALENTS AT THE– beginning of the period 565.0 450.8 – end of the period 538.2 565.0 1 Mainly comprises proceeds from sale of a minority share of Hudson Ltd. CHF 665.2 million (see note 6)2 See comments on 2017 restated figures in note 2.3CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)FOR THE YEAR ENDED DECEMBER 31, 2018 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
NOTES TO THE
CONSOLIDATED
FINANCIAL
STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2018
1.
CORPORATE INFORMATION
Dufry AG (the Company) is a publicly listed company with headquarters in Basel,
Switzerland. The Company is the world’s leading travel retail company. It operates
around 2,300 shops worldwide. The shares of the Company are listed on the Swiss
Stock Exchange (SIX) in Zurich.
The consolidated financial statements of Dufry AG and its subsidiaries (Dufry or
the Group) for the year ended December 31, 2018 and the respective comparative
information were authorized for public disclosure in accordance with a resolution
of the Board of Directors of the Company dated March 6, 2019, and are subject to
the approval of the Annual General meeting to be held on May 9, 2019.
2.
ACCOUNTING POLICIES
2.1
BASIS OF PREPARATION
The consolidated financial statements of Dufry AG and its subsidiaries have been
prepared in accordance with International Financial Reporting Standards (IFRS).
The consolidated financial statements have been prepared on the historical cost
basis, except for certain financial assets, liabilities (including derivative instruments)
and defined benefit plan assets, that are measured at fair value, as explained in the
accounting policies below. Historical cost is generally based on the fair value of the
consideration given in exchange for assets. The carrying values of recognized
assets and liabilities that are hedged items in fair value hedges, and are otherwise
carried at amortized cost, are adjusted to record changes in the fair values
attributable to the risks that are being hedged. The consolidated financial state-
ments are presented in millions of Swiss Francs (CHF). All values are rounded to
the nearest one hundred thousand, except when indicated otherwise.
119 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
2.2
BASIS OF CONSOLIDATION
The consolidated financial statements of Dufry comprise all entities directly or
indirectly controlled by Dufry (its subsidiaries) as at December 31, 2018 and the
respective comparative information.
Subsidiaries are fully consolidated from the date of acquisition, being the date on
which Dufry obtains control, and continue to be consolidated until the date when
such control is lost. The Group controls an entity when Dufry is exposed to, or has
rights to, variable returns from its involvement with the entity and has the ability
to affect those returns through its power over the entity. All intra group balances,
transactions, unrealized gains or losses and dividends, resulting from intragroup
transactions, are eliminated in full.
A change in the ownership interest of a subsidiary, without a loss of control, is
accounted for as an equity transaction.
If Dufry, loses control over a subsidiary, it:
– derecognizes the assets (including goodwill) and liabilities of the subsidiary,
derecognizes the carrying amount of any non-controlling interest as well as
derecognizes the cumulative translation differences recorded in equity,
– recognizes the fair value of the consideration received, recognizes the fair value
of any investment retained as well as recognizes any surplus or deficit in the
income statement.
For the accounting treatment of associated companies see 2.4 q).
2.3 CORRECTION OF THE 2017 CONSOLIDATED FINANCIAL STATEMENTS
In 2018 Dufry AG became aware of a classification error in the consolidated
statement of cash flows for the year ended December 31, 2017.
In the fourth quarter of 2017, Dufry reorganized some group-internal finance
arrangements, by simplifying the structure of these loans. Consequently existing
loans have been settled and new ones issued. The resulting cash flows led to the
realization of the related (positive) currency translation of CHF 149.7 million. FX
variances occur when group companies hold financial positions in foreign currencies
for a period of time. Such FX variances originated by inter-company loans do not
eliminate during consolidation.
In the 2017 consolidated statement of cash flows, these effects were shown as
“Currency translation on cash”. However, according to IAS 7.28 only unrealized
gains and losses arising from changes in foreign currency exchange rates on cash
and cash equivalents are to be shown under this caption. Given that the translation
effects occurred on group-internal financing, the FX effect should have been
eliminated, resulting in a reduction in the line item “Repayment of loans and senior
notes”, which is part of the cash flow from financing activities.
The following corrections have been made in the comparative information for 2017
of the consolidated statement of cash flows: “Repayment of loans and senior notes”
within “Net cash flows used in financing activities” has been decreased by CHF 149.7
million to CHF – 4,097.9 million (instead of the previously reported CHF – 4,247.6 mil-
lion), ”Net cash flows used in financing activities” have been reduced to CHF – 401.3
million (instead of the previously reported CHF – 551.0 million) and the line item
“Currency translation on cash” has been decreased to CHF 57.8 million (instead of
120 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
the previously reported CHF 207.5 million). There was no impact in any other line
items in the statement of cash flows nor on the reported amount of cash and cash
equivalents in these financial statements, except at note 27 Net Debt.
2.4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Goodwill and Business combinations
Business combinations are accounted for using the acquisition method. The cost
of an acquisition is measured as the aggregate of the consideration transferred,
measured at acquisition date fair value and the amount of any non-controlling
interest in the acquiree. For each business combination, Dufry selects whether it
measures the non-controlling interest in the acquiree either at fair value or at the
proportionate share of the acquiree’s identifiable net assets. Acquisition related
transaction costs are expensed and presented in other operational result. When
Dufry acquires a business, it assesses the financial assets and liabilities assumed
for appropriate classification and designation in accordance with the contractual
terms, economic circumstances and pertinent conditions as at the acquisition date.
Any contingent consideration to be transferred by the acquirer will be recognized
at fair value at the acquisition date. Thereafter any change in the fair value of the
contingent consideration not classified as equity will be recognized through the
income statement.
Dufry measures goodwill at the acquisition date as:
– The fair value of the consideration transferred;
– plus the recognized amount of any non-controlling interests in the acquiree;
– plus if the business combination is achieved in stages, the fair value of the
pre-existing equity interest in the acquiree;
– less the net recognized amount of the identifiable assets acquired and liabilities
assumed.
When the excess is negative, a bargain purchase gain is recognized immediately in
the income statement.
After initial recognition, goodwill is measured at cost less any accumulated impair-
ment losses. For the purpose of impairment testing, goodwill acquired in a business
combination is, from the acquisition date, allocated to each of Dufry’s group of
cash-generating units that are expected to benefit from the combination.
Where goodwill forms part of a cash-generating unit and an operation within is
disposed of, the goodwill associated with the operation disposed of is included in
the carrying amount of the operation when determining the gain or loss on disposal
of the operation. Goodwill disposed of in this circumstance is measured based
on the relative values of the operation disposed of and the portion of the cash-
generating unit retained, unless there are specific allocations.
b) Turnover
Turnover comprises sales and advertising. Sales are measured at the fair value of
the consideration received in cash (or credit card) for the goods, excluding sales
taxes or duties. Retail sales are recognized at point in time when the goods are
transferred. These transactions are settled in cash or by credit card. Advertising
income is recognized over time when the services have been rendered.
121 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
122c) Cost of salesCost of sales are recognized when the company sells the products and comprise the purchase price and the cost incurred until the products arrive at the warehouse, i. e. import duties, transport, purchase discounts (price-offs) as well as inventory valuation adjustments and inventory losses. d) Personnel expensesThese expenses include all expenses related to the employees, management and board members of Dufry.e) Foreign currency translationEach subsidiary in Dufry uses its corresponding functional currency. Items included in the financial statements of each entity are measured using that functional currency. Transactions in foreign currencies are recorded at the date of the trans-action in the functional currency using the exchange rate of such date.Monetary assets and liabilities denominated in foreign currencies are re-measured using the functional currency exchange rate at the reporting date and the differ-ence is recorded as unrealized foreign exchange gains / losses. Exchange differences arising on the settlement or on the translation of derivative financial instruments are recognized through the income statement, except where the hedges on net investments allow the recognition through other comprehensive income, until the respective investments are disposed of. Deferred tax related to unrealized FX is accounted accordingly. Non-monetary items are measured at historical cost in the respective functional currency.At the reporting date, the assets and liabilities of all subsidiaries reporting in foreign currency are translated into the presentation currency of Dufry (CHF) using the exchange rate at the reporting date. The income statements of the subsidiaries are translated using the average exchange rates of the respective month in which the transactions occurred. The net translation differences are recognized in other comprehensive income. On disposal of a foreign entity or when control is lost, the deferred cumulative translation difference recognized within equity relating to that particular operation is recognized in the income statement as gain or loss on sale of subsidiaries.Goodwill, Intangible assets and fair value adjustments identified during a business combination (purchase price allocation) are treated as assets and liabilities in the functional currency of such operation.Principal foreign exchange rates applied for valuation and translation:AVERAGE RATECLOSING RATEIN CHF2018201731.12.201831.12.20171 USD0.97840.98410.98140.97431 EUR1.15471.11191.12591.16921 GBP1.30551.26841.25241.3170f) Other operational resultThe transactions included in these accounts are non-recurring and not related to the key business of the Group. 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
123g) LinearizationIn cases where fees for the concession are based on fixed or determinable amounts of money, the expenses paid are treated as operational leases. For these operational leases when the amounts are increasing or decreasing over the time Dufry accrues the difference between the amount paid and the respective straight-line expenses for the period calculated over the overall duration of the contract, as linearization. In addition, this line item includes the reduction in concession payments granted based on an upfront payment done at the inception of two Spanish contracts (Madrid and Barcelona as main airports), acquired as part of the World Duty Free acquisition.h) Equity instrumentsAn equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by Dufry are recognized at the proceeds received, net of direct issue costs. Repurchase of Dufry’s own equity instruments is recognized and deducted directly in equity. No gain or loss is recognized in the income statement on the purchase, sale, issue or cancellation of Dufry’s own equity instruments.i) Share capitalOrdinary shares are classified as equity. Costs directly attributable to the issuance of shares or options are shown in the statement of changes in equity as transaction costs for equity instruments, net of tax.For Dufry shares purchased by Dufry AG or any subsidiary, the consideration paid, including any directly attributable expenses, net of income taxes, is deducted from equity until the shares are cancelled, assigned or sold. Where such ordinary shares are subsequently sold, any consideration received, net of any direct transaction expenses and income tax, is included in equity.j) Pension and other post-employment benefit obligationsThe employees of the subsidiaries are eligible for retirement, invalidity and death benefits under local social security schemes prevailing in the countries concerned and defined benefit or defined contribution plans provided through separate funds, insurance plans, or unfunded arrangements. The pension plans are either funded through regular contributions made by the employer or the employee or unfunded. The cost of providing benefits under defined benefit plans is determined using the projected unit credit method. The plan assets are valued at fair value.Re-measurements, the effect of the asset ceiling (excluding net interest) and the return on plan assets (excluding net interest), are recognized in the statement of financial position with a corresponding debit or credit to other comprehensive income in the period in which they occur. Re-measurements are not reclassified to profit or loss in subsequent periods.Past service costs are recognized in profit or loss on the earlier of: –The date of the plan amendment or curtailment, and –the date that Dufry recognizes restructuring related costsNet interest is calculated by applying the discount rate to the net defined benefit obligation (asset). Dufry recognizes the following changes in the net defined benefit obligation in the income statement: –Service costs comprising current service costs are disclosed under “personnel expenses”. Past service costs, gains and losses on curtailments and non-routine settlements are shown under “other operational result” –Net interest expense or income under “interest expenses or income” 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
Based on pension legislation of certain countries the employer and / or the
employees have the obligation to remedy any default situation of the pension foun-
dation, which usually would result in higher periodic contributions. At the balance
sheet date, there was no such default situation. The actuarial calculations based
on IAS 19 resulted in a defined benefit obligation / asset as presented in note 31.
k) Share-based payments
Equity settled share-based payments to employees and other third parties provid-
ing services are measured at the fair value of the equity instruments at grant date.
The fair value determined at grant date of the equity-settled share-based payments
is expensed on a pro rata basis over the vesting period, based on the estimated
number of equity instruments that will eventually vest. At the end of each reporting
period, Dufry revises its estimate of the number of equity instruments expected to
vest. The impact of the revision of the original estimates, if any, is recognized in the
income statement such that the cumulative expense reflects the revised estimate.
Where the terms of an equity settled award are modified, the minimum expense
recognized is the expense as if the terms had not been modified. An additional
expense is recognized for any modification, which increases the total fair value of
the share-based payment arrangement, or is otherwise beneficial to the holder of
the option as measured at the date of modification.
l) Taxation
Income tax expense represents the sum of the current income tax and deferred
tax. Where the functional currency is not the local currency, the position includes
the effects of foreign exchange translation on deferred tax assets or deferred tax
liabilities.
Income tax positions not relating to items recognized in the income statement, are
recognized in correlation to the underlying transaction either in other comprehensive
income or equity.
Current income tax
Income tax receivables or payables are measured at the amount expected to be
recovered from or paid to the tax authorities. The tax rates and tax laws used to
compute the amount are those that are enacted or substantially enacted at the
reporting date in the countries where Dufry operates and generates taxable income.
Income tax relating to items recognized in other comprehensive income is recog-
nized in the same statement.
Deferred tax
Deferred tax is provided using the liability method on temporary differences be-
tween the tax basis of assets or liabilities and their carrying amounts for financial
reporting purposes at the reporting date.
Deferred tax liabilities are recognized for all taxable temporary differences, except:
– When the deferred tax liability arises from the initial recognition of goodwill or
an asset or liability in a transaction that is not a business combination and, at
the time of the transaction, affects neither the accounting profit nor taxable
profit or loss
– In respect of taxable temporary differences associated with investments in
subsidiaries, when the timing of the reversal of the temporary differences can
be controlled and it is probable that the temporary differences will not reverse
in the foreseeable future
124 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
Deferred tax assets are recognized for all deductible temporary differences, the
carry forward of unused tax credits or tax losses. Deferred tax assets are recog-
nized to the extent that it is probable that taxable profit will be available, against
which the deductible temporary differences and the carry forward of unused tax
credits and unused tax losses can be utilized, except:
– When the deferred tax asset relating to the deductible temporary difference
arises from the initial recognition of an asset or liability in a transaction that is
not a business combination and, at the time of the transaction, affects neither
the accounting profit nor taxable profit or loss
– In respect of deductible temporary differences associated with investments in
subsidiaries, deferred tax assets are recognized only to the extent that it is
probable that the temporary differences will reverse in the foreseeable future
and taxable profit will be available against which the temporary differences can
be utilized.
The carrying amount of deferred tax assets is reviewed at each reporting date and
reduced to the extent that it is no longer probable that sufficient taxable profit will
be available to allow the deferred tax asset to be utilized. Unrecognized deferred
tax assets are reassessed at each reporting date and are recognized to the extent
that it has become probable that future taxable profits will allow the deferred tax
asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected
to apply in the year when the asset is realized or the liability is settled, based on
tax rates (and tax laws) that have been enacted or substantially enacted at the
reporting date applicable for each respective company.
m) Property, plant and equipment
These are stated at cost less accumulated depreciation and any impairment in fair
value. Depreciation is computed on a straight-line basis over the shorter of the
estimated useful life of the asset or the lease term. The useful lives applied are as
follows:
– Real estate (buildings) 20 to 40 years
– Leasehold improvements the shorter of the lease term or 10 years
– Furniture and fixtures the shorter of the lease term or 5 years
– Motor vehicles the shorter of the lease term or 5 years
– Computer hardware the shorter of the lease term or 5 years
n) Intangible assets
These assets mainly comprise of concession rights and brands. Usually these
assets are capitalized at cost, but when identified as part of a business combination,
these assets are capitalized at fair value as at the date of acquisition. The useful
lives of these intangible assets are assessed to be either finite or indefinite. Dufry
may consider that these assets have indefinite useful lives, when concession rights
are granted by a non-controlling interests holder of the company, or for brands
when the company considers to use the brand for the foreseeable future. Follow-
ing initial recognition, the cost model is applied to intangible assets. Intangible
assets with finite lives are amortized over the useful economic life. Intangible
assets with an indefinite useful life are reviewed annually to determine whether the
indefinite life assessment continues to be supportable. If not, any changes are
made on a prospective basis.
125 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
o) Software
Software is valued at amortized historical cost, or in case of internal developments
by the sum of costs incurred less amortizations.
p) Impairment of non-financial assets
Goodwill and Intangible assets with indefinite useful life are not subject to
amortization and are tested annually for impairment. Assets that are subject to
depreciation and amortization are reviewed for impairment whenever events or
circumstances indicate that the carrying amount may not be recoverable. An
impairment loss is recognized when the carrying amount of an asset or cash
generating unit exceeds its recoverable amount. The recoverable amount is the
higher of an asset’s fair value less cost of disposal and its value in use. For the
purpose of assessing impairment, assets are grouped at the lowest levels for which
there are separately identifiable cash inflows (cash generating units).
q) Associates
Associates are all entities over which Dufry has significant influence but not
control, generally accompanying a shareholding interest of more than 20 % of the
voting rights. Investments in associates are accounted for using the equity method
of accounting. Under the equity method, the investment is initially recognized at
cost. The carrying amount is increased or decreased to recognize the investor’s
share of the net earnings of the investee after the date of acquisition and decreased
by dividends declared. Dufry’s investment in associates includes goodwill identified
on acquisition.
Dufry’s share of post-acquisition net earnings is recognized in the income state-
ment, and its share of post-acquisition movements in other comprehensive income
is recognized in the statement of comprehensive income with a corresponding
adjustment to the carrying amount of the investment. When Dufry’s share of losses
in an associate equals or exceeds its interest in the associate, Dufry does not
recognize further losses, unless it has incurred legal or constructive obligations
or made payments on behalf of the associate. If the ownership interest in an asso-
ciate is reduced but significant influence is retained, only a proportionate share of
the amounts previously recognized in other comprehensive income is reclassified
to net earnings where appropriate.
Dufry determines at each reporting date whether there is any objective evidence
that the investment in the associate is impaired. If this is the case, Dufry calculates
the amount of impairment as the difference between the recoverable amount of
the associate and its carrying value and recognizes the amount adjacent to share
of result of associates in the income statement.
Profits and losses resulting from upstream and downstream transactions between
Dufry and its associate are recognized in the Group’s financial statements only to
the extent of unrelated investor’s interests in the associates. Unrealized losses are
eliminated unless the transaction provides evidence of an impairment of the asset
transferred. Accounting policies of associates have been changed where necessary
to ensure consistency with the policies adopted by Dufry.
Dilution gains and losses arising in investments in associates are recognized in the
income statement.
126 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
r) Inventories
Inventories are valued at the lower of historical cost or net realizable value. The
historical costs are determined using the FIFO method. Historical cost includes all
expenses incurred in bringing the inventories to their present location and condition.
This includes mainly import duties and transport cost. Purchase discounts and
rebates are deducted in determining the cost of inventories. The net realizable value
is the estimated selling price in the ordinary course of business less the estimated
costs necessary to make the sale. Inventory allowances are set up in the case of
slow-moving and obsolete stock. Expired items are fully written off.
s) Trade and credit card receivables
These accounts include receivables related to the sale of merchandise.
t) Cash and cash equivalents
Cash and cash equivalents consist of cash on hand or current bank accounts as
well as short-term deposits at banks with initial maturity below 91 days. Credit card
receivables with a maturity of up to 4 days are included as cash in transit. Short-term
investments are included in this position if they are highly liquid, readily convertible
into known amounts of cash and subject to insignificant risk of changes in value.
u) Provisions
Provisions are recognized when Dufry has a present obligation (legal or construc-
tive) as a result of a past event, it is probable that Dufry will be required to settle
the obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognized as a provision is the best estimate at the end of the report-
ing period of the consideration required to settle the present obligation, taking into
account the risks and uncertainties surrounding the obligation. When a provision
is measured using the cash flows estimated to settle the present obligation, its
carrying amount is the present value of those cash flows (where the effect of the
time value of money is material).
When some or all of the economic benefits required to settle a provision are
expected to be recovered from a third party, a receivable is recognized as an asset
if it is virtually certain that the reimbursement will be received and the amount of
the receivable can be measured reliably.
Contingent liabilities acquired in a business combination
Contingent liabilities acquired in a business combination are initially measured at
fair value at the acquisition date. At the end of subsequent reporting periods, such
contingent liabilities are measured at the higher of the amount that would be
recognized in accordance with IAS 37 Provisions, contingent liabilities and contin-
gent assets and the amount initially recognized less cumulative amortization
recognized in accordance with IFRS 15 Revenue.
Onerous contracts
Present obligations arising under onerous contracts are measured and recognized
as provisions. An onerous contract is considered to exist if Dufry has a contract
under which the unavoidable costs of meeting the obligations under the contract
exceed the economic benefits expected to be received from the contract.
127 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
Restructurings
A restructuring provision is recognized when Dufry has developed a detailed formal
plan for the restructuring and has raised a valid expectation in those affected that
it will carry out the restructuring by starting to implement the plan or announcing
its main features to those affected by it. The measurement of a restructuring pro-
vision includes only the direct expenditures arising from the restructuring, which
are those amounts that are both necessarily entailed by the restructuring and not
associated with the ongoing activities of the entity.
Lawsuits and duties
A lawsuits and duties provision is recognized to cover uncertainties dependant on
the outcome of ongoing lawsuits in relation with taxes or duties.
v) Investments and other financial assets
(i) Classification
From January 1, 2018, the group classifies its financial assets in the following
measurement categories:
– those to be measured subsequently at fair value (either through OCI or through
profit or loss), and
– those to be measured at amortized cost.
The classification depends on the entity’s business model for managing the financial
assets and the contractual terms of the cash flows. For assets measured at fair
value, gains and losses will either be recorded in profit or loss or OCI. For
investments in equity instruments that are not held for trading, this will depend on
whether the group has made an irrevocable election at the time of initial recognition
to account for the equity investment at fair value through other comprehensive
income (FVOCI).
(ii) Recognition and derecognition
Regular purchases and sales of financial assets are recognized on trade-date, the
date on which the group commits to purchase or sell the asset. Financial assets
are derecognized when the rights to receive cash flows from the financial assets
have expired or have been transferred and the group has transferred substantially
all the risks and rewards of ownership.
(iii) Measurement
At initial recognition, the group measures a financial asset at its fair value plus, in
the case of a financial asset not at fair value through profit or loss (FVPL), trans-
action costs that are directly attributable to the acquisition of the financial asset.
Transaction costs of financial assets carried at FVPL are expensed in profit or loss.
Financial assets with embedded derivatives are considered in their entirety when
determining whether their cash flows are solely payment of principal and interest.
128 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
Debt instruments
Subsequent measurement of debt instruments depends on the group’s business
model for managing the asset and the cash flow characteristics of the asset. There
are three measurement categories into which the group classifies its debt
instruments:
– Amortized cost: Assets that are held for collection of contractual cash flows
where those cash flows represent solely payments of principal and interest are
measured at amortized cost. Interest income from these financial assets is
included in finance income using the effective interest rate method. Any gain
or loss arising on derecognition is recognized directly in profit or loss and
presented in the financial result together with foreign exchange gains and losses
or interest income and expenses. Impairment losses are presented in the other
operational result.
– FVOCI: Assets that are held for collection of contractual cash flows and for
selling the financial assets, where the asset’s cash flows represent solely
payments of principal and interest, are measured at FVOCI. Movements in the
carrying amount are taken through OCI, except for the recognition of impairment
gains or losses, interest income and foreign exchange gains and losses which
are recognized in profit or loss. When the financial asset is derecognized, the
cumulative gain or loss previously recognized in OCI is reclassified from equity
to profit or loss and recognized in other FX gains / (losses). Interest income from
these financial assets is included in interest income using the effective interest
rate method. Impairment expenses are presented in the other operational
result.
– FVPL: Assets that do not meet the criteria for amortized cost or FVOCI are
measured at FVPL. A gain or loss on a debt investment that is subsequently
measured at FVPL is recognized in profit or loss and presented as net in the
period in which it arises.
Equity instruments
The group subsequently measures all equity investments at fair value. Where the
group’s management has elected to present fair value gains and losses on equity
investments in OCI, there is no subsequent reclassification of fair value gains and
losses to profit or loss following the derecognition of the investment. Dividends
from such investments continue to be recognized in profit or loss as other income
when the group’s right to receive payments is established.
Changes in the fair value of financial assets at FVPL are recognized in the financial
result in the statement of profit or loss as applicable.
(iv) Impairment of financial assets
From January 1, 2018, the group assesses on a forward looking basis the expected
credit losses associated with its debt instruments carried at amortized cost and
FVOCI. The impairment methodology applied depends on whether there has been
a significant increase in credit risk. For trade receivables, receivables for refund
from suppliers and related services the group applies the simplified approach which
requires expected lifetime losses to be recognized from initial recognition of the
receivables, see note 39 for further details.
129 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
(v) Trade, other accounts receivable and cash and cash equivalents
Trade and other receivables (including credit cards receivables, other accounts
receivable, cash and cash equivalents) are measured at amortized cost using the
effective interest method, less any impairment.
(vi) Accounting policies applied until December 31, 2017
The group has applied IFRS 9 by using the retrospective method, but has elected
not to restate comparative information. As a result, the comparative information
provided continues to be accounted for in accordance with the group’s previous
accounting policy.
Classification
Until December 31,2017, the group classified its financial assets in the following
categories:
– financial assets at fair value through profit or loss,
– loans and receivables,
– held-to-maturity investments (not applicable to Dufry at this date), and
– available-for-sale financial assets (not applicable to Dufry at this date).
The classification depended on the purpose for which the investments were
acquired. Management determined the classification of its investments at initial
recognition. There were no reclassifications between categories during 2017.
Subsequent measurement
The measurement at initial recognition did not change on adoption of IFRS 9, see
description above. Subsequent to the initial recognition, loans and receivables were
carried at amortized cost using the effective interest method.
Financial assets at FVPL were subsequently carried at fair value. Gains or losses
arising from changes in the fair value were recognized in income statement within
the financial result. Details on how the fair value of financial instruments is deter-
mined are disclosed in note 33.
Impairment of financial assets
The group assessed at the end of each reporting period whether there was objective
evidence that a financial asset or group of financial assets was impaired. A finan-
cial asset or a group of financial assets was impaired and impairment losses were
incurred only if there was objective evidence of impairment as a result of one or
more events that occurred after the initial recognition of the asset (a “loss event”)
and that loss event (or events) had an impact on the estimated future cash flows
of the financial asset or group of financial assets that could be reliably estimated.
Assets carried at amortized cost
For loans and receivables, the amount of the loss was measured as the difference
between the asset’s carrying amount and the present value of estimated future
cash flows (excluding future credit losses that had not been incurred) discounted
at the financial asset’s original effective interest rate. The carrying amount of the
asset was reduced and the amount of the loss was recognized in profit or loss. If
a loan had a variable interest rate, the discount rate for measuring any impairment
loss was the current effective interest rate determined under the contract. As
a practical expedient, the group could measure impairment on the basis of an
instrument’s fair value using an observable market price. If, in a subsequent period,
the amount of the impairment loss decreased and the decrease could be related
objectively to an event occurring after the impairment was recognized (such as an
130 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
improvement in the debtor’s credit rating), the reversal of the previously recognized
impairment loss was recognized in profit or loss. Impairment testing of trade
receivables is described in note 21.
w) Financial liabilities
i) Financial liabilities at FVPL
These are stated at fair value, with any gains or losses arising on re-measurement
recognized in the income statement. The net gain or loss recognized in the
consolidated income statement incorporates any interest paid on the financial
liability and is included in the financial result in the income statement. Fair value is
determined in the manner described in note 33.
ii) Other financial liabilities
Other financial liabilities (including borrowings) are subsequently measured at
amortized cost using the effective interest method.
iii) Derecognition of financial liabilities
Dufry derecognizes financial liabilities only when the obligations are discharged,
cancelled or expired. The difference between the carrying amount of the financial
liability derecognized and the consideration paid or payable is recognized in the
consolidated income statement.
iv) Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported
in the consolidated statement of financial position if there is a currently enforce-
able legal right to offset the recognized amounts and there is an intention to settle
on a net basis, to realize the assets and settle the liabilities simultaneously (see
note 27.1).
x) Derivatives and hedging activities
Derivatives are initially recognized at fair value on the date a derivative contract is
entered into and are subsequently remeasured to their fair value at the end of each
reporting period. The accounting for subsequent changes in fair value depends on
whether the derivative is designated as a hedging instrument, and if so, the nature
of the item being hedged. The group designates certain derivatives as either:
– hedges of the fair value of recognized assets or liabilities or a firm commitment
(fair value hedges)
– hedges of a particular risk associated with the cash flows of recognized assets
and liabilities and highly probable forecast transactions (cash flow hedges), or
– hedges of a net investment in a foreign operation (net investment hedges).
At inception of the hedge relationship, the group documents the economic rela-
tionship between hedging instruments and hedged items including whether changes
in the cash flows of the hedging instruments are expected to offset changes in the
cash flows of hedged items. The group documents its risk management objective
and strategy for undertaking its hedge transactions. The fair values of derivative
financial instruments designated in hedge relationships are disclosed in note 33.
Movements in the hedging reserve in shareholders’ equity are shown in note 23.3.
The full fair value of a hedging derivative is classified as a non-current asset or
liability when the remaining maturity of the hedged item is more than 12 months;
it is classified as a current asset or liability when the remaining maturity of the
hedged item is less than 12 months. Trading derivatives are classified as a current
asset or liability.
131 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
Cash flow hedges that qualify for hedge accounting
The effective portion of changes in the fair value of derivatives that are designated
and qualify as cash flow hedges is recognized in the cash flow hedge reserve within
OCI. The gain or loss relating to the ineffective portion is recognized immediately
in profit or loss, within other gains / (losses).
When option contracts are used to hedge forecast transactions, the group desig-
nates only the intrinsic value of the options as the hedging instrument. Until
December 31, 2017, the group classified foreign currency options as held-for-
trading derivatives and accounted for them at FVPL.
Gains or losses relating to the effective portion of the change in intrinsic value of
the options are recognized in the cash flow hedge reserve within OCI. The changes
in the time value of the options that relate to the hedged item (‘aligned time value’)
are recognized within OCI. When forward contracts are used to hedge forecast
transactions, the group generally designates only the change in fair value of the
forward contract related to the spot component as the hedging instrument. Gains
or losses relating to the effective portion of the change in the spot component of
the forward contracts are recognized in the cash flow hedge reserve within equity.
The change in the forward element of the contract that relates to the hedged item
(‘aligned forward element’) is recognized within OCI. In some cases, the entity may
designate the full change in fair value of the forward contract (including forward
points) as the hedging instrument. In such cases, the gains or losses relating to the
effective portion of the change in fair value of the entire forward contract are
recognized in the cash flow hedge reserve.
Amounts accumulated in equity are reclassified in the periods when the hedged
item affects profit or loss, as follows:
– Where the hedged item subsequently results in the recognition of a non-financial
asset (such as inventory), both the deferred hedging gains and losses and the
deferred time value of the option contracts or deferred forward points, if any,
are included within the initial cost of the asset. The deferred amounts are
ultimately recognised in profit or loss as the hedged item affects profit or loss
(for example through cost of sales).
– The gain or loss relating to the effective portion of the interest rate swaps
hedging variable rate borrowings is recognised in profit or loss within finance
cost at the same time as the interest expense on the hedged borrowings.
When a hedging instrument expires, or is sold or terminated, or when a hedge no
longer meets the criteria for hedge accounting, any cumulative deferred gain or
loss and deferred costs of hedging in equity at that time remains in equity until the
forecast transaction occurs, resulting in the recognition of a non-financial asset
such as inventory. When the forecast transaction is no longer expected to occur,
the cumulative gain or loss and deferred costs of hedging that were reported in
equity are immediately reclassified to profit or loss.
132 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
Net investment hedges
Hedges of net investments in foreign operations are accounted for similarly to cash
flow hedges. Any gain or loss on the hedging instrument relating to the effective
portion of the hedge is recognised in other comprehensive income and accumulated
in reserves in equity. The gain or loss relating to the ineffective portion is recognised
immediately in profit or loss within other gains / (losses). Gains and losses accumu-
lated in equity are reclassified to profit or loss when the foreign operation is
partially disposed of or sold. See notes 26.1 and 26.2 for further details.
Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge accounting. Changes in
the fair value of any derivative instrument that does not qualify for hedge account-
ing are recognized immediately in profit or loss and are included in other
gains / (losses).
Further details of derivative financial instruments are disclosed in note 34.
133 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
2.5 CHANGES IN ACCOUNTING POLICY AND DISCLOSURES
New and amended standards and interpretations
The accounting policies adopted are consistent with those of the previous finan-
cial year, except for the revised Standards and the Interpretations adopted in these
financial statements (effective January 1, 2018). The impact is disclosed in note 42.
IFRS 9
Financial Instruments
IFRS 9 addresses the classification, measurement and derecognition of financial
assets and financial liabilities, introduces new rules for hedge accounting and a new
impairment model for financial assets.
Phase 1: Classification and measurement – determines how financial assets and
financial liabilities are accounted for and measured on an ongoing basis.
At January 1, 2018, the Group had no financial assets classified as available for
sale, held-to-maturity or fair value through OCI (FVOCI). The financial assets and
liabilities which are classified as fair value through profit or loss (FVPL) meet the
criteria for this category as these do not include any non-derivative components.
Hence there have not been any change to the accounting classification for Dufry’s
assets and liabilities.
Phase 2: Impairment – a new single expected loss impairment model is introduced
that will require more timely recognition of expected credit losses.
The new impairment model requires the recognition of impairment provisions based
on expected credit losses (ECL) rather than only incurred credit losses as it was
the case under IAS 39. It applies to financial assets classified at amortized cost,
debt instruments measured at FVOCI, contract assets under IFRS 15 Revenue from
Contracts with Customers, lease receivables, loan commitments and certain
financial guarantee contracts. Based on the assessments, no significant change in
the allowances has been identified, as the company has measured the credit risk
in the past based on expected future losses.
Phase 3: Hedge accounting – the new model aligns the accounting treatment with
risk management activities. Users of the financial statements will be provided with
better information about risk management and the effect of hedge accounting on
the financial statements.
Based on IFRS 9, more hedge relationships might be eligible for hedge accounting,
as the standard introduces a more principles-based approach. The Group has con-
firmed that its current hedge relationships qualify as continuing hedges upon the
adoption of IFRS 9. In addition, the Group started to designate the intrinsic value
of foreign currency option contracts as hedging instruments going forward, which
until December 31, 2017 have been accounted as derivatives at FVPL. Changes in
the fair value of foreign exchange forward contracts attributable to forward points,
and in the time value of the option contracts, will in this case be deferred in new
costs of hedging reserve OCI. Thereafter, the deferred amounts will be recycled
against the related hedged transaction when it occurs.
The Group has not utilized hedges in relation to changes in the fair value of foreign
exchange forward contracts attributable to forward points at December 31, 2017.
134 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
In 2018, Dufry’s disclosures about financial instruments expanded, commenting
about changes in nature and extent.
Dufry did not identify any cases where the new classifications and measurements
of financial assets and financial liabilities as introduced by IFRS 9 had any material
impact on the current financial statements. The valuation and presentation of
hedges are aligned with the requirements of IFRS 9. Furthermore, the allowances
for trade receivables and receivables for advertising services are not expected to
increase due to the adoption of IFRS 9.
IFRS 15 – Revenue from contracts with customers
IFRS 15, revenue from contracts with customers deals with revenue recognition
and establishes principles for reporting useful information to users of financial
statements about the nature, amount, timing and uncertainty of revenue and cash
flows arising from an entity’s contracts with customers. Revenue is recognized
when a customer obtains control of goods or services and thus has the ability to
direct the use and obtain the benefits from the goods or services.
The standard replaces IAS 18 Revenue and IAS 11 Construction contracts and
related interpretations. Dufry has analyzed the impact of the standard and has not
identified any need for material changes to the current revenue recognition
approach.
Dufry considered the following aspects:
(a) Net Sales
The Group recognizes net sales, and the related cost of goods sold at point in time,
when it sells and hands over directly at the shops to the traveler consumables or
fashion products manufactured by third parties. The sale has to be settled by cash
on delivery. Net sales are presented net of customary discounts or sales taxes.
(b) Advertising income
The Group’s advertising income is resulting from several distinctive marketing
support activities, not affecting the retail price, performed by Dufry after having
been developed and coordinated together with our suppliers. The income is rec-
ognized in the period the advertising is performed. The settlement will be based on
contractual terms. Usually Dufry is not entitled to offset the income with trade
payables related with the same supplier. An allowance on the advertising income
is recognized to reflect the risks in relation with the final achievements of incentives
based on thresholds, to be confirmed only after the end of the program, as well as
other uncertainties.
There has been no impact on retained earnings as of January 1, 2018 after the
adoption of IFRS 15.
Annual Improvements – IAS 28 – Investments in Associates and Joint Ventures
Clarification that the election to measure at fair value through profit or loss is
available on an investment-by-investment basis, upon initial recognition.
135 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
3.
CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES
OF ESTIMATION UNCERTAINTY
The preparation of Dufry’s financial statements requires management to make
judgments, estimates and assumptions that affect the reported amounts of income,
expenses, assets and liabilities, and the disclosure of contingent liabilities, at the
reporting date.
KEY SOURCES OF ESTIMATION UNCERTAINTY
The key assumptions concerning the future and other key sources of estimation
include uncertainties at the reporting date, which may have a significant risk of
causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial periods, are discussed below.
Concession rights
Concession rights acquired in a business combination are measured at fair value
as at the date of acquisition. The useful lives of operating concessions are assessed
to be either finite or indefinite based on individual circumstances and are considering
extensions and renewals. The useful lives of operating concessions are reviewed
annually to determine whether the indefinite useful life assessment for those
concessions continues to be sustainable.
Impairment tests assets
Dufry annually tests the intangible assets with indefinite useful lives and assesses
those tangible or intangible assets with finite lives for impairment indications.
Where required, the company performs impairments test which are based on
the discounted value models of future cash flows. The underlying calculation
requires the use of estimates. The comments and assumptions used are disclosed
in note 17.1.2.
Onerous contracts
Some of the long-term concession agreements described above include clauses
to prevent early termination, such as obligations to fulfill guaranteed minimal pay-
ments during the full term of the agreement. The conditions for an onerous
contract will be met, when such a contract presents a non-profitable outlook. In
this event, a provision based on the present value of the unavoidable future negative
cash flows expected by the management is established. The unavoidable costs are
the lower of the costs of fulfilling it and any compensation or penalties arising from
failure to fulfil it. Further details are given in note 30.
Brands and goodwill
Dufry tests these items annually for impairment. The underlying calculation
requires the use of estimates. The comments and assumptions used are disclosed
in notes 17.1.1 and17.1.4.
Income taxes
Dufry is subject to income taxes in numerous jurisdictions. Significant judgment is
required in determining the worldwide provision for income taxes. There are many
transactions and calculations for which the ultimate tax assessment is uncertain.
Dufry recognizes liabilities for tax audit issues based on estimates of whether
additional taxes will be payable. Where the final tax outcome is different from the
amounts that were initially recorded, such differences will impact the income tax
or deferred tax provisions in the period in which such assessment is made. Further
details are given in notes 14 and 29.
136 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
Deferred tax assets
Deferred tax assets are recognized for unused tax losses and deductible temporary
differences to the extent that it is probable that taxable profit will be available
against which the losses can be utilized. Management judgment is required to
determine the amount of deferred tax assets that can be recognized, based upon
the likely timing and level of future taxable profits. Further details are given in note 29.
Provisions
Management makes assumptions in relation to the expected outcome and cash
outflows based on the development of each individual case. Further details are
given in note 30.
Share-based payments
Dufry measures the cost of equity settled transactions with employees by refer-
ence to the fair value of the equity instruments at the grant date. Estimating such
fair values require determining the most appropriate valuation model for a grant
of equity instruments, which depends on the terms and conditions of the grant, as
well as, the most appropriate inputs to the valuation model including the expected
probability that the triggering clauses will be met. The result will be the expected
quantity of shares to be assigned. The assumptions and models used are disclosed
in note 24.
Pension and other post-employment benefit obligations
The cost of defined benefit pension plans is determined using actuarial valuations.
The actuarial valuation involves assumptions about discount rates, future salary
and pension increases as well as mortality rates. Due to the long-term nature of
these plans, such estimates are subject to significant uncertainty. Further details
are given in note 31.
Purchase price allocation
The determination of the fair values of the identifiable assets (especially the con-
cession rights) and the assumed liabilities (especially the contingent liabilities rec-
ognized as provisions), resulting from business combinations, is based on valuation
techniques such as the discounted cash flow model. Some of the inputs to this
model are partially based on assumptions and judgments and any changes thereof
would affect the reported values.
Consolidation of entities where Dufry has control,
but holds only minority voting rights
Dufry considers controlling certain entities, even when it holds less than the
majority of the voting rights, when it is exposed to or has the rights to variable
returns from the involvements with the investee and has the ability to affect those
returns through its power over the entity. These indicators are evaluated at the
time of first consolidation and reviewed when there are changes in the statutes or
composition of the executive board of these entities. Further details on non-
controlling interests are disclosed in notes 25 and 25.1 as well as the Annex “Most
important subsidiaries”.
137 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
4.
NEW AND REVISED STANDARDS AND INTERPRETATIONS ISSUED
BUT NOT YET ADOPTED / EFFECTIVE
The standards and interpretations described below are expected to have an impact
on Dufry’s financial position, performance, and / or disclosures. Dufry intends to
adopt these standards when they become effective.
IFRS 16 – Leases (effective January 1, 2019)
(The Group adopted the standard as of January 1, 2019 under modified retrospec-
tive approach)
IFRS 16 replaces IAS 17 and sets the principles for recognition, measurement,
presentation of leases, specifying the requirements for disclosures of lessees or
lessors more extensive than under IAS 17. The main difference on the Group’s
financial statements is that IFRS 16 introduces a single lessee accounting model
and requires lessee to recognize right-of-use assets and lease liabilities for lease
contracts.
To contain a lease, an agreement has to convey the right to control the use of an
identified asset throughout the period of use in exchange for consideration, so that
the customer has the right to obtain substantially all of the economic benefits from
the use of the identified asset; and direct the use of the identified asset (i. e. direct
how and for what purpose the asset is used). The lease term corresponds to the
non-cancellable period of each contract, except in cases where the Group is
reasonably certain of exercising renewal options contractually foreseen. Right-
of-use assets are capitalized at a value equivalent to the lease obligation at inception
and depreciated over the useful life of the asset, except for leases with a remaining
useful life of less than 12 months and leases of low value assets.
The lease liability represents the net present value of lease payments over the lease
term. The implied interest charge will be presented as interest expenses. Where
these lease agreements do not specify a discount rate and as these subsidiaries
are financed internally, Dufry uses a discount rate based on a risk free rates for
the respective currency and lease terms, increased by individual company spread.
The company made an assessment where the lease contains options to extend or
terminate the lease. Initial direct costs for contracts signed in the past will not be
recognized as part of the right-of-use asset at the date of initial application.
Short term leases with a duration of less than 12 months and low value leases, as
well as those lease elements, partially or totally not complying with the principles
of recognition defined by IFRS 16 also in future will be treated similarly to operating
leases i. e. recognized only through the income statement when accrued.
The standard will mainly affect the accounting of:
a) Concession agreements
Dufry enters into concession agreements with operators of airports, seaports,
railway stations etc. to operate retail shops which in substance can be considered
leases. These concessions lease agreements contain complex features, which can
include variable payment components e. g. based on sales, and minimal payments
(MAG), which again be fixed or variable depending on certain parameters. Such
payment features are often determined on the basis of the individual circum-
stances of the parties to the contract and are unique to the particular contract.
Management signs and renews on average more than 50 agreements every year
with a typical duration of 5 to 10 years. These agreements do not contain a residual
value guarantee. In some cases, parts of the lease obligations are secured with
138 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
139bank guarantees in case the Group would not fulfill its contractual commitments.Dufry will capitalize all elements of the lease contracts in accordance with IFRS 16 when at the commencement of the agreement such commitments are fixed in the respective contractual terms or these commitments depend on an index or rate that can be estimated reliably. Payments obligations that cannot be reasonably projected, if any, will continue to be presented as variable lease expense. Dufry has identified a number of agreements in its portfolio which are not fulfilling the prin-ciples of recognition defined by IFRS 16, i. e. they have minimal guaranteed payments based on non-predictable parameters or variables, such as actual number of pas-sengers or a percentage of previous year total lease payments, which will continue to be presented fully as operating lease expense. b) Building leasesRental agreements for offices or warehouse buildings will usually qualify under IFRS 16 capitalization rules. c) Other leasesDufry has also entered into many other lease agreements for e. g. vehicles, hard- or software, and other assets, which in accordance with IFRS 16 will qualify for capitalization of leases.On January 1, 2019 the Group adopted IFRS 16 and recognize about CHF 4.1 billion in right-of-use assets and CHF 4.1 billion lease liabilities. These amounts include the existing prepayment for leases and accrued lease expense. For 2018 all remain-ing things being equal, under the new standard, concession fees and premises expense would have been lower by approximately CHF 971 million mostly compen-sated by higher depreciation of right-of-use assets charges of CHF 964 million. In addition there would be interest expenses on lease obligations of CHF 155 million among the most important impacts on the income statement, resulting in an overall negative impact on the net earnings of CHF (77) million for the year 2018. The operating cash flow would have increased and the financing cash flow would decreased as the payment of the lease obligation of CHF 1,004 million would have been classified as cash flow used in financing activities.In 2018 Dufry recognized lease expenses of CHF 2,464.7 (2017: 2,322.9) million as concession fees and CHF 70.5 (2017: 63.7) million as premise expenses in the income statement.Unless specified in the respective contract, Dufry uses discount rates based on duration and currencies, of which the weighted average at January 1, 2019 was for CHF 1.50 %, for EUR 1.50 % and for USD 4.53 %Amendments that are considered to be insignificant from a current point of view:Sale or Contribution of Assets between an Investor and its Associate or Joint venture (proposed amendments to IFRS 10 and IAS 28) (effective date not yet defined by IASB)The gain or loss resulting from the sale to or contribution from an associate of assets that constitute a business as defined in IFRS 3 is recognized in full. The gain or loss resulting from the sale to or contribution from a subsidiary that does not constitute a business as defined in IFRS 3 (i. e. not a group of assets conforming a business) to an associate is recognized only to the extent of unrelated investors’ interests in the associate. 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
IFRIC Interpretation 23 – Uncertainty over Income Tax Treatments
(effective January 1, 2019)
The interpretation is to be applied to the determination of taxable profit (tax loss),
tax bases, unused tax losses, unused tax credits and tax rates, when there is
uncertainty over income tax treatments under IAS 12.
– An entity is required to use judgment to determine whether each tax treatment
should be considered independently or whether some tax treatments should be
considered together. The decision should be based on which approach provides
better predictions of the resolution of the uncertainty.
– An entity is to assume that a taxation authority with the right to examine any
amounts reported to it will examine those amounts and will have full knowledge
of all relevant information when doing so.
– An entity has to consider whether it is probable that the relevant authority will
accept each tax treatment, or group of tax treatments, that it used or plans to
use in its income tax filing. If the entity concludes that it is probable that
a particular tax treatment is accepted, the entity has to determine taxable profit
(tax loss), tax bases, unused tax losses, unused tax credits or tax rates consistently
with the tax treatment included in its income tax filings. If the entity concludes
that it is not probable that a particular tax treatment is accepted, the entity has
to use the most likely amount or the expected value of the tax treatment when
determining taxable profit (tax loss), tax bases, unused tax losses, unused tax
credits and tax rates. The decision should be based on which method provides
better predictions of the resolution of the uncertainty.
Amendments to IFRS 9 – Prepayment Features with Negative Compensation
(effective January 1, 2019)
This refers to the classification and measurement of a debt instrument if the
borrower was permitted to prepay the instrument at an amount less than the
unpaid principal and interest owed. The amendment to IFRS 9 enables companies
to measure some prepayable financial assets at amortized cost.
Amendments to IAS 28 – Long-term interests in Associates and Joint Ventures
(effective January 1, 2019)
Clarification that IFRS 9, including its impairment requirements, applies to long-
term interests in an associate or joint venture that form part of the net investment
in the associate or joint venture, if the equity method is not applied.
Amendments to IAS 19 – Plan Amendment, Curtailment or Settlement
(effective January 1, 2019)
– If a plan amendment, curtailment or settlement occurs, it is now mandatory that
the current service cost and the net interest for the period after the remeasure-
ment are determined using the assumptions used for the remeasurement.
– Clarification of the effect of a plan amendment, curtailment or settlement on
the requirements regarding the asset ceiling.
140 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
Annual Improvements to IFRS Standards 2015 – 2017 Cycle issued December 2017
(effective January 1, 2019)
Contain the following amendments to IFRSs:
– IFRS 3 Business Combinations and IFRS 11 Joint Arrangements
The amendments to IFRS 3 clarify that when an entity obtains control of a busi-
ness that is a joint operation, it remeasures previously held interests in that
business. The amendments to IFRS 11 clarify that when an entity obtains joint
control of a business that is a joint operation, the entity does not remeasure
previously held interests in that business.
– IAS 12 Income Taxes
The amendments clarify that the requirements in the former paragraph 52B (to
recognise the income tax consequences of dividends where the transactions or
events that generated distributable profits are recognised) apply to all income
tax consequences of dividends by moving the paragraph away from paragraph
52A that only deals with situations where there are different tax rates for
distributed and undistributed profits.
– IAS 23 Borrowing Costs
The amendments clarify that if any specific borrowing remains outstanding after
the related asset is ready for its intended use or sale, that borrowing becomes
part of the funds that an entity borrows generally when calculating the capital-
isation rate on general borrowings.
The Conceptual Framework for Financial Reporting (effective January 1, 2020)
The revised Conceptual Framework introduces the following main improvements:
New definitions
– Measurement
Concepts on measurement, including factors to be considered when selecting
a measurement basis
– Presentation and disclosure
Concepts on presentation and disclosure, including when to classify income
and expenses in other comprehensive income
– Derecognition
Guidance on when assets and liabilities are removed from financial statements
– Definitions
Definitions of an asset and a liability
Updated criteria
Recognition criteria for including assets and liabilities in financial statements
Clarified items
Prudence, Stewardship, Measurement, Uncertainty and Substance over form
Amendments to IFRS 3 – Business Combinations (effective January 1, 2020)
The amended definition of business assists in whether an acquisition made is of
a business or group of assets. It emphasis, that the output of a business is to
provide goods and services to customers.
141 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
1425. SEGMENT INFORMATIONDufry’s risks and returns are predominantly affected by the fact that Dufry oper-ates in different countries. Therefore, Dufry presents the segment information as it does internally to the Group Executive Committee, using geographical segments and the distribution centers as an additional segment.The annex “Most Important Subsidiaries” presents subsidiaries grouped by type of activity and divisions.TURNOVER2018 IN MILLIONS OF CHFwith external customerswith other divisionsTOTALEBITDA *FULL TIME EQUIVALENTSSouthern Europe and Africa 1,854.0 – 1,854.0 193.0 5,437 UK and Central Europe 1,974.2 – 1,974.2 243.4 4,384 Eastern Europe, Middle East, Asia and Australia 1,153.6 – 1,153.6 114.5 3,588 Latin America 1,617.0 – 1,617.0 103.7 6,899 North America 1,884.4 – 1,884.4 229.7 9,372 Distribution Centers 201.7 1,463.5 1,665.2 156.0 584 Total divisions 8,684.9 1,463.5 10,148.4 1,040.3 30,264 Eliminations–(1,463.5)(1,463.5)––Dufry 8,684.9 – 8,684.9 1,040.3 30,264 TURNOVER2017 IN MILLIONS OF CHFwith external customerswith other divisionsTOTALEBITDA *FULL TIME EQUIVALENTSSouthern Europe and Africa 1,857.8 – 1,857.8 240.6 5,338 UK and Central Europe 1 1,945.1 – 1,945.1 240.6 4,408 Eastern Europe, Middle East, Asia and Australia 1 1,011.4 – 1,011.4 95.9 3,387 Latin America 1,694.0 – 1,694.0 122.9 7,298 North America 1,771.5 – 1,771.5 194.7 8,894 Distribution Centers 97.6 1,114.1 1,211.7 112.4 554 Total divisions 8,377.4 1,114.1 9,491.5 1,007.1 29,879 Eliminations–(1,114.1)(1,114.1)––Dufry 8,377.4 – 8,377.4 1,007.1 29,879 * EBITDA is earnings before interest, taxes, depreciation, amortization, linearization and other operational result1 On January 1, 2018, Dufry assigned certain Russian and Central Asian operations from Division UK and Central Europe to Division Eastern Europe, Middle East, Asia, and Australia. The 2017 figures have been adjusted accordingly.Dufry generated 3.9 % (2017: 4.1 %) of its turnover with external customers in Switzerland (domicile). 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
143Financial Position and other disclosures31.12.2018 IN MILLIONS OF CHFTOTAL ASSETSTOTAL LIABILITIESINCOME TAX (EXPENSE) / INCOMECAPITAL EXPENDITURE PAIDDEPRECIATION AND AMORTIZATION OTHER NON-CASH ITEMS *Southern Europe and Africa 2,165.4 584.4 (24.0)(51.2)(119.7) 8.5 UK and Central Europe 2,091.7 515.8 (20.6)(40.8)(119.6) 6.0 Eastern Europe, Middle East, Asia and Australia 606.5 201.8 (3.1)(24.9)(41.2) 1.8 Latin America 1,419.6 306.7 (13.7)(47.9)(144.1) 11.7 North America 1,338.9 234.1 (3.2)(67.9)(126.2) 10.0 Distribution Centers 1,183.1 339.7 (8.0)(6.7)(2.3)(1.1)Total divisions 8,805.2 2,182.5 (72.6)(239.4)(553.1) 36.9 Unallocated positions 585.4 3,866.4 (26.2)(16.1)(18.8) 22.2 Dufry 9,390.6 6,048.9 (98.8)(255.5)(571.9) 59.1 31.12.2017 IN MILLIONS OF CHFTOTAL ASSETSTOTAL LIABILITIESINCOME TAX (EXPENSE) / INCOMECAPITAL EXPENDITURE PAIDDEPRECIATION AND AMORTIZATION OTHER NON-CASH ITEMS *Southern Europe and Africa 1 2,447.8 692.9 (28.2)(34.9)(138.0) 16.9 UK and Central Europe 2 2,298.7 566.0 (28.2)(27.2)(114.8) 1.4 Eastern Europe, Middle East, Asia and Australia 2 627.2 241.3 (0.2)(30.4)(59.9)(103.6)Latin America 1,786.7 376.6 5.5 (59.9)(144.7)(20.7)North America 1 1,438.5 232.6 (25.9)(86.7)(107.1) 12.1 Distribution Centers 1,014.4 270.8 (1.6)(0.5)(2.2) 13.4 Total divisions 9,613.3 2,380.2 (78.6)(239.6)(566.7)(80.5)Unallocated positions 377.5 4,254.4 (12.4)(46.4)(16.1) 55.2 Dufry 9,990.8 6,634.6 (91.0)(286.0)(582.8)(25.3)* Other non-cash items do not include the linearization of concession fees1 During 2018, the investment of an entity from Division Southern Europe and Africa have been sold to division North America. The 2017 figures have been adjusted accordingly.2 On January 1, 2018, Dufry assigned certain Russian and Central Asian operations from Division UK and Central Europe to Division Eastern Europe, Middle East, Asia, and Australia. The 2017 figures have been adjusted accordingly. 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
144Reconciliation of earningsIN MILLIONS OF CHF20182017EBITDA 1 1,040.3 1,007.1 Depreciation, amortization and impairment(571.9)(582.8)Linearization(47.7)(58.9)Other operational result(49.3) 53.3 Interest expenses(196.4)(259.6)Interest income 64.7 35.4 Foreign exchange gain / (loss)(5.5) 7.4 Earnings before taxes 234.2 201.9 1 EBITDA is earnings before interest, taxes, depreciation, amortization, linearization and other operational resultReconciliation of assetsIN MILLIONS OF CHF31.12.201831.12.2017Operating assets 8,805.2 9,613.3 Current assets of corporate and holding companies 1(175.3)(282.4)Non-current assets of corporate and holding companies 760.7 659.9 Total assets 9,390.6 9,990.8 1 Includes notional Cash Pool overdrafts at HeadquarterReconciliation of liabilitiesIN MILLIONS OF CHF31.12.201831.12.2017Operating liabilities 2,182.5 2,380.2 Financial debt of corporate and holding companies, short-term– 0.9 Financial debt of corporate and holding companies, long-term 3,754.0 4,153.7 Other non-segment liabilities 112.4 99.8 Total liabilities 6,048.9 6,634.6 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
1456. HUDSON IPOPrior to the completion of the secondary initial public offering, Dufry Interna-tional AG created Hudson Ltd, a fully owned subsidiary in Bermuda, to hold all the shares of Dufry America Holding, Inc. the parent entity of the Hudson Group (HG), Inc. in the USA and Canada, as well as The Nuance Group (Canada), Inc. the parent entity of WDFG Vancouver LP. All these operations comprise Dufry’s North America division. On January 31, 2018, the initial public offering (IPO) took place in which Dufry International AG offered 42.6 % or 39,417,765 Class A common shares of Hudson Ltd at a public offering price of USD 19.00 per share, adding up to a gross income of CHF 697.4 (USD 748.9) million. The underwriting discounts and commis-sions incurred were CHF 32.2 (USD 34.5) million, resulting in proceeds of CHF 665.2 (USD 714.4) million. The shares began trading on the New York Stock Exchange on February 1, 2018, under the ticker symbol “HUD”. Dufry used the proceeds mainly to reduce the bank debt. The gain of this transaction after transaction expenses amounted to CHF 439.5 million and will have no material income tax effect. After the IPO Dufry retained the control of Hudson Ltd, as the shares offered through the IPO represented less than 50 % of the total in terms of shares or voting rights. IN MILLIONS OF CHFUSDCHFInitial public offering proceeds748.9697.4Underwriting discounts and commissions(34.5)(32.2)Proceeds from sale714.4665.2Transaction cost for financial instruments(11.1)(10.3)IPO award Hudson (see note 24.2)(9.2)(9.0)Net proceeds694.1645.9Cost of sale of 42.6 % share of investment in Hudson–(206.4)Gain on sale of minority share in Hudson Ltd.–439.5The gain on sale of a minority share of a controlled entity is presented in equity. 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
1467. NET SALESNet sales by product categories:IN MILLIONS OF CHF20182017Perfumes and Cosmetics 2,694.6 2,637.8 Confectionery, Food and Catering 1,490.9 1,398.6 Wine and Spirits 1,311.4 1,280.9 Tobacco goods 995.0 917.1 Watches, Jewelry and Accessories 600.0 582.3 Fashion, Leather and Baggage 494.9 495.0 Electronics 186.1 244.5 Souvenirs 220.8 206.4 Literature and Publications 188.7 197.1 Other product categories 273.4 205.0 Total 8,455.8 8,164.7 Net sales by market sector:IN MILLIONS OF CHF20182017Duty-free 5,182.3 5,058.0 Duty-paid 3,273.5 3,106.7 Total 8,455.8 8,164.7 Net sales by channel:IN MILLIONS OF CHF20182017Airports 7,597.0 7,415.3 Border, downtown and hotel shops 275.3 276.3 Cruise liners and seaports 255.1 207.1 Railway stations and other 328.4 266.0 Total 8,455.8 8,164.7 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
1478. SELLING EXPENSES IN MILLIONS OF CHF20182017Concession fees and rents(2,464.7)(2,322.9)Credit card commissions(91.2)(84.8)Advertising and commission expenses(36.1)(32.6)Packaging materials(14.1)(15.1)Other selling expenses(19.3)(23.7)Selling expenses(2,625.4)(2,479.1)Concession and rental income 17.8 16.9 Commission income 1.9 2.1 Commercial services and other selling income 25.2 30.0 Selling income 44.9 49.0 Total(2,580.5)(2,430.1)Dufry pays concession fees to landlords for lease of shops at airports or other similar locations. Such fees are usually determined in proportion to sales or as a fee based on a criteria, such as passengers, square meters or other operating performance indicators. Note 4 explains changes in accounting policy as of January 1, 2019 in relation to these leases.9. PERSONNEL EXPENSES IN MILLIONS OF CHF20182017Salaries and wages(919.2)(889.4)Social security expenses(144.0)(142.9)Retirement benefits (20.2)(13.8)Other personnel expenses(91.8)(88.9)Total(1,175.2)(1,135.0)10. GENERAL EXPENSES IN MILLIONS OF CHF20182017Repairs, maintenance and utilities(84.7)(86.4)Premises(70.5)(63.7)Legal, consulting and audit fees(62.8)(58.3)IT expenses(47.1)(48.4)Office and administration(32.0)(33.7)Travel, car, entertainment and representation(33.0)(33.9)Franchise fees and commercial services(22.4)(23.6)PR and advertising(22.8)(17.2)Insurances(12.1)(11.0)Bank expenses(6.1)(7.3)Taxes, other than income taxes(10.0)(21.3)Total(403.5)(404.8) 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
14811. DEPRECIATION, AMORTIZATION AND IMPAIRMENT IN MILLIONS OF CHF20182017Depreciation(178.1)(160.3)Impairment 1(24.2) 1.4 Subtotal (note 16 Property, Plant and Equipment)(202.3)(158.9)Amortization(367.4)(359.2)Impairment 2(2.2)(64.7)Subtotal (note 17 Intangible Assets)(369.6)(423.9)Total(571.9)(582.8)1 In 2018, the Group has impaired leasehold improvements and furniture and fixtures in North America for CHF 14.5 million and Southern Europe and Africa for CHF 9.7 million.2 In 2017, after the annual impairment test of Dufry, the Group has partially impaired concession rights in Southern Europe and Africa for CHF 40.9 million, as the expected sales level used for the projection has not been materialized and concession rights in Asia, Middle East and Australia for the amount of CHF 25 million as Dufry has not been able to secure the extension of the contract.12. OTHER OPERATIONAL RESULTThis line includes non-recurring transactions, impairments of financial assets and changes in provisions.IN MILLIONS OF CHF20182017Sales taxes for past periods(11.5)(14.0)Consulting fees, expenses related to projects and start-up expenses(11.0)(10.7)Losses on sale of non-current assets(7.4)(8.4)Impairment of loans and other receivables(2.3)(6.4)Project-related costs (includes Hudson and WDF)(17.1)(6.1)Closing or restructuring of operations(7.6)(5.8)Other operating expenses(12.7)(16.1)Other operational expenses(69.6)(67.5)IN MILLIONS OF CHF20182017Release of long term provisions and payables 16.0 93.5 Past service cost adjustment pension fund– 22.0 Insurance – compensation for losses 1.2 1.8 Gain on sale of non-current assets 0.5 0.6 Recovery of write offs / release of allowances– 0.2 Other income 2.6 2.7 Other operational income 20.3 120.8 IN MILLIONS OF CHF20182017Other operational expenses(69.6)(67.5)Other operational income 20.3 120.8 Other operational result(49.3) 53.3 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
14913. INTEREST IN MILLIONS OF CHF20182017INCOME ON FINANCIAL ASSETSInterest income on short-term deposits 21.8 18.1 Other financial income 36.2 9.7 Interest income on financial assets 58.0 27.8 INCOME ON NON-FINANCIAL ASSETSInterest income 6.7 7.6 Total interest income 64.7 35.4 EXPENSES ON FINANCIAL LIABILITIESInterest expense(162.6)(173.2)of which bank interest(153.3)(166.1)of which bank commitment fees(4.9)(3.1)of which bank guarantees commission expense(3.0)(3.7)of which related to other financial liabilities(1.4)(0.3)Amortization / write off of arrangement fees and waiver fees(6.0)(33.9)Other financial expenses(24.7)(24.1)Interest expense on financial liabilities(193.3)(231.2)EXPENSES ON NON-FINANCIAL LIABILITIESInterest and other financial expenses (3.1)(28.4)Total interest (expense)(196.4)(259.6)14. INCOME TAXESINCOME TAX RECOGNIZED IN THE CONSOLIDATED INCOME STATEMENT IN MILLIONS OF CHF20182017Current income taxes(125.9)(120.2)of which corresponding to the current period(128.5)(120.3)of which adjustments recognized in relation to prior years 2.6 0.1 Deferred income taxes 27.1 29.2 of which related to the origination or reversal of temporary differences 18.3 69.3 of which adjustments recognized in relation to prior years 5.6 1.3 of which relates to foreign exchange movements 1(9.4)(0.3)of which adjustments due to change in tax rates 12.6 (41.1)Total(98.8)(91.0)1 In countries where Dufry pays taxes in another currency than the fuctional currency, deferred tax assets and liabilites are impacted by foreign exchange fluctuations between the functional and local currencies. These changes are included in the group’s tax expense line. 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
150IN MILLIONS OF CHF20182017Consolidated earnings before income tax (EBT) 234.2 201.9 Expected tax rate in %21.1 % 21.4 % Tax at the expected rate(49.4)(43.2)EFFECT OFIncome not subject to income tax 5.8 5.5 Different tax rates for subsidiaries in other jurisdictions 14.8 37.9 Effect of changes in tax rates on previously recognized deferred tax assets and liabilities 12.6 (41.1)Non-deductible expenses(11.3)(7.9)Net change of unrealized tax loss carry-forwards(52.9)(47.7)Non recoverable withholding taxes(12.0)(11.9)Minority interests 9.4 10.6 Adjustments recognized in relation to prior year 8.2 1.4 Foreign exchange movements on deferred tax balances 1(9.4)(0.3)Other items 2(14.6) 5.4 Total (98.8)(91.0)1 In countries where Dufry pays taxes in another currency than the fuctional currency, deferred tax assets and liabilites are impacted by foreign exchange fluctuations between the functional and local currencies. These changes are included in the group’s tax expense line.2 Other includes CHF 13.5 capital gain taxes resulting from internal restructuring in connection with the IPO of division 5 (Hudson).The expected tax rate in % approximates the average income tax rate of the coun-tries where the Group is active, weighted by the profitability of the respective operations. For 2018, the most important change in tax rate related to the reduction of the federal US corporate income tax rate. A gradual tax rate change of the Greek current income tax rate from currently 29 % to perspectively 25 % was enacted in December 2018, which resulted in a deferred tax income of CHF 11.6 millions. In December 2017, a significant decrease of the US federal income tax rate has been enacted, applicable for the year 2018 and onwards. The reduction in the U. S. federal corporate income tax rate from 35 % to 21 % resulted in a net downward adjustment of CHF 41.1 million in relation to deferred taxes.DEFERRED INCOME TAX RECOGNIZED IN OTHER COMPREHENSIVE INCOME / EQUITYIN MILLIONS OF CHF20182017RECOGNIZED IN OTHER COMPREHENSIVE INCOMEActuarial gains / (losses) on defined benefit plans(1.8)(1.0)Total(1.8)(1.0)RECOGNIZED IN EQUITYTax effect on share-based payments5.3(0.5)Total5.3(0.5)1 Includes CHF 1.3 million recognized as equity attributable to non-controlling interests. 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
15115. COMPONENTS OF OTHER COMPREHENSIVE INCOMEATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT2018 IN MILLIONS OF CHFEmployee benefit reserveHedging & revaluation reservesTranslation reservesRetained earningsTOTALNON-CON-TROLLING INTERESTSTOTAL EQUITYRemeasurement of post-employment benefits plans 10.6 ––– 10.6 – 10.6 Income tax effect(1.8)–––(1.8)–(1.8)Subtotal 8.8 ––– 8.8 – 8.8 Exchange differences on translating foreign operations––(76.0)–(76.0) 1.7 (74.3)Subtotal––(76.0)–(76.0) 1.7 (74.3)Net gain / (loss) on hedge of net investment in foreign operations–– 17.1 – 17.1 – 17.1 Subtotal–– 17.1 – 17.1 – 17.1 Changes in the fair value of equity investments at FVOCI–(0.3)––(0.3)–(0.3)Subtotal–(0.3)––(0.3)–(0.3)Share of other comprehensive income of associates–– 0.3 – 0.3 – 0.3 Subtotal–– 0.3 – 0.3 – 0.3 Other comprehensive income 8.8 (0.3)(58.6)–(50.1) 1.7 (48.4)ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT2017 IN MILLIONS OF CHFEmployee benefit re-serveHedging & revaluation reservesTranslation reservesRetained earningsTOTALNON-CON-TROLLING INTERESTSTOTAL EQUITYRemeasurement of post-employment benefits plans 10.8 –– 0.1 10.9 0.1 11.0 Income tax effect(1.0)–––(1.0)–(1.0)Subtotal 9.8 –– 0.1 9.9 0.1 10.0 Exchange differences on translating foreign operations––(70.1)–(70.1) 5.2 (64.9)Subtotal––(70.1)–(70.1) 5.2 (64.9)Net gain / (loss) on hedge of net investment in foreign operations–– 54.7 – 54.7 – 54.7 Subtotal–– 54.7 – 54.7 – 54.7 Changes in the fair value of interest rate swap held as cash flow hedges–(1.6)––(1.6)–(1.6)Income tax effect–––––––Subtotal–(1.6)––(1.6)–(1.6)Share of other comprehensive income of associates–– 0.3 – 0.3 – 0.3 Subtotal–– 0.3 – 0.3 – 0.3 Other comprehensive income 9.8 (1.6)(15.1) 0.1 (6.8) 5.3 (1.5) 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
15216. PROPERTY, PLANT AND EQUIPMENT 2018 IN MILLIONS OF CHFLEASEHOLD IMPROVE-MENTSBUILDINGS FURNITURE FIXTURESCOMPUTER HARDWAREVEHICLESWORK IN PROGRESSTOTALAT COSTBalance at January 1 569.2 43.3 439.2 71.4 8.4 58.6 1,190.1 Additions 48.2 0.6 24.4 12.6 1.1 111.1 198.0 Disposals(31.5)(4.5)(95.9)(41.9)(1.9)(0.8)(176.5)Reclassification within classes 48.4 12.0 35.5 8.5 0.1 (104.5)–Reclassification to intangible assets–––(2.7)––(2.7)Currency translation adjustments(6.6)(1.7)(7.2)(0.9)(0.1)(1.5)(18.0)Balance at December 31 627.7 49.7 396.0 47.0 7.6 62.9 1,190.9 ACCUMULATED DEPRECIATIONBalance at January 1(237.7)(15.6)(213.8)(40.7)(5.2)–(513.0)Additions (note 11)(84.3)(4.7)(74.5)(13.4)(1.2)–(178.1)Disposals 29.5 2.4 92.5 41.7 1.9 – 168.0 Reclassification within classes(1.5)– 1.5 ––––Reclassification to intangible assets––– 0.2 –– 0.2 Currency translation adjustments 3.0 0.5 4.6 0.4 0.1 – 8.6 Balance at December 31(291.0)(17.4)(189.7)(11.8)(4.4)–(514.3)IMPAIRMENTBalance at January 1(3.7)(0.2)(5.1)(0.2)––(9.2)Impairment(14.8)–(8.8)(0.6)––(24.2)Net impairment (note 11)(14.8)–(8.8)(0.6)––(24.2)Disposals 0.5 ––––– 0.5 Currency translation adjustments 0.4 – 0.2 ––– 0.6 Balance at December 31(17.6)(0.2)(13.7)(0.8)––(32.3)CARRYING AMOUNTAt December 31, 2018 319.1 32.1 192.6 34.4 3.2 62.9 644.3 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
153 2017 IN MILLIONS OF CHFLEASEHOLD IMPROVE-MENTSBUILDINGS FURNITURE FIXTURESCOMPUTER HARDWAREVEHICLESWORK IN PROGRESSTOTALAT COSTBalance at January 1 481.9 39.0 457.6 62.3 8.6 41.1 1,090.5 Additions 64.7 0.3 30.0 12.9 1.0 105.8 214.7 Disposals(47.5)(0.8)(34.3)(5.5)(1.1)(0.5)(89.7)Reclassification within classes 1 84.9 2.0 (2.6) 7.9 0.2 (87.8) 4.6 Reclassification to intangible assets(0.2)––(2.2)––(2.4)Currency translation adjustments(14.6) 2.8 (11.5)(4.0)(0.3)–(27.6)Balance at December 31 569.2 43.3 439.2 71.4 8.4 58.6 1,190.1 ACCUMULATED DEPRECIATIONBalance at January 1(209.0)(11.1)(192.1)(37.7)(5.3)–(455.2)Additions (note 11)(76.7)(3.7)(67.3)(11.5)(1.1)–(160.3)Disposals 43.8 – 29.5 5.3 1.1 – 79.7 Reclassification within classes(4.2)(0.1) 4.8 (0.5)–––Reclassification to intangible assets––– 0.1 –– 0.1 Currency translation adjustments 8.4 (0.7) 11.3 3.6 0.1 – 22.7 Balance at December 31(237.7)(15.6)(213.8)(40.7)(5.2)–(513.0)IMPAIRMENTBalance at January 1(0.6)(0.3)(5.1)–––(6.0)Impairment(2.9)–(0.2)(0.2)––(3.3)Reversal of impairment 0.3 0.1 4.1 0.1 0.1 – 4.7 Net impairment (note 11)(2.6) 0.1 3.9 (0.1) 0.1 – 1.4 Disposals 0.1 ––––– 0.1 Reclassification within classes 1(0.3)–(4.1)(0.1)(0.1)–(4.6)Currency translation adjustments(0.3)– 0.2 –––(0.1)Balance at December 31(3.7)(0.2)(5.1)(0.2)––(9.2)CARRYING AMOUNTAt December 31, 2017 327.8 27.5 220.3 30.5 3.2 58.6 667.9 1 In connection with the reversal of the onerous contract of Lenrianta LLC, assets for a value of CHF 4.6 millions have been reinstated.Cash flow used for purchase of property, plant and equipmentIN MILLIONS OF CHF20182017Payables for capital expenditure at the beginning of the period(36.8)(28.5)Additions of property, plant and equipment(198.0)(214.7)Payables for capital expenditure at the end of the period 32.7 36.8 Currency translation adjustments 0.4 1.1 Total Cash Flow(201.7)(205.3) 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
15417. INTANGIBLE ASSETSCONCESSION RIGHTS2018 IN MILLIONS OF CHFIndefinite livesFinite livesBRANDSOTHERTOTALGOODWILLAT COSTBalance at January 1 46.9 4,984.1 278.2 255.8 5,565.0 2,670.6 Additions (note 17.1.5)– 8.8 – 39.2 48.0 –Disposals–(2.1)–(12.0)(14.1)–Reclassification–(4.9)– 4.9 ––Reclassification from property, plant & equipment––– 2.7 2.7 –Currency translation adjustments(1.7)(108.9)(3.8)(1.3)(115.7)(67.5)Balance at December 31 45.2 4,877.0 274.4 289.3 5,485.9 2,603.1 ACCUMULATED AMORTIZATIONBalance at January 1–(1,408.4)(3.3)(147.6)(1,559.3)–Additions (note 11)–(331.7)–(35.7)(367.4)–Disposals– 2.0 – 8.6 10.6 –Reclassification from property, plant & equipment–––(0.2)(0.2)–Currency translation adjustments– 23.2 – 0.9 24.1 –Balance at December 31–(1,714.9)(3.3)(174.0)(1,892.2)–IMPAIRMENTBalance at January 1–(76.6)––(76.6)(1.6)Impairment–(2.2)––(2.2)–Net impairment (note 11)–(2.2)––(2.2)–Disposals – 0.1 –– 0.1 –Currency translation adjustments– 1.8 –– 1.8 –Balance at December 31–(76.9)––(76.9)(1.6)CARRYING AMOUNTAt December 31, 2018 45.2 3,085.2 271.1 115.3 3,516.8 2,601.5 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
155CONCESSION RIGHTS2017 IN MILLIONS OF CHFIndefinite livesFinite livesBRANDSOTHERTOTALGOODWILLAT COSTBalance at January 1 42.9 4,883.2 269.7 207.1 5,402.9 2,615.3 Additions (note 17.1.5)– 23.4 – 57.8 81.2 –Disposals–(7.9)–(8.0)(15.9)–Reclassification from property, plant & equipment– 0.2 – 2.2 2.4 –Currency translation adjustments 4.0 85.2 8.5 (3.3) 94.4 55.3 Balance at December 31 46.9 4,984.1 278.2 255.8 5,565.0 2,670.6 ACCUMULATED DEPRECIATIONBalance at January 1–(1,092.3)(3.3)(123.0)(1,218.6)–Additions (note 11)–(325.4)–(33.8)(359.2)–Disposals– 7.8 – 7.7 15.5 –Reclassification– 0.3 –(0.3)––Reclassification from property, plant and equipment–––(0.1)(0.1)–Currency translation adjustments– 1.2 – 1.9 3.1 –Balance at December 31–(1,408.4)(3.3)(147.6)(1,559.3)–IMPAIRMENTBalance at January 1–(12.0)––(12.0)(1.0)Impairment–(65.9)––(65.9)(0.6)Reversal of impairment– 1.8 –– 1.8 –Net impairment (note 11)–(64.1)––(64.1)(0.6)Currency translation adjustments–(0.5)––(0.5)–Balance at December 31–(76.6)––(76.6)(1.6)CARRYING AMOUNTAt December 31, 2017 46.9 3,499.1 274.9 108.2 3,929.1 2,669.0 17.1 IMPAIRMENT TEST Concession rights with indefinite useful lives, as well as brands and goodwill are subject to impairment testing each year. Concession rights with finite useful lives are tested for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable. 17.1.1 Impairment test of goodwillFor the purpose of impairment testing, goodwill recognized from business combi-nations has been allocated to the following groups of cash generating units (CGU’s). These groups also reflect the reportable segments that are expected to benefit from the synergies of the business combinations:IN MILLIONS OF CHF31.12.201831.12.2017Southern Europe and Africa 501.5 522.9 UK and Central Europe 1,011.7 1,053.3 Eastern Europe, Middle East, Asia and Australia 87.5 85.7 Latin America 652.7 645.9 North America 306.1 319.2 Distribution Centers 42.0 42.0 Total carrying amount of goodwill 2,601.5 2,669.0 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
156The recoverable amounts of each cash generating unit (CGU) is determined based on value-in-use calculations which require the use of assumptions (see table with key assumptions below). The calculations use cash flow projections based on financial forecasts approved by the management covering a five-year period. Cash flows beyond the five-year period are extrapolated using a steady growth rate that does not exceed the long-term average growth rate for the respective market and are consistent with forecasted growth included in the travel related retail industry reports. The financial results of the distribution centers have been broken down by CGU and allocated accordingly.The key assumptions used for determining the recoverable amounts of goodwill are: POST TAX DISCOUNT RATESPRE TAX DISCOUNT RATESGROWTH RATES FOR NET SALESCASH GENERATING UNITS IN PERCENTAGE (%)201820172018201720182017Southern Europe and Africa 7.72 7.63 8.90 8.61 4.1 – 4.8 4.0 – 6.5 UK and Central Europe 5.55 5.79 6.14 6.34 3.1 – 4.9 1.7 – 3.4 Eastern Europe, Middle East, Asia and Australia 8.76 8.20 10.06 9.07 6.0 – 10.6 7.6 – 8.5 Latin America 9.11 9.24 10.14 9.95 4.3 – 6.3 8.0 – 12.6 North America 7.13 7.27 8.91 8.79 4.9 – 5.7 4.3 – 5.6 As basis for the calculation of these discount rates, the Group uses the weighted average cost of capital, based on the following risk free interest rates (derived from past 5 year average of prime 10-year bonds rates): CHF (0.21 %), EUR 0.30 %, USD 2.18 % (2017: CHF 0.04 %, EUR 0.64 %, USD 2.23 %)For the calculation of the discount rates and WACC (weighted average cost of capital), the Company used the following re-levered beta:20182017Beta factor0.970.85Sensitivity analysis to changes in assumptionsWith regard to the assessment of value-in-use, Dufry believes that no reasonably possible change (+ / – 1 %) in any of the above key assumptions would cause the recov erable amount of the concession rights to materially fall below the carrying amount, except for the goodwill allocated to the division Latin America, where an increase of the risk free rate by 1 %, would result in the carrying amount exceeding the recoverable amount by CHF 30.9 million.17.1.2 Impairment test of concession rights with indefinite useful lives Concession rights are tested for impairment purposes at company level, which represents the cash generating unit. At present, the concession rights with indef-inite useful lives of EUR 40.1 (2017: 40.1) million relate to our Italian operations where the concessions are granted by the non-controlling interest holder.The recoverable amounts of each cash generating unit (CGU) is determined based on value-in-use calculations which require the use of assumptions (see table with key assumptions below). The calculations use cash flow projections based on finan-cial forecasts approved by the management covering a five-year period. Cash flows beyond the five-year period are extrapolated using a steady growth rate that does not exceed the long-term average growth rate for the respective market and are consistent with forecasted growth included in the travel related retail industry 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
157 reports. The financial results of the distribution centers have been broken down by CGU and allocated accordingly.The key assumptions used for determining the recoverable amounts for Italy are:POST TAX DISCOUNT RATESPRE TAX DISCOUNT RATES GROWTH RATES FOR NET SALESCONCESSION RIGHTS IN PERCENTAGE (%)201820172018201720182017Italy 7.55 7.63 8.53 8.61 0.4 – 3.6 4.1 – 6.6 Sensitivity to changes in assumptionsManagement believes that any reasonably possible change (+ / – 1 %) in the key assumptions, on which the recoverable amounts are based, would not cause the respective recoverable amount to fall below the carrying amount. 17.1.3 Key assumptions used for value-in-use calculationsThe calculation of value-in-use is most sensitive to the following assumptions: –Sales growth –Growth rate used to extrapolate –Gross margin and suppliers prices –Concession fee levels –Discount ratesSales growth Sales growth is based on passenger statistics published by external experts, such as Air4cast or ACI (Airports Council International) to estimate the development of international passenger traffic per country where Dufry is active. For the budget year, the management also takes into consideration specific price inflation factors of the country, the cross currency effect and the expected potential changes to capture clients (penetration) per cash generating unit.Growth rates used to extrapolateFor the period after 5 years, Dufry has used a growth rate of 1.0 % – 2.0 % (2017: 2.0 % – 3.0 %) to extrapolate the cash flow projections.Gross marginsThe expected gross margins are based on average product assortment values estimated by the management for the budget 2019. These values are maintained over the planning period or where specific actions are planned and have been increased or decreased by up to 1 % over the 5 year planning horizon compared to the historical data. The gross margin is also affected by supplier’s prices. Estimates are obtained from global negotiations held with the main suppliers for the products and countries for which products are sourced, as well as data relating to specific commodities during the months before the budget. Concession fee levelsThese assumptions regarding the concession fee evolution are important and monitored in the specific market as well as the renewal conditions and competitor behavior where the CGU’s are active. For the CGU’s subject to a value-in-use calculation, the management expects the competitive position to remain stable over the budget period. 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
158Discount ratesSeveral factors affect the discount rates: –For the financial debt part, the rate is based on the average interest of the past 5 years of the respective ten-year government bond and is increased by the company’s effective bank spread and adjusted by the effective blended tax rate and country risk of the respective CGU. –For the equity part, a 5 % equity risk premium is added to the base rate commented above and adjusted by the Beta of Dufry’s peer group. The same methodology is used by the management to determine the discount rate used in discounted cash flow (DCF) valuations, which are a key instrument to assess business potential of new or additional investment proposals. 17.1.4 BrandsWhile at corporate level the Group is recognized under the name of Dufry, for retail purposes, it is applying several brands including, among others, Dufry, Hudson, World Duty Free, Nuance, Hellenic Duty Free, Regstaer, Colombian Emeralds, Duty Free Caribbean, do Brasil or Interbaires. The book values of these brand names remain at fair value recognized at acquisition and are subject to annual impairment testing. With regard to the assessment of value-in-use, Dufry believes that no reasonably possible change (+ / – 1 %) in any of the below key assumptions would cause that the recoverable amount falls materially below the carrying value of the respective brand name. The recoverable amount is determined using the Relief of Royalty method that con-siders a steady cash flow income from the royalty income after tax on projected sales for each brand. The following table indicates the key assumptions used for the valuation of the main brands:ROYALTY INCOME AFTER TAXPOST TAX DISCOUNT RATESGROWTH RATES FOR NET SALESBRAND NAMES IN PERCENTAGE (%)201820172018201720182017Dufry 0.31 0.34 7.36 7.36 0.1 – 4.7 6.3 – 13.3 Hudson News 1.10 1.11 7.16 7.26 4.5 – 5.7 3.1 – 5.6 Colombian Emeralds 1.70 1.75 7.88 7.92 (3.3) – 3.7 (5.0) – 4.5 Nuance 0.33 0.35 6.20 6.32 3.6 – 17.7 2.0 – 4.6 World Duty Free 0.32 0.40 6.19 6.28 3.6 – 5.4 2.0 – 5.7 These sales growth rates are in line with the assumptions used for the impairment test of goodwill. The discount rates represent the weighted average cost of capital (WACC) of the markets where the brand is generating sales.17.1.5 Cash flows used for purchase of intangible assetsIN MILLIONS OF CHF20182017Payables for capital expenditure at January 1(11.3)(11.7)Additions of intangible assets(48.0)(81.2)Payables for capital expenditure at December 31 4.7 11.3 Currency translation adjustments 0.8 0.9 Total Cash Flow(53.8)(80.7) 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
15918. INVESTMENTS IN ASSOCIATESThis includes mainly Lojas Francas de Portugal SA which operates duty-paid and duty-free shops in the airport of Lisbon, as well as other locations in Portugal.These investments are accounted for using the equity method.Summarized statement of financial positionIN MILLIONS OF CHFLOJAS FRANCAS DE PORTUGAL SAOTHER ASSOCIATES31.12.2018Cash and cash equivalents 10.0 3.5 13.5 Other current assets 22.2 11.7 33.9 Non-current assets 53.9 10.2 64.1 Other current liabilities(26.7)(12.0)(38.7)Non-current liabilities–(5.6)(5.6)Net assets 59.4 7.8 67.2 Proportion of Dufry’s ownership49 % Dufry’s share of the equity 29.1 6.5 35.6 IN MILLIONS OF CHFLOJAS FRANCAS DE PORTUGAL SAOTHER ASSOCIATES31.12.2017Cash and cash equivalents 7.1 4.2 11.3 Other current assets 24.3 11.3 35.6 Non-current assets 57.9 4.4 62.3 Other current liabilities(26.2)(12.6)(38.8)Non-current liabilities–(5.8)(5.8)Net assets 63.1 1.5 64.6 Proportion of Dufry’s ownership49 % Dufry’s share of the equity 30.9 3.0 33.9 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
160Summarized statement of comprehensive incomeIN MILLIONS OF CHFLOJAS FRANCAS DE PORTUGAL SAOTHER ASSOCIATES2018Turnover 286.4 50.8 337.2 Depreciation, amortization and impairment(7.6)(0.3)(7.9)Interest expenses–(0.4)(0.4)Income tax(4.1)–(4.1)Net earnings for the year 8.4 (1.4) 7.0 OTHER COMPREHENSIVE INCOMEItems to be reclassified to net income in subsequent periods(0.5) 1.1 0.6 Total other comprehensive income(0.5) 1.1 0.6 Total comprehensive income 7.9 (0.3) 7.6 DUFRY’S SHARE49 % Net earnings for the year 4.1 (0.3) 3.8 Total other comprehensive income(0.2) 0.5 0.3 Total comprehensive income 3.9 0.2 4.1 IN MILLIONS OF CHFLOJAS FRANCAS DE PORTUGAL SAOTHER ASSOCIATES2017Turnover 261.3 42.2 303.5 Depreciation, amortization and impairment(3.9)(17.7)(21.6)Income tax(3.9)–(3.9)Net earnings for the year 10.3 (19.2)(8.9)OTHER COMPREHENSIVE INCOMEItems to be reclassified to net income in subsequent periods 0.9 (0.3) 0.6 Total other comprehensive income 0.9 (0.3) 0.6 Total comprehensive income 11.2 (19.5)(8.3)DUFRY’S SHARE49 % Net earnings for the year 5.0 (6.6)(1.6)Total other comprehensive income 0.5 (0.2) 0.3 Total comprehensive income 5.5 (6.8)(1.3)The information above reflects the amounts presented in the financial statements of the associates (and not Dufry’s share of those amounts) adjusted for differences in accounting policies between the associates and Dufry. 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
161Reconciliation of the carrying amount of its investmentsIN MILLIONS OF CHFLOJAS FRANCAS DE PORTUGAL SAOTHER ASSOCIATES TOTALCarrying value at January 1, 2017 30.7 9.0 39.7 Contribution to new partnership– 1.0 1.0 Net earnings 5.0 (6.6)(1.6)Dividends received(4.9)–(4.9)Other comprehensive income 0.5 (0.2) 0.3 Currency translation adjustments(0.4)(0.2)(0.6)Carrying value at December 31, 2017 30.9 3.0 33.9 Additions– 3.3 3.3 Net earnings 4.1 (0.3) 3.8 Dividends received(5.7)–(5.7)Other comprehensive income(0.2) 0.5 0.3 Carrying value at December 31, 2018 29.1 6.5 35.6 19. OTHER NON-CURRENT ASSETS IN MILLIONS OF CHF31.12.201831.12.2017Guarantee deposits 102.1 109.9 Loans and contractual receivables 33.9 31.6 Prepayment for leases 120.9 190.2 Other 5.7 8.9 Subtotal 262.6 340.6 Allowances(3.0)(2.0)Total 259.6 338.6 MOVEMENT IN ALLOWANCES IN MILLIONS OF CHF20182017Balance at January 1(2.0)(2.7)Creation(2.6)(0.3)Utilized 1.6 0.8 Currency translation adjustments– 0.2 Balance at December 31(3.0)(2.0) 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
16220. INVENTORIES IN MILLIONS OF CHF31.12.201831.12.2017Purchased inventories at cost 1,126.7 1,074.6 Inventory allowance 1(64.0)(51.7)Total 1,062.7 1,022.9 1 The historical cost of all items impaired is CHF 116.4 (2017: 63.0) millionCASH FLOWS USED FOR INCREASE / FROM DECREASE IN INVENTORIES IN MILLIONS OF CHF20182017Balance at January 1 1,074.6 950.5 Balance at December 31 1,126.7 1,074.6 Gross change – at cost(52.1)(124.1)Change in unrealized profit on inventory 4.1 (4.5)Utilization of allowances 4.0 (0.4)Currency translation adjustments(13.0) 1.3 Cash Flow – (Increase) / decrease in inventories(57.0)(127.7)Cost of sales includes inventories written down to net realizable value and inventory losses of CHF 30.7 (2017: 26.8) million. 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
16321. TRADE AND CREDIT CARD RECEIVABLES IN MILLIONS OF CHF31.12.201831.12.2017Trade receivables 47.3 61.9 Credit card receivables 18.6 22.1 Gross 65.9 84.0 Allowances(3.3)(1.5)Net 62.6 82.5 AGING ANALYSIS OF TRADE RECEIVABLES IN MILLIONS OF CHF31.12.201831.12.2017Not due 19.7 29.5 OVERDUEUp to 30 days 8.3 18.7 31 to 60 days 7.4 5.1 61 to 90 days 1.4 1.5 More than 90 days 10.5 7.1 Total overdue 27.6 32.4 Trade receivables, gross 47.3 61.9 MOVEMENT IN ALLOWANCES IN MILLIONS OF CHF31.12.201831.12.2017Balance at January 1(1.5)(0.4)Creation(1.9)(1.0)Utilized 0.1 0.1 Currency translation adjustments–(0.2)Balance at December 31(3.3)(1.5) 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
16422. OTHER ACCOUNTS RECEIVABLE IN MILLIONS OF CHF31.12.201831.12.2017Advertising receivables 146.4 159.1 Services provided to suppliers 60.2 56.8 Loans receivable 4.8 5.7 Receivables from subtenants and business partners 4.8 4.9 Personnel receivables 2.1 4.2 Accounts receivables 218.3 230.7 Prepayments for concession fees and rents 108.7 98.3 Prepayments of sales and other taxes 109.4 120.6 Prepayments to suppliers 7.3 6.3 Prepayments, other 15.3 18.2 Prepayments 240.7 243.4 Guarantee deposits 5.9 16.0 Derivative financial assets 7.6 10.0 Accrued income 0.3 0.8 Other 19.5 25.1 Other receivables 33.3 51.9 Total 492.3 526.0 Allowances(18.2)(17.5)Total 474.1 508.5 MOVEMENT IN ALLOWANCES IN MILLIONS OF CHF31.12.201831.12.2017Balance at January 1(17.5)(9.5)Creation (3.9)(8.1)Released 1.7 –Utilized 1.3 –Currency translation adjustments 0.2 0.1 Balance at December 31(18.2)(17.5) 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
16523. EQUITYIN MILLIONS OF CHFNOTE31.12.201831.12.2017Attributable to equity holders of the parentShare capital23.0.1 269.4 269.4 Share premium23.0.1 4,060.6 4,259.3 Treasury shares24.3(520.8)(12.5)Employee benefit reserve23.2(18.1)(26.9)Hedging and revaluation reserves23.3(0.3)–Translation reserves23.4(324.1)(265.5)Retained earnings23.5(567.9)(1,093.7)Total 2,898.8 3,130.1 Non-controlling interests 442.9 226.1 Total Equity 3,341.7 3,356.2 23.0.1 Fully paid ordinary sharesIN MILLIONS OF CHFNUMBER OF SHARESSHARE CAPITALSHARE PREMIUMBalance at January 1, 2017 53,871,707 269.44,259.3Balance at December 31, 2017 53,871,707 269.44,259.3Distribution to shareholders––(198.7)Balance at December 31, 2018 53,871,707 269.44,060.6The ordinary general assembly approved a dividend of CHF 3.75 per share on May 3, 2018 and the company paid such dividend totalling CHF 198.7 million during the year ended December 31, 2018. No dividend was approved or paid in 2017.23.1 AUTHORIZED AND CONDITIONAL SHARE CAPITAL CONDITIONAL SHARE CAPITALNUMBER OF SHARESIN THOUSANDS OF CHFBalance at January 1, 2017 888,432 4,442 Balance at December 31, 2017 888,432 4,442 Balance at December 31, 2018 888,432 4,442 There was no authorized share capital outstanding in 2017 and 2018.23.2 EMPLOYEE BENEFITS RESERVEIN MILLIONS OF CHFATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENTNON-CONTROLLING INTERESTSTOTAL EQUITYBalance at January 1, 2017(36.7)–(36.7)Actuarial gains (losses) on defined benefit plans 10.8 – 10.8 Income tax(1.0)–(1.0)Balance at December 31, 2017(26.9)–(26.9)Actuarial gains (losses) on defined benefit plans 10.6 – 10.6 Income tax(1.8)–(1.8)Balance at December 31, 2018(18.1)–(18.1) 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
16623.3 HEDGING AND REVALUATION RESERVESIN MILLIONS OF CHFATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENTNON-CONTROLLING INTERESTSTOTAL EQUITYBalance at January 1, 2017 1.6 1.6 Gain / (loss) arising on changes in fair value of financial instruments:- Interest rate swaps entered for as cash flow hedges(1.6)–(1.6)Balance at December 31, 2017–––Gain / (loss) arising on changes in fair value of financial instruments:- Fair value changes of equity investments(0.3)–(0.3)Balance at December 31, 2018(0.3)(0.3)23.4 TRANSLATION RESERVESIN MILLIONS OF CHFATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENTNON-CONTROLLING INTERESTSTOTAL EQUITYBalance at January 1, 2017(250.4)(250.4)Exchange differences arising on translating the foreign operations(70.1) 5.3 (64.8)Net gain / (loss) on hedge of net investments in foreign operations (note 31) 54.7 – 54.7 Share of other comprehensive income of associates 0.3 – 0.3 Balance at December 31, 2017(265.5)(260.2)Exchange differences arising on translating the foreign operations(76.0) 1.7 (74.3)Net gain / (loss) on hedge of net investments in foreign operations (note 31) 17.1 – 17.1 Share of other comprehensive income of associates 0.3 – 0.3 Balance at December 31, 2018(324.1)(317.1)Foreign exchange gains and losses on financing instruments that are designated as hedging instruments for net investments in foreign operations are included in the translation reserves.23.5 RETAINED EARNINGSIN MILLIONS OF CHFATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENTNON-CONTROLLING INTERESTSTOTAL EQUITYBalance at January 1, 2017(1,166.2)Profit of the period 56.8 54.1 110.9 Other comprehensive income / (loss) 0.1 – 0.1 Dividends to non-controlling interests–(57.3)(57.3)Assignment of treasury shares(2.5)–(2.5)Share-based payments 22.5 –22.5Tax effect on equity transactions(0.5)–(0.5)Other changes in participation of non-controlling interests(3.9) 15.4 11.5Balance at December 31, 2017(1,093.7)Profit of the period 71.8 63.6 135.4 Dividends to non-controlling interests–(76.2)(76.2)Profit on disposal of treasury shares 0.2 – 0.2 Assignment of treasury shares(14.3)–(14.3)Share-based payments 26.2 5.0 31.2 Tax effect on equity transactions 4.0 1.3 5.3 Gain on sale of 42.6 % of Hudson Ltd 439.5 206.4 645.9 Other changes in participation of non-controlling interests(1.6) 15.0 13.4 Balance at December 31, 2018(567.9) 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
16724. SHARE-BASED PAYMENTS24.1 SHARE PLAN OF DUFRY AGOn December 12, 2018, Dufry granted to selected members of the senior manage-ment the award 2018 consisting of 136,443 PSU units. The PSU award 2018 has a contractual life of 29 months and will vest on May 1, 2021. At grant date the fair value of one PSU award 2018 represents the market value for one Dufry share at that date, i. e. CHF 91.48. As of December 31, 2018, no PSU award 2018 forfeited and 136,443 PSU award 2018 remain outstanding.On December 1, 2017, Dufry granted to the members of the Group Executive Com-mittee and selected members of the senior management the award 2017 consisting of 144,654 PSU units. The PSU award 2017 has a contractual life of 29 months and will vest on May 4, 2020. At grant date the fair value of one PSU award 2017 repre-sents the market value for one Dufry share at that date, i. e. CHF 140.69, adjusted by the probability that participants comply with the ongoing contractual relationship clause. As of December 31, 2018, no PSU award 2017 forfeited, so that 144,654 PSU award 2017 remain outstanding.Holders of one PSU award 2018 or award 2017 will have the right to receive free of charge up to two Dufry shares depending on the effective cumulative amount of cash earnings per share (Cash EPS) reached by Dufry during the grant year of award and the following two years compared with the target (2018: CHF 29.23, 2017: CHF 25.97). The Cash EPS equals the basic Earnings per Share adjusted for amor-tization of intangible assets identified during business combinations and non- recurring effects. If at vesting the cumulative adjusted Cash EPS is at target level, each PSU grants one share. If the cumulative adjusted Cash EPS is at 150 % of the target (maximum threshold) or above, each PSU grants 2 (2017: 1.5) shares at vesting, and if the adjusted Cash EPS is at 50 % of the target (minimum threshold) or below, no share will be granted at vesting. If the adjusted Cash EPS is between 50 % and 150 % of the target, the number of shares granted for each PSU will be allocated on a linear basis. Additionally, the allocation of shares is subject to an ongoing contractual relationship of the participant with Dufry throughout the vesting period. Holders of PSU are not entitled to vote or receive dividends, like shareholders do.On May 3, 2018, the PSU-award 2015 vested and the company assigned and deliv-ered free of charge 97,308 Dufry shares to the holders of these certificates. The performance of the PSU award 2015 was measured against the target Cash EPS of CHF 24.42 and achieved a pay-out ratio of 0.926 Dufry shares per PSU award 2015, i. e. a total of 97,308 shares. Holders of 82,536 RSU-award 2016 will have the right to receive free of charge one Dufry share per RSU subject to an ongoing contractual relationship with Dufry throughout the vesting period (Award 2016 until January 1, 2019). Holders of these rights are not entitled to vote or receive dividends, like shareholders do. Dufry has granted to selected members of the senior management the award 2016 consisting of 159,220 PSU units. The PSU award 2016 has a contractual life of 30 months and will vest on May 2, 2019. The performance of the PSU award 2016 was measured against the target Cash EPS of CHF 24.59, whereby the group achieved over the three-year period 2016 – 2018 a Cash EPS of CHF 24.72, so that in May 2019 the PSU award 2016 will vest and Dufry will assign 1.010 Dufry shares per PSU award 2016, i. e. a total of 160,812 shares. 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
16824.2 SHARE PLAN OF HUDSON LTD.On June 28, 2018, Hudson Ltd. granted an IPO-award in the form of restricted share units (RSU’s) to selected members of management. The IPO-award consists of 526,313 RSU’s in total. One RSU gives the holder the right to receive free of charge one Hudson Ltd. Class A common share. At grant date, the fair value of one RSU award represented the market value for one Hudson Ltd. share at that date, i. e. CHF 17.24 (USD 17.39). The RSUs were vested on the grant date and will be settled 50 % in first quarter 2019 and 50 % in first quarter 2020. Hudson expects to settle such awards by purchasing Class A common shares in the market or by issuing new shares. Hudson recognized the CHF 9.0 (USD 9.2 million) expenses related to this award through shareholders’ equity as these incentives were provided in connection with the successful listing of Hudson Ltd. As of December 31, 2018, no IPO-award forfeited, so that 526,313 RSU awards remain outstanding.On November 1, 2018, Hudson Ltd granted to selected members of its senior man-agement the Hudson- award 2018 consisting of 435,449 PSU’s units and 145,150 RSU’s units. Both plans have a contractual life of 30 months and will vest on May 1, 2021. At grant date the fair value of one PSU or RSU award 2018 represents the market value for one Hudson share at that date, i. e. CHF 20.85 (USD 21.06), adjusted by the probability that participants comply with the ongoing contractual relationship clauses As of December 31, 2018, no PSU or RSU Hudson-award 2018 forfeited, so that the remaining 435,449 PSU’s and 145,150 RSU Hudson-awards 2018 remain outstanding.The holders of one PSU award 2018 will have the right to receive free of charge up to two Hudson Ltd Class A common share based on the cumulative results achieved by the Hudson over a three year period on three performance metrics (PM) against the respective targets and thus as follows: 30 % on Sales of CHF 5,719 (USD 5,828) million, 30 % on EBITDA of CHF 694.8 (USD 708) million and 40 % on Cash EPS of CHF 2.17 (USD 2.22). Whereby the Cash EPS equals the basic Earnings per Share adjusted for amortization of intangible assets identified during business combina-tions and non-recurring effects. If at vesting the effective cumulative PM are at target level, each PSU grants one share. If a cumulative PM is at 150 % of the target (maximum threshold) or above, each PSU will grant at vesting the specific PM weight of two shares, and if a PM is at 50 % of the PM target (minimum threshold) or below, no share will be granted at vesting. If a PM is between 50 % and 150 % of the target, the pay-out ratio will be allocated on a linear basis. Finally, the number of shares granted for each PSU will be the sum of the three pay-out ratios. Additionally, the allocation of shares is subject to an ongoing contractual relationship of the par-ticipant with Hudson throughout the vesting period. Holders of PSU are not entitled to vote or receive dividends, like shareholders do. The plans consider different rights in case of early termination.The holders of one RSU award 2018 will have the right to receive free of charge one Hudson share subject to an ongoing contractual relationship with Hudson through-out the vesting period (Award 2018 until May 1, 2021). Holders of these rights are not entitled to vote or receive dividends, like shareholders do. The plans consider different rights in case of early termination.In 2018 Dufry recognized through profit and loss for all these share-based plans expenses for a total of CHF 22.2 (2017: CHF 22.3) million. 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
16924.3 TREASURY SHARESTreasury shares are valued at historical cost.TOTAL EQUITYNUMBER OF SHARESIN MILLIONS OF CHFBalance at January 1, 2017 100,169 (15.0)Assigned to holders of RSU-Awards (15,979) 2.5 Balance at December 31, 2017 84,190 (12.5)Share purchases 4,379,541 (549.8)Share sales(197,334) 27.2 Assigned to holders of PSU-Awards (97,308) 14.3 Balance at December 31, 2018 4,169,089 (520.8)24.4 EARNINGS PER SHARE24.4.1 Earnings per share attributable to equity holders of the parentBasicBasic earnings per share are calculated by dividing the net earnings attributable to equity holders of the parent by the weighted average number of shares out-standing during the year.IN MILLIONS OF CHF / QUANTITY20182017Net earnings attributable to equity holders of the parent 71.8 56.8 Weighted average number of ordinary shares outstanding 51,867,767 53,781,257 Basic earnings per share in CHF 1.38 1.06 DilutedDiluted earnings per share are calculated by dividing the net earnings attributable to equity holders of the parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.IN MILLIONS OF CHF / QUANTITY20182017Net earnings attributable to equity holders of the parent 71.8 56.8 Weighted average number of ordinary shares outstanding adjusted for the effect of dilution 52,156,991 53,979,059 Diluted earnings per share in CHF 1.38 1.05 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
17024.4.2 Earnings per share adjusted for amortization (cash eps) Cash EPS are calculated by dividing net earnings attributable to equity holders of the parent, adjusted by the amortization effect generated by the intangible assets identified during the purchase price allocations of past acquisitions through weighted average number of ordinary shares outstanding. With this Cash EPS, Dufry aims to facilitate the comparison at EPS level with other companies not having performed such acquisition activities.IN MILLIONS OF CHF / QUANTITY20182017Net earnings attributable to equity holders of the parent 71.8 56.8 ADJUSTED FORDufry’s share of the amortization in respect of acquisitions (excluding impairments) 307.4 311.1 Adjusted net earnings 379.2 367.9 Weighted average number of ordinary shares outstanding 51,867,767 53,781,257 Cash EPS 7.31 6.84 Deferred tax on above mentioned amortization in CHF per share(1.05)(1.00)Linearization of Spanish contracts in CHF per share 0.92 1.10 Impairment in respect of acquisitions 0.04 1.18 24.4.3 Weighted average number of ordinary sharesIN THOUSANDS20182017Outstanding shares 53,871,707 53,871,707 Less treasury shares(2,003,940)(90,450)Used for calculation of basic earnings per share 51,867,767 53,781,257 EFFECT OF DILUTIONPSU / RSU Awards 2016 – 2017 289,224 197,802 Used for calculation of earnings per share adjusted for the effect of dilution 52,156,991 53,979,059 For movements in shares see note 23 Equity, note 24 Share-based payment and Treasury shares. 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
17125. BREAKDOWN OF TRANSACTIONS WITH NON-CONTROLLING INTERESTS The following transactions have been recognized in equity attributable to non- controlling interests at fair value:IN MILLIONS OF CHF20182017Hudson Ltd 42.6 % disposed (see note 6) 206.4 –Dufry Cyprus Ltd 30 % acquired (holding of Russian entity) 0.3 –Dufry do Brasil DF Shop Ltda 13.05 % disposed 1– 20.0 Dufry Lojas Francas Ltd 6.95 % acquired (new NCI share 13.05 %) 1–(15.3)Dufry Aruba N. V. 20 % acquired 1– 0.4 Dufry Sharjah FZC 1 % disposed 1– 0.3 Nuance Group (India) Pvt. Ltd 50 % acquired 1–(1.3)Other non-controlling interests acquired–(0.2)Change in Dufry’s interest 206.7 3.9 Division North America, increase in share capital of several subsidiaries 15.1 10.4 Dufry Kenia Ltd share capital increase 1 0.2 –Dufry Thomas Julie Korea Co. Ltd share capital increase 0.2 –Dufry TCDC Ltd liquidation (Taiwan)(0.5)–Nuance Group (Bulgaria) AD liquidation(0.2)–Dufry Mozambique Ltda 75 %– 0.4 Dufry HWG Shopping Sdn Bhn (Malaysia) 51 %– 0.2 Other(0.1) 0.5 Total 221.4 15.4 1 No cash flow effects in current financial period25.1 INFORMATION ON COMPANIES WITH NON-CONTROLLING INTERESTSIn 2018, Dufry allocated CHF 63.6 (2017: 54.1) million of net earnings to non- cont-rolling interests (NCI). Within the Dufry Group, the net earnings allocated to non-controlling interests is predominantly related to Hudson sub-group, totaling CHF 46.3 (2017: 29.0) million. As of February 1, 2018 Dufry sold a minority interest in Hudson Ltd. (see note 6), and thereafter holds 57.4 % of the outstanding shares of Hudson Ltd., providing Dufry with 93.1 % of the voting rights as of December 31, 2018. Hudson Ltd. is a holding company incorporated in Hamilton, Bermuda which is the ultimate parent of various subsidiaries with NCI’s (none of which is individually material) in the United States and Canada and operates duty free and duty paid shops. Details about the name of these subsidiaries, location of primary operations, Hudson’s share in ownership and share capital of these subsidiaries, sorted by country of incorporation, have been disclosed in the list of most important subsidiaries within the financial statements. Airport authorities in the United States frequently require Dufry group companies to partner with local business partners based on Airport Concession Disadvan-taged Business Enterprise (“ACDBE”) regulation. Dufry also may partner with third parties to win new business opportunities and maintain existing ones. Consequently, Dufry’s business model contemplates the involvement of local partners. Net earnings from these operating subsidiaries attributed to Dufry and to non-controlling interests reflect the applicable ownership structure, and as a result net earnings and dividend payments attributable to non-controlling interests exclude expenses borne by Dufry which are not attributable to the local partners, such as acquisition related interest expenses, income taxes and amor-tization on fair value step-ups from acquisitions. 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
17231.12.2018 IN MILLIONS OF CHFHUDSON LTD. 1OTHER 2TOTALDividends paid to NCI (38.6) (31.5) (70.1)Current assets 457.1 613.2 1,070.3 of which cash and cash equivalents 229.8 109.3 339.1 Non-current assets 658.5 774.0 1,432.5 Current liabilities 265.8 756.3 1,022.1 of which financial liabilities 50.4 726.7 777.1 Non-current liabilities 523.7 185.2 708.9 of which financial liabilities 483.5 124.2 607.7 Net assets 326.1 445.7 771.8 Equity attributable to NCI 310.2 132.7 442.9 31.12.2017 IN MILLIONS OF CHFHUDSON LTD. 1OTHER 2TOTALDividends paid to NCI(33.9)(23.4)(57.3)Current assets 285.4 559.5 844.9 of which cash and cash equivalents 108.3 105.6 213.9 Non-current assets 231.9 660.7 892.6 Current liabilities 173.6 591.5 765.1 of which financial liabilities 159.0 574.1 733.1 Non-current liabilities 8.5 186.8 195.3 of which financial liabilities - 129.9 129.9 Net assets 335.2 441.9 777.1 NCI share of the equity 76.7 149.4 226.1 1 More information about Hudson Ltd. is available under www.hudsongroup.com2 Comprises subsidiaries worldwide, except US and Canada, with non-controlling interests (see list of most important subsidiaries within the financial statements) 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
17331.12.2018 IN MILLIONS OF CHFHUDSON LTD. 1OTHER 2TOTALTurnover 1,884.4 1,454.4 3,338.8 Depreciation, amortization and impairment (126.2) (80.2) (206.4)Interest income 2.5 2.4 4.9 Interest expense (30.4) (18.7) (49.1)Income tax (3.2) (19.8) (23.0)Net earnings 65.0 7.5 72.5 of which attributable to NCI 3 46.3 17.3 63.6 Other comprehensive income 10.0 (4.1) 5.9 Total comprehensive income 75.0 3.4 78.4 of which attributable to NCI 50.5 14.8 65.3 31.12.2017 IN MILLIONS OF CHFHUDSON LTD. 1OTHER 2TOTALTurnover 1,112.2 1,251.7 2,363.9 Depreciation, amortization and impairment (44.8) (52.3) (97.1)Interest income 0.2 6.2 6.4 Interest expense (0.3) (19.4) (19.7)Income tax 4.5 (3.9) 0.6 Net earnings 119.3 53.2 172.5 of which attributable to NCI 3 29.0 25.1 54.1 Other comprehensive income (13.1) 16.6 3.5 Total comprehensive income 106.2 69.8 176.0 of which attributable to NCI 26.4 33.0 59.4 1 More information about Hudson Ltd. is available under www.hudsongroup.com2 Comprises subsidiaries worldwide, except US and Canada, with non-controlling interests (see list of most important subsidiaries within the financial statements)3 The net earnings attributable to NCI represent the share the NCI have in the result of the respective subsidiaries prepared on local GAAP’s. The net earnings attributable to the Group for these operations represent the remaining part of the net earnings adjusted to comply with IFRS as well as adjusted with the fair value adjustments made at the time of acquisitions. 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
17426. FINANCIAL DEBT IN MILLIONS OF CHF31.12.201831.12.2017Bank debt (overdrafts) 9.4 10.8 Bank debt (loans) 44.7 72.9 Third party loans 3.9 3.1 Financial debt, short-term 58.0 86.8 Bank debt (loans) 2,083.6 2,420.1 Senior Notes 1,675.4 1,737.6 Third party loans 7.3 7.4 Financial debt, long-term 3,766.3 4,165.1 Total 3,824.3 4,251.9 OF WHICH AREBank debt 2,137.7 2,503.8 Senior Notes 1,675.4 1,737.6 Third party loans 11.2 10.5 BANK DEBT IN MILLIONS OF CHF31.12.201831.12.2017MAIN BANK DEBTS ARE DENOMINATED INUS Dollar 1,324.9 1,266.6 British Pound Sterling 563.6 316.10 Euro– 584.6 Swiss Franc 200.4 265.7 Subtotal 2,088.9 2,433.0 BANK DEBTS AT SUBSIDIARIES INDifferent currencies 60.0 87.7 Deferred bank arrangement fees (11.2)(16.9)Total 2,137.7 2,503.8 SENIOR NOTES IN MILLIONS OF CHF31.12.201831.12.2017Senior Notes denominated in Euro 1,688.8 1,753.8 Deferred arrangement fees(13.4)(16.2)Total 1,675.4 1,737.6 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
175DETAILED CREDIT FACILITIESDufry negotiates and manages its key credit facilities centrally. Minor credit lines at local level are kept for practical reasons.The bank credit agreements and the bank guarantee facility (see note 32) contain covenants and conditions customary to this type of financing. Dufry complied with the financial covenants and conditions contained in the bank credit agreements in 2017 and 2018 as well.Main bank credit facilitiesDRAWN AMOUNT IN CHFIN MILLIONS OFMATURITYCURRENCYCREDIT LIMIT IN LOCAL CURRENCY31.12.201831.12.2017Committed short-term financing03.11.2018EUR 500.0 – 584.6 Committed 5-year term loan (multi-currency)03.11.2022USD 700.0 687.0 682.0 Committed 5-year term loan (multi-currency)03.11.2022EUR 500.0 551.4 581.8 5 + 1 + 1-year revolving credit facility (multi-currency)03.11.2023EUR 1,300.0 700.5 584.6 Uncommited short-term facilitiesn. a.CHF – 150.0 –Total 2,088.9 2,433.0 On September 3, 2018, Dufry extended the 5 + 1 + 1 year revolving credit facility (multi-currency) by one year to November 3, 2023.Senior notesAMOUNT IN CHFIN MILLIONS OFMATURITYCOUPON RATECURRENCYNOMINAL IN LOCAL CURRENCY31.12.201831.12.2017Senior notes01.08.20234.50 % EUR 700.0 782.0 811.0 Senior notes15.10.20242.50 % EUR 800.0 893.4 926.6 Total 1,675.4 1,737.6 WEIGHTED AVERAGE INTEREST RATEThe borrowings under these credit facilities bear interest at a floating rate (EURIBOR or LIBOR) plus spread. Below are the overall weighted average notional interest rates on the main currencies as per December 31, 2018 of respective years:INTEREST RATE IN PERCENTAGE (%)20182017Average on USD 3.67 3.15 Average on CHF 1.40 1.57 Average on EUR 3.35 3.85 Average on GBP 2.02 2.50 Weighted Average Total 3.21 3.36 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
17626.1 HEDGE OF NET INVESTMENTS IN FOREIGN OPERATIONSThe following net debt is designated as hedge in net investment:AMOUNT IN HEDGING CURRENCYAMOUNT IN CHFIN MILLIONS OFCURRENCY31.12.201831.12.201731.12.201831.12.2017Dufry do Brasil and other subsidiaries 1USD 292.9 947.2 287.4 922.8 World Duty Free Group SAGBP – 50.0 – 65.8 Total 287.4 988.6 1 Alliance Inc., Interbaires SA, Navinten SA, Blaicor SA, International Operation & Services SA, Duty Free Ecuador SA and Regstaer Ltd.26.2 NET INVESTMENT IN FOREIGN OPERATIONSDufry granted below mentioned long-term loans to subsidiaries. These loans are considered as part of Dufry’s net investment in foreign operations, as settlement is neither planned nor likely to occur in the foreseeable future.AMOUNT IN HEDGING CURRENCYAMOUNT IN CHFIN MILLIONS OFCURRENCY31.12.201831.12.201731.12.201831.12.2017Nuance Group (Australia) Pty Ltd.AUD 121.8 121.8 84.3 92.6 Dufry America Holding Inc.USD 10.2 13.4 10.0 13.0 Nuance Group (Sverige) ABSEK 110.0 110.0 12.2 13.1 Dufry Duty Free (Nigeria) Ltd.USD 6.1 6.1 6.0 5.9 Total 112.5 124.6 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
17727. NET DEBTIN MILLIONS OF CHFCASH AND CASH EQUIVALENTSFINANCIAL DEBT CURRENTFINANCIAL DEBT NON-CURRENTNET DEBTBalance at January 1, 2018 565.0 86.8 4,165.1 3,686.9Cash flows from operating, financing and investing activities(7.0)–– 7.0 Transaction costs for financial instruments––(1.7)(1.7)Proceeds from bank loans, senior notes and 3rd party loan– 2.8 161.0 163.8 Repayments of bank loans and senior notes–(41.4)(436.8)(478.2)Cash flow(7.0)(38.6)(277.5)(309.1)Foreign exchange adjustments(19.8) 9.8 (131.1)(101.5)Arrangement fees amortization–– 9.8 9.8 Other non-cash movements–– 9.8 9.8 Balance at December 31, 2018 538.2 58.0 3,766.3 3,286.1 IN MILLIONS OF CHFCASH AND CASH EQUIVALENTSFINANCIAL DEBT CURRENTFINANCIAL DEBT NON-CURRENTNET DEBTBalance at January 1, 2017 450.8 127.3 4,073.9 3,750.4 Cash flows from operating, financing and investing activities 56.4 ––(56.4)Transaction costs for financial instruments––(26.9)(26.9)Proceeds from loans, senior notes and 3rd party loan– 30.2 3,972.5 4,002.7 Repayments of bank loans and senior notes 1–(68.8)(4,029.1)(4,097.9)Cash flow 56.4 (38.6)(83.5)(178.5)Foreign exchange adjustments 1 57.8 (1.9) 139.6 79.9 Fair value adjustments–– 0.7 0.7 Arrangement fees amortization–– 34.4 34.4 Other non-cash movements–– 35.1 35.1 Balance at December 31, 2017 565.0 86.8 4,165.1 3,686.9 1 See comments about 2017 restated figures in note 2.327.1 OFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIESDufry’s notional cash pool is operated by a major finance institute. The respective balances at the end of the period have been set-off as follows, based on enforceable master netting agreement:IN MILLIONS OF CHFBALANCE BEFORE GLOBAL POOLINGSET-OFFNET BALANCE 31.12.2018Cash and cash equivalents 1,440.6 (902.4) 538.2 Financial debt, short-term 960.4 (902.4) 58.0 31.12.2017Cash and cash equivalents 1,243.7 (678.7) 565.0 Financial debt, short-term 765.5 (678.7) 86.8 27.2 LEGAL RESTRICTIONS ON MONEY TRANSFERCash and cash equivalents at the end of the reporting period include CHF 58.4 (2017: 46.6) million held by subsidiaries operating in countries with exchange controls or other legal restrictions on money transfer. 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
17828. OTHER LIABILITIES IN MILLIONS OF CHF31.12.201831.12.2017Accrued lease expense 210.2 205.7 Concession fee payables 184.8 180.1 Personnel payables 155.1 168.9 Other service related vendors 178.2 196.8 Sales and other tax liabilities 72.7 123.0 Payables for capital expenditure 37.4 48.1 Interest payables 23.7 26.2 Advertising payables– 15.0 Other payables 60.8 37.9 Total 922.9 1,001.7 THEREOFCurrent liabilities 860.1 888.8 Non-current liabilities 62.8 112.9 Total 922.9 1,001.7 29. DEFERRED TAX ASSETS AND LIABILITIESDefered tax assest or liabilities arising from the following positions:IN MILLIONS OF CHF31.12.201831.12.2017DEFERRED TAX ASSETSInventories 15.3 18.6 Property, plant and equipment 28.3 55.0 Intangible assets 33.2 29.1 Provisions and other payables 41.6 32.1 Tax loss carry-forward 96.9 128.9 Other 23.4 15.0 Total 238.7 278.7 DEFERRED TAX LIABILITIESProperty, plant and equipment(14.1)(44.5)Intangible assets(497.7)(561.4)Provisions and other payables(14.3)(6.3)Other(0.1)–Total(526.2)(612.2)Deferred tax liabilities net(287.5)(333.5)Deferred tax balances are presented in the consolidated statement of financial position as follows:IN MILLIONS OF CHF20182017Deferred tax assets 138.4 133.3 Deferred tax liabilities(425.9)(466.8)Balance at December 31(287.5)(333.5) 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
179Reconciliation of movements to the deferred taxes:IN MILLIONS OF CHF20182017Changes in deferred tax assets 5.1 –Changes in deferred tax liabilities 40.9 205.3 Currency translation adjustments(15.4)(177.6)Deferred tax movements (expense) at December 31 30.6 27.7 THEREOFRecognized in the income statement 27.1 29.2 Recognized in equity 1 5.3 (0.5)Recognized in OCI(1.8)(1.0)1 Includes CHF 1.3 million recognized as equity attributable to non-controlling interests.Tax loss carry-forwardsCertain subsidiaries incurred tax losses, which according to the local tax legislation gives rise to a tax credit usable in future tax periods. However, the use of this tax benefit may be limited by local law in time (expiration) or in quantity or limited by the ability of the respective subsidiary to generate enough taxable profits in the future. Deferred tax assets relating to tax loss carry-forwards or temporary differences are recognized when it is probable that such tax credits can be utilized in the future by the respective entity in accordance with the approved budget 2019 and the management projections thereafter.The unrecognized tax loss carry-forwards by expiry date are as follows:IN MILLIONS OF CHF31.12.201831.12.2017Expiring within 1 to 3 years 5.7 54.6 Expiring within 4 to 7 years 348.2 221.8 Expiring after 7 years 56.6 162.3 With no expiration limit 731.9 687.9 Total 1,142.4 1,126.6 Unrecognized deferred tax liabilitiesDufry has not recognized deferred tax liabilities associated with investments in subsidiaries where Dufry can control the reversal of the timing differences and where it is not probable that the temporary differences will reverse in the foresee-able future. Dufry does not expect that these differences result in taxable amounts in determining taxable profit (tax loss) of future periods when the carrying amount of the investment is recovered. 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
18030. PROVISIONS IN MILLIONS OF CHFCONTIN-GENT LIABILITIESONEROUS CONTRACTSCLOSEDOWNLAWSUITS AND DUTIESLABOR DISPUTESOTHERTOTALBalance at January 1 47.3 55.6 5.5 35.9 4.2 23.6 172.1 Charge for the year 1.7 8.1 1.0 0.7 0.1 4.9 16.5 Utilized(1.0)(31.5)(0.8)(1.3)(1.2)(10.6)(46.4)Unused amounts reversed––(0.6)––(1.4)(2.0)Interest discounted– 2.5 –––– 2.5 Reclassification from / to other accounts–––– 1.1 (1.1)–Currency translation adjustments(1.7)(1.3)–(1.7)(0.1)(0.7)(5.5)Balance at December 31 46.3 33.4 5.1 33.6 4.1 14.7 137.2 THEREOFCurrent – 10.3 5.1 33.6 1.1 4.7 54.8 Non-current 46.3 23.1 –– 3.0 10.0 82.4 Management believes that its provisions are adequate based upon currently avail-able information. However, given the inherent difficulties in estimating liabilities in the areas described below, actual costs may vary from the amounts provisioned.CONTINGENT LIABILITIESContingent liabilities are recognized in connection with business combinations, usually in relation with legal and tax claims, from which the final outcome is difficult to assess.ONEROUS CONTRACTSConcession agreements usually fix the fee for the locations as a percentage on net sales. Some of these long-term concession agreements, which Dufry has entered into, include clauses to ensure a minimal concession fee during the full term of the agreement. However, in certain circumstances the economic environ-ment around an activity deteriorates in such a way that it is highly unlikely that the operation will become profitable during the remaining concession duration. In such cases Dufry does impair the assets subject to amortization or depreciation and creates a provision for onerous contracts. This provision reflects the present value of the unavoidable cost (losses) of meeting the contractual obligation. At balance sheet date, an amount of CHF 33.4 (2017: 55.6) million has been provided in relation to operations in Europe.CLOSE DOWNThe provision of CHF 5.1 (2017: 5.5) million relates mainly to the closing of operations in Asia and Europe. In 2018 CHF 0.6 million has been reversed after the closing of an operation in China. 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
181LAWSUITS AND DUTIESThe provision for lawsuits and duties of CHF 33.6 (2017: 35.9) million cover uncer-tainties dependent on the outcome of law suits in relation to taxes, duties or other claims with our subsidiaries located in India, Turkey, Brazil and Ecuador. Two of Dufry’s dormant operations in India still keep two open claims (CHF 12.9 million) in relation with customs duties and service taxes. Dufry expects that both cases won’t be finally judged in the next year. After reaching an agreement with the tax author-ities, Italy has used CHF (1.3) million of the provision. Other charges of the year relate to interests on a custom claim in Ecuador, LABOR DISPUTESThe provision of CHF 4.1 (2017: 4.2) million relates mainly to claims presented by sales staff in Brazil based on disputes due to the termination of temporary labor contracts.OTHEROther provisions comprise mainly those to cover the cost for restoration of leased shops to their original condition at the end of the lease agreement. The charges for the year are in connection with a loyalty program and a potential penalty fee due to the close down of a store in a Caribbean Island. The utilization of the year mainly relates to the restructuring program in Spain and the loyalty program.CASH OUTFLOWS OF NON-CURRENT PROVISIONSThe cash outflows of non-current provisions as of December 31, 2018 are expected to occur in:IN MILLIONS OF CHFEXPECTED CASH OUTFLOW2020 7.1 2021 5.7 2022 4.4 2023 5.4 2024 + 59.8 Total non-current 82.4 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
18231. POST-EMPLOYMENT BENEFIT OBLIGATIONSDufry provides retirement benefits through a variety of arrangements comprised principally of stand-alone defined benefit or defined contribution plans, or state administered plans that cover a substantial portion of employees in accordance with local regulations and practices. The most significant plans in terms of the benefits accrued to date by participants are cash balance and final salary plans. Around 99.5 % (2017: 99.6 %) of the total defined benefit obligation and 99.5 % (2017: 99.4 %) of the plan assets correspond to pension funds in Switzerland (CH) and the United Kingdom (UK). 20182017IN MILLIONS OF CHFFundedUnfundedTOTALFundedUnfundedTOTALSWITZERLANDFair value of plan assets 189.7 – 189.7 189.7 – 189.7 Present value of defined benefit obligation 205.0 – 205.0 203.4 – 203.4 Financial (liability) asset(15.3)–(15.3)(13.7)–(13.7)UKFair value of plan assets 182.5 – 182.5 203.8 – 203.8 Present value of defined benefit obligation 177.9 – 177.9 211.5 – 211.5 Financial (liability) asset 4.6 – 4.6 (7.7)–(7.7)OTHER PLANSFair value of plan assets 2.0 – 2.0 2.2 – 2.2 Present value of defined benefit obligation 1.8 18.1 19.9 2.1 18.1 20.2 Financial (liability) asset 0.2 (18.1)(17.9) 0.1 (18.1)(18.0)NET DEFINED BENEFITNet defined benefit asset 4.8 – 4.8 –––Employee benefit obligations(15.3) 18.1 (33.4)(21.3) 18.1 (39.4)Total net book value employee benefits(10.5)(18.1)(28.6)(21.3)(18.1)(39.4)A description of the significant retirement benefit plans is as follows:Reconciliation to the funded plans20182017IN MILLIONS OF CHFSwitzerlandUKSwitzerlandUK Net defined (obligation) / asset at January 1(13.7)(7.7)(20.2)(29.5)Pension income / (expense) through income statement(8.0)(0.2)(8.1) 20.1 Remeasurements through other comprehensive income 0.2 10.0 8.0 2.3 Contributions paid by employer 6.0 2.1 6.6 0.1 Currency translation–0.4–(0.7)Net defined (obligation) / asset at December 31(15.3) 4.6 (13.7)(7.7) 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
18331.1 SWITZERLANDDufry operates a company sponsored pension fund in form of a foundation in Switzerland that provides contribution-based cash balance retirement and risk benefits to employees. Pension plans in Switzerland are governed by the Federal Law on Occupational Retirement, Survivors’ and Disability Pension Plans (BVG), which stipulates that pension plans are to be managed by independent, legally autonomous units. Pension plans are overseen by a regulator as well as by a state supervisory body. A pension plan’s most senior governing body (Board of Trustees) must be composed of equal numbers of employee and employer representatives. The various insurance benefits are governed in regulations, with the BVG law specifying the minimum benefits that are to be provided. The employer and employees pay contributions to the pension plan. In case of an underfunding, various measures can be taken such as increasing future contributions revising the investment strategy or the benefits granted above the legally granted rents. The BVG law prescribes how the employer and the employee have to jointly fund potential restructurings. Under Swiss pension law Dufry cannot recover any surplus from the pension foundation. The main risks assumed by the pension fund are eventual discrepancies between: a) the effective average life expectancy compared with the official demographic statistics, b) the effective future returns on plan assets compared with the esti-mated discount rate used to calculate the conversion factors and c) the effective invalidity cases compared with the demographic statistics. These risks are regularly assessed by the Board of Trustees. In addition, two annual actuarial reports are submitted, one in accordance with the requirements of the BVG, the other in accordance with IFRS requirements.The investment strategy is defined in form of a long-term target asset-, currency- and risk allocation, which takes into account requirements from BVG, and aim to obtain a high long-term return on plan assets. The Board of Trustees is responsible for the investment of the assets, reviewing the investment portfolio from time to time at least once a year. The Investment Committee supervises the investment process. The plan assets are deposited in a global custody bank account, whereby the investments in Real estate funds are directly managed by the fund administration.The pension fund currently invests in a diverse portfolio of asset classes including equities, bonds, property and commodities but do not currently use any more explicit asset-liability matching strategy instruments such as annuity purchase products or longevity swaps. 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
18431.2 UNITED KINGDOM (UK)Dufry operates another defined benefit pension plan in the UK under specific regulatory frameworks. The Plan has been closed to new members for many years and was closed to existing members on August 31, 2017. Under the Plan, members are entitled to annual pensions on retirement at age 65 of one sixtieth of revalued pensionable salary for each year of service. Pensionable salary is defined as basic salary less the statutory Lower Earnings limit. The Plan is administered by a sepa-rate board of trustees which is legally separate from the Company. The Trustees are comprised of representatives of employer, employees and independent trustees. The trustees are required by law to act in the interest of all relevant beneficiaries and are responsible for the investment policy with regards to assets plus the day to day administration of the scheme. The pension payments are made from the trustee-administered funds; however, where plans are underfunded, the company meets the benefit payment obligation as it falls due.Cost of defined benefit plans20182017IN MILLIONS OF CHFSwitzerlandUKSwitzerlandUK SERVICE COSTSCurrent service costs(7.5)–(7.6)(0.2)Past service costs 1––– 21.1 Fund administration(0.4)–(0.4)(0.8)Net interest (0.1)(0.2)(0.1)–Total pension expenses recognized in the income statement(8.0)(0.2)(8.1) 20.1 1 The past service cost in the UK for 2018 is materially lower than prior year, as it reflects a CHF 21.1 (GBP 15,8) million past service credit arising from the move from RPI-linked to CPI-linked pension increases. The above past service credit was calculated as at the date that the change was announced to the Plan membership (November 9, 2017) using a discount rate of 2.75 % p. a. (reflecting market conditions at that date). The current service costs are included in personnel expenses, whereas the past service costs are included in the other operational result.Remeasurements employee benefits20182017IN MILLIONS OF CHFSwitzerlandUKSwitzerlandUK Actuarial gains (losses) – experience(1.3)(3.1) 1.1 1.6 Actuarial gains (losses) – demographic assumptions– 5.2 – 0.9 Actuarial gains (losses) – financial assumptions 5.4 15.1 –(5.3)Return on plan assets exceeding expected interest(3.9)(7.2) 6.9 5.1 Total remeasurements recorded in other comprehensive income 0.2 10.0 8.0 2.3 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
185The following tables summarize the components of the funded status and amounts recognized in the statement of financial position for the plan:Change in the fair value of plan assets20182017IN MILLIONS OF CHFSwitzerlandUKSwitzerlandUK Balance at January 1 189.7 203.8 185.0 191.5 Interest income 1 1.5 4.9 1.4 5.4 Return on plan assets, above interest income(3.9)(7.2) 6.9 5.1 Contributions paid by employer 6.0 2.1 6.6 0.1 Contributions paid by employees 3.7 – 3.8 0.1 Benefits paid(10.6)(11.1)(14.0)(7.6)Transfer payment 3.3 –––Currency translation–(10.0)– 9.2 Balance at December 31 189.7 182.5 189.7 203.8 1 Expected interest income on plan assets based on discount rate. See actuarial assumptions.Change in present value of defined benefit obligation20182017IN MILLIONS OF CHFSwitzerlandUKSwitzerlandUK Balance at January 1 203.4 211.5 205.2 221.0 Current service costs 7.5 – 7.6 0.2 Interest costs 1.5 5.1 1.5 6.3 Contributions paid by employees 3.7 – 3.8 0.1 Accrual of expected future administration costs 0.4 – 0.4 –Actuarial losses / (gains) – experience 1.3 3.1 (1.1)(1.6)Actuarial losses / (gains) – demographic assumptions–(5.2)–(0.9)Actuarial losses / (gains) – financial assumptions(5.4)(15.1)– 5.3 Benefits paid(10.6)(11.1)(14.0)(7.6)Past service cost – plan amendments–––(21.1)Transfer payment 3.2 –––Currency translation–(10.4)– 9.8 Balance at December 31 205.0 177.9 203.4 211.5 Net defined benefit (obligation) / asset at December 31(15.3) 4.6 (13.7)(7.7) 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
186Actuarial assumptionsThe present value of the defined benefit obligation is determined annually by inde-pendent actuaries using the projected unit credit method. The main actuarial assumptions used are:20182017IN PERCENTAGE (%)SwitzerlandUKSwitzerlandUK Discount rates 0.90 3.00 0.75 2.60 Future salary increases 1.50 – 1.50 –Future pension increases 0.25 1.80 0.25 1.80 Average retirement age (in years) 64 65 64 65 Mortality table (generational tables)2015201620152016The mortality table takes into account changes in the life expectancy. Plan asset structure The categories of plan assets in percentage of total value are as follows:20182017IN PERCENTAGE (%)SwitzerlandUKSwitzerlandUKShares 34.5 33.3 31.531.4Bonds 22.1 –22.650.4Real estate 42.6 –31.9–Other 1 0.8 66.7 14.018.2Total100.0 100.0 100.0100.01 Includes liquid positions and alternative investments.All assets held by the Pension fund in Switzerland and UK are fair-value-level 1 (quoted prices in active markets), except certain real estate in Switzerland which are fair-value-level 2 (significant observable inputs) representing 27.7 % (2017: 29.0 %) of the total assets.The net outflow of funds due to pension payments can be planned reliably. Con-tributions are paid regularly to the funded pension plans in Switzerland and UK. Furthermore, the respective investment strategies take account of the need to guarantee the liquidity of the plan at all times. Dufry does not make use of any assets held by pension plans. 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
187Plan participants20182017IN THOUSAND OF CHFSwitzerlandUKSwitzerlandUKACTIVE PARTICIPANTSNumber at December 31 (persons) 774 – 794 –Average annual plan salary 82.0 – 82.0 –Average age (years) 41.5 – 41.0 –Average benefit service (years) 10.8 – 10.2 –DEFERRED PARTICIPANTSNumber at December 31 (persons)– 1,194 – 1,242 Average annual plan pension– 5.3 – 5.3 BENEFIT RECEIVING PARTICIPANTSNumber at December 31 (persons) 150 1,053 141 1,026 Average annual plan pension 24.0 4.0 25.0 3.7 20182017IN MILLIONS OF CHFSwitzerlandUKSwitzerlandUKEXPECTED CONTRIBUTIONS FOREmployer 5.6 2.2 6.0 0.1 Employees 3.2 – 3.4 0.1 Weighted average duration of defined benefit obligation (years) 20.2 19.0 20.5 20.0 20182017IN MILLIONS OF CHFSwitzerlandUKSwitzerlandUKMATURITY PROFILE OF DEFINED BENEFIT OBLIGATIONExpected payments within 1 year 6.9 4.9 6.8 5.5 Expected payments in year 2 6.7 5.1 6.7 4.8 Expected payments in year 3 6.6 6.0 6.6 5.0 Expected payments in year 4 6.4 6.0 6.4 5.9 Expected payments in year 5 7.4 5.5 6.3 5.3 Expected payments in year 6 and beyond 32.4 30.4 32.9 33.6 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
188Sensitivities of significant actuarial assumptionsThe discount rate and the future salary increase were identified as significant actuarial assumptions.The following impacts on the defined benefit obligation are to be expected:SWITZERLANDUK2018 IN MILLIONS OF CHFIncreaseDecreaseIncreaseDecreaseA CHANGE OF 0.5 % IN THE FOLLOWING ASSUMPTIONS WOULD IMPLYDiscount rate(16.5) 18.9 – 18.8 Salary rate 3.9 (3.6)––The sensitivity analysis is based on realistically possible changes as of the end of the reporting year. Each change in a significant actuarial assumption was analyzed separately as part of the test. Interdependencies were not taken into account.Expected costs 2019 IN MILLIONS OF CHFSWITZERLANDUKCurrent service cost 7.1 –Fund administration expenses 0.3 –Net interest expenses 0.1 0.2 Costs to be recognized in income statement 7.5 0.2 32. COMMITMENTS AND CONTINGENCIESGUARANTEE COMMITMENTSSome long-term concession agreements, which Dufry has entered into, include obligations to fulfill minimal fee payments during the full term of the agreement. Some of these agreements have been backed with guarantees provided by Dufry or a financial institution. During the years 2018 or 2017, no party has exercised their right to call upon such guarantees. All accrued, but still unpaid concession fees are presented as liabilities in the statement of financial position. 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
18933. FAIR VALUE MEASUREMENTFAIR VALUE OF FINANCIAL INSTRUMENTS CARRIED AT AMORTIZED COSTExcept as detailed in table Quantitative disclosures fair value measurement hier-archy for assets below, Dufry considers that the carrying amounts of financial assets and financial liabilities recognized in the financial statements approximate their fair values.The following tables provide the fair value measurement hierarchy of Dufry’s assets and liabilities, that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable: –Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities. –Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i. e. as prices) or indirectly (i. e. derived from prices). –Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
190Quantitative disclosures fair value measurement hierarchy for assetsFAIR VALUE MEASUREMENT AT DECEMBER 31, 2018 USINGDECEMBER 31, 2018 IN MILLIONS OF CHFTOTALQuoted prices in active markets (Level 1)Significant observable inputs (Level 2)Significant unobservable inputs (Level 3)BOOK VALUESASSETS MEASURED AT FAIR VALUEDerivative financial assetsForeign exchange forward contracts – USD 0.2 0.2 0.2 Foreign exchange swaps contracts – USD 0.5 0.5 0.5 Foreign exchange swaps contracts – EUR 4.5 4.5 4.5 Foreign exchange swaps contracts – OTHER 0.9 0.9 0.9 Cross currency swaps contracts – USD 1.0 1.0 1.0 Cross currency swaps contracts – GBP 0.5 0.5 0.5 Total (Note 37.3) 7.6 7.6 7.6 Financial assets valued at FVOCIEquity investments at FVOCI 1.7 1.7 – 1.7 1.7 1.7 – 1.7 ASSETS FOR WHICH FAIR VALUES ARE DISCLOSEDLoans and receivablesCredit card receivables 18.1 18.1 18.6 FAIR VALUE MEASUREMENT AT DECEMBER 31, 2017 USINGDECEMBER 31, 2017 IN MILLIONS OF CHFTOTALQuoted prices in active markets (Level 1)Significant ob-servable inputs (Level 2)Significant unob-servable inputs (Level 3)BOOK VALUESASSETS MEASURED AT FAIR VALUEDerivative financial assetsForeign exchange forward contracts – USD 0.1 0.1 0.1 Foreign exchange swaps contracts – USD 5.0 5.0 5.0 Cross currency swaps contracts – EUR 3.9 3.9 3.9 Cross currency swaps contracts – GBP 0.3 0.3 0.3 Cross currency swaps contracts – OTHER 0.7 0.7 0.7 Total (Note 37.3) 10.0 10.0 10.0 ASSETS FOR WHICH FAIR VALUES ARE DISCLOSEDLoans and receivablesCredit card receivables 21.6 21.6 22.1 There were no transfers between Level 1 and 2 during the period. 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
191Quantitative disclosures fair value measurement hierarchy for liabilitiesFAIR VALUE MEASUREMENT AT DECEMBER 31, 2018 USINGDECEMBER 31, 2018 IN MILLIONS OF CHFTOTALQuoted prices in active markets (Level 1)Significant observable inputs (Level 2)Significant unobservable inputs (Level 3)BOOK VALUESLIABILITIES MEASURED AT FAIR VALUEDerivative financial liabilitiesForeign exchange swaps contracts – USD 0.5 0.5 0.5 Foreign exchange swaps contracts – OTHER 1.5 1.5 1.5 Cross currency swaps contracts – USD 5.9 5.9 5.9 Cross currency swaps contracts – GBP 6.7 6.7 6.7 Total (Note 37.3) 14.6 14.6 14.6 Financial liabilities valued at FVPL Interest rate swaps 2.7 2.7 2.7 Total (Note 38.1) 2.7 2.7 2.7 LIABILITIES FOR WHICH FAIR VALUES ARE DISCLOSEDAt amortized costSenior Notes EUR 800 857.8 857.8 893.4 Senior Notes EUR 700 805.0 805.0 782.0 Total 1,662.8 1,662.8 1,675.4 Floating rate borrowings USD 1,368.5 1,368.5 1,317.8 Floating rate borrowings CHF 201.4 201.4 199.3 Floating rate borrowings GBP 583.4 583.4 560.6 Total 2,153.3 2,153.3 2,077.7 There were no transfers between Level 1 and 2 during the period. 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
192FAIR VALUE MEASUREMENT AT DECEMBER 31, 2017 USINGDECEMBER 31, 2017 IN MILLIONS OF CHFTOTALQuoted prices in active markets (Level 1)Significant observable inputs (Level 2)Significant unobservable inputs (Level 3)BOOK VALUESLIABILITIES MEASURED AT FAIR VALUEDerivative financial liabilitiesForeign exchange forward contracts – USD–––Foreign exchange forward contracts – EUR–––Foreign exchange forward contracts – GBP–––Foreign exchange swaps contracts – EUR–––Cross currency swaps contracts – GBP–––Total (Note 37.3)–––Financial liabilities valued at FVPL Interest rate swaps–––Total (Note 38.1)–––LIABILITIES FOR WHICH FAIR VALUES ARE DISCLOSEDAt amortized costSenior Notes EUR 800 953.6 953.6 926.6 Senior Notes EUR 700 857.5 857.5 811.0 Total 1,811.1 1,811.1 1,737.6 Floating rate borrowings USD 1,294.9 1,294.9 1,256.5Floating rate borrowings EUR 591.2 591.2 579.9 Floating rate borrowings CHF 287.0 287.0 263.6 Floating rate borrowings GBP 331.0 331.0 316.1 Total 2,504.1 2,504.1 2,416.1 There were no transfers between Level 1 and 2 during the period. 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
19334. FINANCIAL INSTRUMENTS Significant accounting policies are described in notes 2.4.v) and 2.5.35. CAPITAL RISK MANAGEMENTCapital comprises equity attributable to the equity holders of the parent less hedging and revaluation reserves for unrealized gains or losses on net investments, plus other equity-linked or equity-like instruments attributable to the parent.The primary objective of Dufry’s capital management is to ensure that it maintains an adequate credit rating and sustainable capital ratios in order to support its business and maximize shareholder value.Dufry manages its financing structure and makes adjustments to it in light of its strategy and the long-term opportunities and costs of each financing source. To maintain or adjust the financing structure, Dufry may adjust dividend payments to shareholders, return capital to shareholders, issue new shares or issue equity-linked instruments or equity-like instruments.Furthermore, Dufry monitors the financing structure using a combination of ratios, including a gearing ratio, cash flow considerations and profitability ratios. As for the gearing ratio Dufry includes within net debt, interest bearing loans and borrow-ings, less cash and cash equivalents, excluding discontinued operations. 35.1 GEARING RATIOThe following ratio compares owner’s equity to borrowed funds:IN MILLIONS OF CHF31.12.201831.12.2017Cash and cash equivalents (538.2)(565.0)Financial debt, short-term 58.0 86.8 Financial debt, long-term 3,766.3 4,165.1 Net debt 3,286.1 3,686.9 Equity attributable to equity holders of the parent 2,898.8 3,130.1 ADJUSTED FORAccumulated hedged gains / (losses)(62.3)(45.2)Effects from transactions with non-controlling interests 1 1,355.1 1,839.0 Total capital 2 4,191.6 4,923.9 Total net debt and capital 7,477.7 8,610.8 Gearing ratio 43.9 % 42.8 % 1 Represents the excess paid (received) above fair value of non-controlling interests on shares acquired (sold) as long as there is no change in control (IFRS 10.23)2 Includes all capital and reserves of Dufry that are managed as capitalDufry did not hold collateral of any kind at the reporting dates. 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
19435.2 CATEGORIES OF FINANCIAL INSTRUMENTSAT DECEMBER 31, 2018FINANCIAL ASSETSIN MILLIONS OF CHFat amortized costat FVOCI (non-recyclable)at FVPLSUBTOTALNON-FINANCIAL ASSETS 1TOTALCash and cash equivalents 538.2 –– 538.2 – 538.2 Financial instruments at fair value through profit and loss– 1.7 – 1.7 – 1.7 Trade and credit card receivables 62.6 –– 62.6 – 62.6 Other accounts receivable220.0– 7.6 227.6 246.5 474.1 Other non-current assets 134.9 –– 134.9 124.7 259.6 Total 955.5 1.7 7.8 965.0 FINANCIAL LIABILITIESIN MILLIONS OF CHFat amortized costat FVPLSUBTOTALNON-FINANCIAL LIABILITIES 1TOTALTrade payables 640.4 – 640.4 – 640.4 Financial debt short-term 58.0 – 58.0 – 58.0 Other liabilities 761.4 17.3 778.7 81.4 860.1 Financial debt long-term 3,790.9 – 3,790.9 (24.6) 3,766.3 Other non-current liabilities 1.1 – 1.1 61.7 62.8 Total 5,251.8 17.3 5,269.1 1 Non-financial assets or non-financial liabilities comprise prepaid expenses (Incl. arrangement fees set off from financial debt) and deferred income, which will not generate a cash outflow or inflow as well as other tax positionsAT DECEMBER 31, 2017FINANCIAL ASSETSIN MILLIONS OF CHFLoans and receivablesat FVPLSUBTOTALNON-FINANCIAL ASSETSTOTALCash and cash equivalents 565.0 – 565.0 – 565.0 Trade and credit card receivables 82.5 – 82.5 – 82.5 Other accounts receivable 246.0 10.0 256.0 252.5 508.5 Other non-current assets 136.5 – 136.5 202.1 338.6 Total 1,030.0 10.0 1,040.0 FINANCIAL LIABILITIESIN MILLIONS OF CHFat amortized costat FVPLSUBTOTALNON-FINANCIAL LIABILITIESTOTALTrade payables 644.6 – 644.6 – 644.6 Financial debt short-term 86.8 – 86.8 – 86.8 Other liabilities 761.5 – 761.5 127.3 888.8 Financial debt long-term 4,165.1 – 4,165.1 – 4,165.1 Other non-current liabilities 18.3 – 18.3 94.6 112.9 Total 5,676.3 – 5,676.3 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
19535.3 NET INCOME BY IFRS 9 VALUATION CATEGORYFinancial Assets at December 31, 2018IN MILLIONS OF CHFAT AMORTIZED COSTAT FVOCI (NON-RECYCLABLE)AT FVPLTOTALInterest income 21.7 0.1 21.8 Other finance income 0.3 – 35.9 36.2 From interest 22.0 36.0 58.0 Fair values gain (loss)––––Foreign exchange gain (loss) 1(57.1)– 9.5 (47.6)Impairments / allowances 2(2.1)––(2.1)Total – from subsequent valuation(59.2)– 9.5 (49.7)Net (expense) / income(37.2)– 45.5 8.3 Financial Liabilities at December 31, 2018IN MILLIONS OF CHFAT AMORTIZED COSTAT FVPLTOTALInterest expenses and arrangement fees(168.6)–(168.6)Other finance expenses(3.8)(20.9)(24.7)From interest(172.4)(20.9)(193.3)Foreign exchange gain (loss) 1 68.2 (26.0) 42.2 Total – from subsequent valuation 68.2 (26.0) 42.2 Net (expense) / income(104.2)(46.9)(151.1)1 This position includes the foreign exchange gain (loss) recognized on third party and intercompany financial assets and liabilities through consolidated income statement2 This position includes the income from the released impairments and allowances and recoveries during the period less the increase of impairments and allowances 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
196Financial Assets at December 31, 2017IN MILLIONS OF CHFLOANS AND RECEIVABLESAT FVPLTOTALInterest income 18.1 – 18.1 Other finance income 1.0 8.7 9.7 From interest 19.1 8.7 27.8 Foreign exchange gain (loss) 1 17.1 (16.6) 0.5 Impairments / allowances 2(7.5)–(7.5)Total – from subsequent valuation 9.6 (16.6)(7.0)Net (expense) / income 28.7 (7.9) 20.8 Financial Liabilities at December 31, 2017IN MILLIONS OF CHFAT AMORTIZED COSTAT FVPLTOTALInterest expenses and arrangement fees(207.1)–(207.1)Other finance expenses(24.1)–(24.1)From interest(231.2)–(231.2)Foreign exchange gain (loss) 1 15.7 – 15.7 Total – from subsequent valuation 15.7 – 15.7 Net (expense) / income(215.5)–(215.5)1 This position includes the foreign exchange gain (loss) recognized on third party and intercompany financial assets and liabilities through consolidated income statement2 This position includes the income from the released impairments and allowances and recoveries during the period less the increase of impairments and allowances36. FINANCIAL RISK MANAGEMENT OBJECTIVESAs a global retailer, Dufry has worldwide activities which need to be financed in dif-ferent currencies and are consequently affected by fluctuations of foreign exchange and interest rates. Dufry’s treasury manages the financing of the operations through centralized credit facilities to ensure an adequate allocation of these resources and simultaneously minimize the potential currency financial risk impacts.Dufry continuously monitors the market risk, such as risks related to foreign cur-rency, interest rate, credit, liquidity and capital. Dufry seeks to minimize the currency exposure and interest rates risk using appropriate transaction structures or alter-natively, using derivative financial instruments to hedge the exposure to these risks. The treasury policy forbids entering or trading financial instruments for specula-tive purposes. 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
19737. MARKET RISKDufry’s financial assets and liabilities are mainly exposed to market risk in foreign currency exchange and interest rates. Dufry’s objective is to minimize the income statement impact and to reduce fluctuations in cash flows through structuring the respective transactions to minimize market risks. In cases, where the associated risk cannot be hedged appropriately through a transaction structure, and the eval-uation of market risks indicates a material exposure, Dufry may use financial instruments to hedge the respective exposure.Dufry may enter into a variety of financial instruments to manage its exposure to foreign currency risk, including forward foreign exchange contracts, currency swaps and over the counter plain vanilla options.During the current financial year Dufry utilized foreign currency forward contracts and options for hedging purposes.37.1 FOREIGN CURRENCY RISK MANAGEMENTDufry manages the cash flow surplus or deficits in foreign currency of the opera-tions through FX-transactions in the respective local currency. Major imbalances in foreign currencies at Group level are hedged through foreign exchange forwards contracts. The terms of the foreign currency forward contracts have been nego-tiated to match the terms of the forecasted transactions.37.2 FOREIGN CURRENCY SENSITIVITY ANALYSISAmong various methodologies to analyze and manage risk, Dufry utilizes a system based on sensitivity analysis. This tool enables Group treasury to identify the level of risk of each entity. Sensitivity analysis provides an approximate quantification of the exposure in the event that certain specified parameters were to be met under a specific set of assumptions.Foreign Currency Exposure:IN MILLIONS OF CHFUSDEUROGBPBRLOTHERTOTALDECEMBER 31, 2018Monetary assets 1,314.0 1,086.9 215.6 23.3 454.1 3,093.9 Monetary liabilities 2,261.6 1,706.0 728.1 32.2 277.5 5,005.4 Net currency exposure before foreign currency contracts and hedging(947.6)(619.1)(512.5)(8.9) 176.6 (1,911.5)Foreign currency contracts 543.1 527.7 501.0 15.2 (16.2) 1,570.8 Hedging 271.4 –––(96.5) 174.9 Net currency exposure(133.1)(91.4)(11.5) 6.3 63.9 (165.8)DECEMBER 31, 2017Monetary assets 2,031.4 1,269.1 323.7 19.1 1,043.8 4,687.1 Monetary liabilities 3,384.1 1,834.8 452.7 43.4 521.5 6,236.5 Net currency exposure before hedging(1,352.7)(565.7)(129.0)(24.3) 522.3 (1,549.4)Foreign currency contracts(262.1) 963.3 (50.9) 11.8 (229.0) 433.1 Hedging 903.8 – 65.8 –(105.7) 863.9 Net currency exposure(711.0) 397.6 (114.1)(12.5) 187.6 (252.4) 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
198The sensitivity analysis includes all monetary assets and liabilities irrespective of whether the positions are third party or intercompany. Dufry has considered some intercompany long-term loans as net investment in foreign operations. Conse-quently, the related exchange differences are presented in other comprehensive income and thereafter as translation reserve in equity and Dufry has entered into cross currency swaps to reduce the currency exposure.The foreign exchange rate sensitivity is calculated by aggregation of the net cur-rency exposure of Dufry entities at December 31 of the respective year. The values and risk disclosed here are the hedged and remaining net currency exposure assuming a 5 % appreciation of the CHF against all other currencies. A positive result indicates a profit, before tax in the income statement or in the hedging and revaluation reserves when the CHF strengthens against the relevant currency.IN MILLIONS OF CHF31.12.201831.12.2017Effect on the Income Statement – profit (loss) of USD 6.7 35.6Other comprehensive income – profit (loss) of USD 13.6 45.2 Effect on the Income Statement – profit (loss) of EUR 4.6 (19.9)Effect on the Income Statement – profit (loss) of GBP 0.6 5.7Other comprehensive income – profit (loss) of GBP– 3.3Reconciliation to categories of financial instruments:IN MILLIONS OF CHF31.12.201831.12.2017FINANCIAL ASSETSTotal financial assets held in foreign currencies (see above) 3,093.9 4,687.1 less intercompany financial assets in foreign currencies(2,874.7)(4,430.6)Third party financial assets held in foreign currencies 219.2 256.5 Third party financial assets held in reporting currencies 745.8 783.5 Total third party financial assets 1 965.0 1,040.0 FINANCIAL LIABILITIESTotal financial liabilities held in foreign currencies (see above) 5,005.4 6,236.5 less intercompany financial liabilities in foreign currencies(1,167.0)(2,944.4)Third party financial liabilities held in foreign currencies 3,838.4 3,292.1 Third party financial liabilities held in reporting currencies 1,430.7 2,384.2 Total third party financial liabilities 1 5,269.1 5,676.3 1 See note 35.2 Categories of financial instruments 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
19937.3 FOREIGN EXCHANGE FORWARD CONTRACTS AND FOREIGN EXCHANGE OPTIONS AT FAIR VALUEAs the management of the company actively pursues to naturally hedge the positions in each operation, the policy of Dufry is to enter into foreign exchange forward and options contracts only where needed.The following table shows the contracts or underlying principal amounts and fair values of derivative financial instruments, including foreign exchange forwards and foreign exchange swaps as well as cross currency interest rate swaps. Contracts or underlying principal amounts indicate the volume of business outstanding at the balance sheet date. The fair values are determined by reference to market prices or standard pricing models that used observable market inputs at December 31 of each year. During 2018, Dufry has entered into a number of cross currency swap contracts in order to optimize interest expenses, which led to a material increase of contractual underlying amounts as of December 31, 2018 compared to previous year.IN MILLIONS OF CHFCONTRACT OR UNDERLYING PRINCIPAL AMOUNTPOSITIVE FAIR VALUENEGATIVE FAIR VALUEDecember 31, 2018 2,044.7 7.6 14.6 December 31, 2017 1,130.4 10.0 –38. INTEREST RATE RISK MANAGEMENTDufry manages the interest rate risk through interest rate swaps and options to the extent that the hedging cannot be implemented through managing the duration of the debt drawings. The levels of the hedging activities are evaluated regularly and may be adjusted in order to reflect the development of the various parameters.38.1 INTEREST RATE SWAP CONTRACTSThe following table shows the contracts or underlying principal amounts and fair values of derivative financial instruments. Contracts or underlying principal amounts indicate the volume of business outstanding at December 31. The fair values are determined by reference to market prices or standard pricing models that used observable market inputs at December 31. IN MILLIONS OF CHFCONTRACT OR UNDERLYING PRINCIPAL AMOUNTPOSITIVE FAIR VALUENEGATIVE FAIR VALUEDecember 31, 2018 687.0 – 2.7 December 31, 2017––– 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
20038.2 INTEREST RATE SENSITIVITY ANALYSISThe sensitivity analysis below has been determined based on the exposure to interest rates derivatives and non-derivative instruments at the reporting date. The risk analysis provided here assumes a simultaneous increase of 100 basis points of the interest rate of all interest bearing financial positions.If interest rates had been 100 basis points higher whereas all other variables were held constant, Dufry’s net earnings for the year 2018 would decrease by CHF 37.0 (2017: decrease by 43.3) million.38.3 ALLOCATION OF FINANCIAL ASSETS AND LIABILITIES TO INTEREST CLASSESIN %IN MILLIONS OF CHFAT DECEMBER 31, 2018Average variable interest rateAverage fixed interest rateVariable interest rateFixed interest rateTotal interest bearingNon-interest bearingTOTAL Cash and cash equivalents0.6 % 2.5 % 214.5 23.6 238.1 300.1 538.2 Financial investments at FVOCI––– 1.7 1.7 Trade and credit card receivables––– 62.6 62.6 Other accounts receivable1.6 % 4.9 % 0.5 0.3 0.8 226.8 227.6 Other non-current assets6.4 % 4.0 % 37.1 2.1 39.2 95.7 134.9 Financial assets 252.1 26.0 278.1 686.9 965.0 Trade payables––– 640.4 640.4 Financial debt, short-term5.5 % 4.5 % 30.7 3.9 34.6 23.4 58.0 Other liabilities––– 778.7 778.7 Financial debt, long-term2.8 % 3.4 % 2,088.0 1,701.9 3,789.9 1.0 3,790.9 Other non-current liabilities––– 1.1 1.1 Financial liabilities 2,118.7 1,705.8 3,824.5 1,444.6 5,269.1 Net financial liabilities 1,866.6 1,679.8 3,546.4 757.7 4,304.1 IN %IN MILLIONS OF CHFAT DECEMBER 31, 2017Average variable interest rateAverage fixed interest rateVariable interest rateFixed interest rateTotal interest bearingNon-interest bearingTOTAL Cash and cash equivalents0.7 % 0.8 % 157.5 8.4 165.9 399.1 565.0 Trade and credit card receivables––– 82.5 82.5 Other accounts receivable6.0 % – 0.5 0.5 255.5 256.0 Other non-current assets4.7 % 51.4 – 51.4 85.1 136.5 Financial assets 208.9 8.9 217.8 822.2 1,040.0 Trade payables––– 644.6 644.6 Financial debt, short-term3.7 % 4.1 % 44.2 40.5 84.7 2.1 86.8 Other liabilities––– 761.5 761.5 Financial debt, long-term0.7 % 3.4 % 2,433.0 1,731.1 4,164.1 1.0 4,165.1 Other non-current liabilities– 16.6 16.6 1.7 18.3 Financial liabilities 2,477.2 1,788.2 4,265.4 1,410.9 5,676.3 Net financial liabilities 2,268.3 1,779.3 4,047.6 588.7 4,636.3 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
20139. CREDIT RISK MANAGEMENTCredit risk refers to the risk that counterparty may default on its contractual obligations resulting in financial loss to Dufry. Almost all Dufry sales are retail sales made against cash or internationally recog-nized credit / debit cards. Dufry has policies in place to ensure that other sales are only made to customers with an appropriate credit history or that the credit risk is insured adequately. The remaining credit risk is in relation to taxes, refunds from suppliers and guarantee deposits.The credit risk on cash deposits or derivative financial instruments relates to banks or financial institutions. Dufry monitors the credit ranking of these institutions and does not expect defaults from non-performance of these counterparties.The main banks where the Group keeps net assets positions hold a credit rating of A – or higher.39.1 MAXIMUM CREDIT RISKThe carrying amount of financial assets recorded in the financial statements, after deduction of any allowances for losses, represents Dufry’s maximum exposure to credit risk. 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
20240. LIQUIDITY RISK MANAGEMENTDufry evaluates this risk as the ability to settle its financial liabilities on time and at a reasonable price. Beside its capability to generate cash through its operations, Dufry mitigates liquidity risk by keeping unused credit facilities with financial institutions (see note 26).40.1 REMAINING MATURITIES FOR NON-DERIVATIVE FINANCIAL ASSETS AND LIABILITIESThe following tables have been drawn up based on the undiscounted cash flows of financial assets and liabilities (based on the earliest date on which Dufry can receive or be required to pay). The tables include principal and interest cash flows.AT DECEMBER 31, 2018 IN MILLIONS OF CHF1 – 6 MONTHS6 – 12 MONTHS1 – 2 YEARSMORE THAN 2 YEARSTOTAL Cash and cash equivalents 545.7 19.8 –– 565.5 Financial instruments at FVOCI 1.7 ––– 1.7 Trade and credit card receivables 62.0 0.6 –– 62.6 Other accounts receivable 217.4 2.7 –– 220.1 Other non-current assets 2.8 2.9 41.9 90.1 137.7 Total cash inflows 829.6 26.0 41.9 90.1 987.6 Trade payables 640.4 ––– 640.4 Financial debt, short-term 66.0 9.1 –– 75.1 Other liabilities 759.9 1.5 –– 761.4 Financial debt, long-term 59.7 52.9 115.2 4,050.9 4,278.7 Other non-current liabilities––– 1.1 1.1 Total cash outflows 1,526.0 63.5 115.2 4,052.0 5,756.7 AT DECEMBER 31, 2017 IN MILLIONS OF CHF1 – 6 MONTHS6 – 12 MONTHS1 – 2 YEARSMORE THAN 2 YEARSTOTAL Cash and cash equivalents 575.5 3.9 –– 579.4 Trade and credit card receivables 82.3 0.2 –– 82.5 Other accounts receivable 238.7 7.3 –– 246.0 Other non-current assets 1.2 1.2 4.4 136.7 143.5 Total cash inflows 897.7 12.6 4.4 136.7 1,051.4 Trade payables 644.7 ––– 644.7 Financial debt, short-term 86.3 10.9 –– 97.2 Other liabilities 759.6 1.9 –– 761.5 Financial debt, long-term 39.9 42.5 165.1 4,427.4 4,674.9 Other non-current liabilities 0.1 0.1 16.9 1.9 19.0 Total cash outflows 1,530.6 55.4 182.0 4,429.3 6,197.3 40.2 REMAINING MATURITIES FOR DERIVATIVE FINANCIAL INSTRUMENTSDufry holds derivative financial instruments at year-end of net CHF – 10.5 millions with maturity below 6 months and CHF 0.8 million with maturity from 6 to 12 months. 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
20341. RELATED PARTIES AND RELATED PARTY TRANSACTIONSA party is related to Dufry if the party directly or indirectly controls, is controlled by, or is under common control with Dufry, has an interest in Dufry that gives it significant influence over Dufry, has joint control over Dufry or is an associate or a joint venture of Dufry. In addition, members of the key management personnel of Dufry or close members of the family are also considered related parties as well as post-employment benefit plans for the benefit of employees of Dufry.The related party transactions and relationships for Dufry are the following:IN MILLIONS OF CHF20182017PURCHASE OF GOODS FROMFolli Follie Group, luxury goods 1 1.2 2.0 PURCHASE OF SERVICES FROMFolli Follie Group, rent of building 1 0.8 1.8 Pension Fund Dufry, post-employment benefits 6.2 6.6 ACCOUNTS PAYABLES AT DECEMBER 31Folli Follie Group 1– 3.5 Pension Fund Dufry 1.6 0.9 1 Folli Follie is a company controlled by George Koutsoulioutsos, a member of the board of directors until June 2018. The values 2018 of Folli Follie correspond to the period January to June 2018.The transactions with associated companies are the following:IN MILLIONS OF CHF20182017PURCHASE OF SERVICES FROMLojas Francas de Portugal S.A.(2.3)(1.6)SALES OF SERVICES TOLojas Francas de Portugal S.A. 2.6 0.6 Nuance Basel LLC (Sochi) 0.5 0.4 Nuance Group (Chicago) LLC 0.9 0.9 SALES OF GOODS TOLojas Francas de Portugal S.A. 38.0 34.4 Nuance Basel LLC (Sochi) 3.5 2.8 Nuance Group (Chicago) LLC 4.2 3.2 ACCOUNTS RECEIVABLES AT DECEMBER 31Lojas Francas de Portugal S.A. 6.7 4.7 Nuance Basel LLC (Sochi) 10.7 10.8 Nuance Group (Chicago) LLC 0.8 1.4 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
204The compensation to members of the Board of Directors and the Group Executive Committee for the services provided during the respective years includes all forms of consideration paid, payable or provided by Dufry, including compensation in company shares as follows: IN MILLIONS OF CHF20182017BOARD OF DIRECTORSNumber of directors119Short-term employee benefits 7.2 5.0 Post-employment benefits 0.3 0.4 Total compensation 7.5 5.4 GROUP EXECUTIVE COMMITTEENumber of members612Short-term employee benefits 12.0 19.2 Post-employment benefits 1.6 1.6 Share-based payments 1 8.5 12.5 Total compensation 22.1 33.3 1 Expenses accrued during the year for members of the Group Executive CommitteeFor further information regarding participations and compensation to members of the Board of Directors or Group Executive Committee, please refer to the remuneration report at the end of the annual report. 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
20542. ACCOUNTING POLICY CHANGESThe group adopted IFRS 9 as of January 1, 2018, implying changes in our accounting policies. In accordance with the transitional provisions in IFRS 9 (7.2.15) and (7.2.26), comparative figures have not been restated.10.1 CLASSIFICATION AND MEASUREMENT OF FINANCIAL INSTRUMENTSThere was no impact on the group’s retained earnings as of January 1, 2018 due toclassification and measurement of financial instruments.On January 1, 2018 the group’s management has assessed which business models apply to the financial assets held by the group at the date of initial application of IFRS 9 (January 1, 2018) and has classified its financial instruments into the appro-priate IFRS 9 categories. There was no effect resulting from this reclassification.As of December 31, 2017 the group had no financial assets classified as available for sale (AfS), held-to-maturity or FVOCI. The financial assets and liabilities classified as FVPL will continue to meet the criteria for this category as these do not include any non-derivatives components. Hence there will be no change to the accounting classification for these assets and liabilities. These reclassifications have no impact on the measurement categories.AMORTIZED COSTS FVOCI FVPL TOTALIN MILLIONS OF CHFNOTEHELD-TO- MATURITY (2017)AVAILABLE- FOR-SALE (2017)01.01.2018Opening balance – IAS 39–– 10.0 10.0 Reclassify investments from AfS to FVPL––––Reclassify corporate bonds from AfS to amoritzed costs––––Total reclassification––––Opening balance – IFRS 9 –– 10.0 10.0 MEASUREMENT CATEGORYCARRYING AMOUNTIN MILLIONS OF CHFORIGINAL (IAS 39)NEW (IFRS 9)ORIGINAL IN MILLIONS OF CHFNEW IN MILLIONS OF CHFDIFFERENCEOther non current assetsAmortized costs Amortized costs 136.5 136.5 –DerivativesFVPLFVPL–––Non-current financial assets 136.5 136.5 –Trade receivablesAmortized costs Amortized costs 82.5 82.5 –Cash and cash equivalentsAmortized costs Amortized costs 565.0 565.0 –Other receivablesAmortized costs Amortized costs 246.0 246.0 –DerivativesFVPLFVPL 10.0 10.0 –Current financial assets 903.5 903.5 –DerivativesFVPLFVPL–––Current financial liabilities––– 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
206MOST IMPORTANT SUBSIDIARIES H = Holding R = Retail D = Distribution CenterAS OF DECEMBER 31, 2018LOCATIONCOUNTRYTYPEOWNER-SHIP IN %SHARE CAPITAL IN THOUSANDSCURRENCYSOUTHERN EUROPE AND AFRICADufry France SANiceFranceR100 8,291 EURHellenic Duty Free Shops SAAthensGreeceR100 397,535 EURDufrital SpAMilanItalyR60 466 EURNuance Group (Malta) LtdLuqaMaltaR52 2,796 EURDufry Maroc SARLCasablancaMoroccoR80 2,500 MADWorld Duty Free Group SAMadridSpainR100 19,832 EURSociedad de Distribucion Comercial Aeroportuaria de Canarias, S. L.TeldeSpainR60 667 EURUrart Gumr. Magaza Isletm. ve Ticaret A.S.AntalyaTurkeyR100 1,161 EURUK AND CENTRAL EUROPEWorld Duty Free Group Helsinki LtdVantaaFinlandR100 2,500 EURWorld Duty Free Group Germany GmbHDüsseldorfGermanyR100 250 EURNuance Group (Sverige) ABStockholmSwedenR100 100 SEKDufry Basel-Mulhouse AGBaselSwitzerlandR100 100 CHFThe Nuance Group AGZurichSwitzerlandR100 82,100 CHFWDFG UK LimitedLondonUKR100 360 GBPNuance Group (UK) LtdLondonUKR100 50 GBPEASTERN EUROPE, MIDDLE EAST, ASIA AND AUSTRALIAADF Shops CJSCYerevanArmeniaR100 553,834 AMDNuance Group (Australia) Pty LtdMelbourneAustraliaR100 210,000 AUDDufry (Cambodia) LtdPhnom PenCambodiaR80 1,231 USDThe Nuance Group (HK) LtdHong KongChinaR100–HKDThe Nuance Group (Macau) LtdMacauChinaR100 49 HKDDufry (Shanghai) Commercial Co., LtdShanghaiChinaR100 123,547 CNYThe Nuance Group (India) Pvt. LtdBangaloreIndiaR100 1,035,250 INRAldeasa Jordan Airports Duty Free Shops LtdAmmanJordanR100 705 USDWorld Duty Free Group SA *Kuwait CityKuwaitR100 2,383 KWDRegstaer LtdMoscowRussiaR51 3,991 EURDufry East OOOMoscowRussiaR100 712 USDLenrianta CSJCSt. PetersburgRussiaR100 315 EURDufry D.O.O.BelgradeSerbiaR100 693,078 RSDDufry Shops Colombo LimitedColomboSri LankaR100 30,000 LKRDufry Sharjah FZCSharjahU. Arab. EmiratesR50 2,054 AEDLATIN AMERICAInterbaires SABuenos AiresArgentinaR100 25,743 USDDufry Aruba N. V.OranjestadArubaR100 1,900 USDDuty Free Caribbean Ltd.St. MichaelBarbadosR60 5,000 USDDufry do Brasil DF Shop LtdaRio de JaneiroBrazilR87 98,175 USDDufry Lojas Francas LtdaSao PauloBrazilR87 99,745 USDAldeasa Chile, LtdSantiago de ChileChileR100 2,517 USDInversiones Tunc SRLSanto DomingoDominican RepublicR100–USD 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
207Inversiones Pánamo SRLSanto DomingoDominican RepublicR100–USDAldeasa Jamaica, LtdSt. JamesJamaicaR100 280 USDDufry Mexico SA de CVMexico CityMexicoR100 268 USDDufry Yucatan SA de CVMexico CityMexicoR100 1,141 USDWorld Duty Free Group Peru S.A.C.LimaPeruR100 1,010 USDAlliance Duty Free, Inc.San JuanPuerto RicoR100 2,213 USDDufry Trinidad LtdPort of SpainTrinidad and TobagoR60 392 USDNavinten SAMontevideoUruguayR100 126 USDDufry Cruise Services, Inc.MiamiUSAR100–USDNORTH AMERICAHudson LtdHamiltonBermudaH57–USDNuance Group (Canada) Inc.TorontoCanadaR100 13,260 CADWDFG Vancouver LPVancouverCanadaR100 9,500 CADHudson Group Canada Inc.VancouverCanadaR100–CADHudson News O’Hare JVChicagoUSAR70–USDDufry O’Hare T5 JVChicagoUSAR80–USDHG-Multiplex-Regali Dallas JVDallasUSAR75–USDAtlanta WDFG TAC ATL Retail LLCDelawareUSAR86–USDHG Denver JVDenverUSAR76–USDAMS of South Florida JVFort LauderdaleUSAR31–USDHudson Las Vegas JVLas VegasUSAR73–USDNuance Group Las Vegas PartnershipLas VegasUSAR73 850 USDHG Magic Concourse TBIT JVLos AngelesUSAR68–USDAirport Management Services LLCLos AngelesUSAH / R100–USDHudson-Magic Johnson Ent. CV LLCLos AngelesUSAR91–USDLAX Retail Magic 2 JVLos AngelesUSAR73–USDAMS-Olympic Nashville JVNashvilleUSAR83–USDHudson Group (HG) Retail, LLCNew JerseyUSAH / R100–USDNew Orleans Air Ventures IINew OrleansUSAR66–USDJFK Air Ventures II JVNew YorkUSAR80–USDHudson-NIA JFK T1 JVNew YorkUSAR90–USDHG-KCGI-TEI JFK T8 JVNew YorkUSAR85–USDSeattle Air Ventures IIOlympiaUSAR75–USDAMS-SJC JVSan JoseUSAR91–USDDufry Seattle JVSeattleUSAR88–USDHG St Louis JVSt. LouisUSAR70–USDHG National JVVirginiaUSAR70–USDGLOBAL DISTRIBUTION CENTERSInternational Operations & Services (HK) LtdHong KongHong KongD100 109,000 HKDInternational Operations & Services (CH) AGBaselSwitzerlandD100 5,000 CHFInternational Operations & Services (UY) SAMontevideoUruguayD100 50 USDInternational Operations & Services (USA) Inc.MiamiUSAD100 398 USDHEADQUARTERSDufry International AGBaselSwitzerlandH100 1,000 CHFDufry Holdings & Investments AGBaselSwitzerlandH100 1,000 CHFDufry Financial Services B. V.EindhovenNetherlandsH100–EURDufry One B. V.EindhovenNetherlandsH100–EUR* Branch of World Duty Free Group SA, SpainAS OF DECEMBER 31, 2017LOCATIONCOUNTRYTYPEOWNER-SHIP IN %SHARE CAPITAL IN THOUSANDSCURRENCY 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
208To the General Meeting of Dufry AG, BaselBasel, March 6, 2019Statutory auditor’s report on the audit of the consolidated financial statementsOpinionWe have audited the consolidated financial statements of Dufry AG and its subsidiaries (the Group), which comprise the consolidated statement of financial position as at 31 December 2018 and the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.In our opinion, the consolidated financial statements (pages 112 to 207) give a true and fair view of the consolidated financial position of the Group as at 31 December 2018, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS) and comply with Swiss law.Basis for opinionWe conducted our audit in accordance with Swiss law, International Standards on Auditing (ISAs) and Swiss Auditing Standards. Our responsibilities under those provisions and standards are further described in the Auditor’s Responsi-bilities for the Audit of the Consolidated Financial Statements section of our report.We are independent of the Group in accordance with the provisions of Swiss law and the requirements of the Swiss audit profession, as well as the IESBA Code of Ethics for Professional Accountants, and we have fulfilled our other ethical responsibilities in accordance with these requirements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.Key audit mattersKey audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the consolidated finan-cial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the consolidated financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the consolidated financial statements. 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
209Valuation of goodwill / intangible assets with indefinite useful lifeArea of FocusAs of December 31, 2018 the Group has recorded intangibles assets with indefinite useful lives of CHF 2’918 million, of which CHF 2’602 million relates to goodwill. The carrying value of goodwill and other intangible assets with indefinite useful lives is tested annually for impairment. The impairment assessment for goodwill and other intangible assets with indefinite useful lives is dependent on the estimation of future cash flows and the discount rates applied. Due to the significance of the carrying values of goodwill and other intangible assets with indefinite useful lives and the judgment involved in performing the impairment tests, this matter was considered to be significant to our audit. The accounting policies regarding goodwill and other intangible assets with indefinite useful lives applied by the Group are explained in the notes to the consolidated financial statements in sections 2.3a, 2.3n and 2.3p. Further details on intangible assets with indefinite useful lives and the annual impairment tests are disclosed in notes 3, 17 and 17.1 to the consolidated financial statements.Our audit responseWe tested, with the support of our valuation specialists, the appropriateness of the Group’s valuation model and evaluated management’s key assumptions, including growth rates used in the cash flow projections during the forecast period, the terminal growth rate assumption and the discount rate. Further, we assessed the historical accuracy of management’s estimates and considered their ability to produce accurate long-term forecasts. Our work moreover included an evaluation of management’s sensitivity analysis on changes to the key assumptions, in order to quantify the downside changes in assumptions that could result in an impairment. Our audit procedures did not lead to any reservations concerning the valuation of goodwill and other intangible assets with indefinite useful lives.Deferred tax assets – recoverability of tax loss carry forwardsArea of FocusAs of December 31, 2018 the Group has recorded deferred tax assets of CHF 239 million (gross), of which CHF 97 million relate to tax loss carry-forwards. The Group records deferred tax assets for unused tax losses to the extent that it is probable that future taxable profit will be available against which the tax losses can be utilized. This assessment requires management to estimate future taxable profits. Due to the significant judgment involved in forecasting timing and level of future taxable profits, this matter was considered to be significant to our audit.The accounting policies regarding deferred income taxes, including deferred tax assets for tax loss carry-forwards, applied by the Group are explained in the notes to the consolidated financial statements in section 2.3l. Further details on deferred income taxes, including deferred tax assets for tax loss carry-forwards, are disclosed in notes 3, 14 and 29 to the consolidated financial statements.Our audit responseWe evaluated, with the support of our taxation specialists, the model used to recognise deferred tax assets and the tax rates applied. We evaluated management’s forecasts regarding timing and level of future taxable profits by comparing these future taxable profits to historical results and assessed any significant assumptions impacting these profits. Further, we evaluated the historical accuracy of management’s estimates and ensured the consistency between management’s estimates regarding future taxable profits and other available prospective financial information, such as future cash flow estimates. Our audit procedures did not lead to any reservations concerning the recoverability of deferred tax assets for tax loss carry-forwards. 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
210Accounting for concession fees, above all minimum annual guaranteesArea of FocusAs of December 31, 2018 the Group has capitalized concession rights with definite useful lives of CHF 3’085 million and capitalized concession rights with indefinite useful lives of CHF 45 million. As of December 31, 2018, there are provisions for onerous concession contracts of CHF 33.4 million. Acquired concession rights are measured at cost as of the date of the acquisition. Concessions rights that were acquired as part of a business combination are measured at their fair value as of the date of the acquisition. Subsequently, all capitalized concessions are amortized over their useful lives. Management assesses quarterly whether there are indicators for a potential impairment of a capitalized concession right. Whenever such indicators are identified, the carrying value of a concession right is tested for impairment. For some concession rights, management estimates that the unavoidable costs of meeting the obligations under such a concession contract exceed the economic benefits expected to be received under it. In such cases, the Group records a provision for onerous concession rights, after having impaired any intangible and tangible assets associated with this concession right. Due to the significance of the carrying values of concession rights and the judgment involved in performing impairment tests or in assessing future unavoidable costs and economic benefits of a contract, this matter was considered to be significant to our audit. The accounting policies regarding concession rights and provisions for onerous concession contracts applied by the Group are explained in the notes to the consolidated financial statements in sections 2.3g, 2.3n and 2.3u, respectively. Further details on concession rights and provisions for onerous concession contracts are disclosed in notes 3, 17 and 30 to the consolidated financial statements.Our audit responseWe assessed management’s controls for identifying indicators of potential impairment. For those concession rights for which a potential impairment or need for an onerous concession contract provision was identified, we tested, with the support of our valuation specialists, the appropriateness of the Group’s valuation model and evaluated management’s key assumptions, including growth rates used in the cash flow projections during the forecast period, the terminal growth rate assumption and the discount rate. Further, we assessed the historical accuracy of management’s estimates and considered their ability to produce accurate long-term forecasts. Our audit procedures did not lead to any reser-vations concerning the valuation of concession rights and provisions for onerous concession contracts.Other information in the annual reportThe Board of Directors is responsible for the other information in the annual report. The other information comprises all information included in the annual report, but does not include the consolidated financial statements, the stand-alone financial statements, the remuneration report and our auditor’s reports thereon.Our opinion on the consolidated financial statements does not cover the other information in the annual report and we do not express any form of assurance conclusion thereon.In connection with our audit of the consolidated financial statements, our responsibility is to read the other information in the annual report and, in doing so, consider whether the other information is materially inconsistent with the con-solidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. 3 Financial Report
Consolidated Financial Statements
DUFRY ANNUAL REPORT 2018
211Responsibility of the Board of Directors for the consolidated financial statementsThe Board of Directors is responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with IFRS and the provisions of Swiss law, and for such internal control as the Board of Directors determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.In preparing the consolidated financial statements, the Board of Directors is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.Auditor’s responsibilities for the audit of the consolidated financial statementsOur objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss law, ISAs and Swiss Auditing Standards will always detect a material misstatement when it exists. Misstate-ments can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.A further description of our responsibilities for the audit of the consolidated financial statements is located at the website of EXPERTsuisse: http://www.expertsuisse.ch/en/audit-report-for-public-companies. This description forms part of our auditor’s report.Report on other legal and regulatory requirementsIn accordance with article 728a para. 1 item 3 CO and the Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of consolidated financial statements according to the instructions of the Board of Directors.We recommend that the consolidated financial statements submitted to you be approved.Ernst & Young Ltd Christian Krämer Philipp BaumannLicensed audit expert Licensed audit expert(Auditor in charge) 3 Financial Report
Financial Statements of Dufry AG
DUFRY ANNUAL REPORT 2018
212INCOME STATEMENTFOR THE YEAR ENDED DECEMBER 31, 2018 IN THOUSANDS OF CHFNOTE20182017Financial income 8,229 10,591 Franchise fee income 2,698 13,740 Other income4 15 34,544 Total income 10,942 58,875 Personnel expenses8(14,962)(33,104)General and administrative expenses(4,315)(4,154)Management fee expenses(17,889)(19,311)Financial expenses(2,316)(8)Direct taxes(2,032)(2,436)Total expenses (41,514)(59,013)(Loss) / profit for the year(30,572)(138) 3 Financial Report
Financial Statements of Dufry AG
DUFRY ANNUAL REPORT 2018
213STATEMENT OF FINANCIAL POSITIONAT DECEMBER 31, 2018IN THOUSANDS OF CHFNOTE31.12.201831.12.2017ASSETSCash and cash equivalents 217 11,052 Current receivables third parties 137 60 Current receivables subsidiaries 3,248 3,563 Prepaid expenses and accrued income 107 –Current financial assets subsidiaries– 346,000 Current assets 3,709 360,675 Investments3 4,238,415 4,238,415 Intangible assets4– 110,780 Non-current assets 4,238,415 4,349,195 Total assets 4,242,124 4,709,870 LIABILITIES AND SHAREHOLDERS’ EQUITYCurrent interest bearing liabilities 121 –Current liabilities third parties 1,661 413 Current liabilities participants and bodies 909 916 Current liabilities subsidiaries 4,571 18,025 Current liabilities other group companies– 14 Deferred income and accrued expenses 43,945 46,417 Current liabilities 51,207 65,785 Long-term interest-bearing liabilities – subsidiaries 175,717 –Non-current liabilities 175,717 –Total liabilities 226,924 65,785 Share capital6.1 269,359 269,359 Legal capital reservesReserve from capital contribution6.1 3,983,404 4,290,806 Reserve from capital contribution for own shares held in subsidiaries6.1 108,699 –Legal retained earningsOther legal reserves 5,927 5,927 Voluntary retained earningsResults carried forward13 90,499 90,637 (Loss) / profit for the year13(30,572)(138)Treasury shares7(412,116)(12,505)Shareholders’ equity 4,015,200 4,644,086 Total liabilities and shareholders’ equity 4,242,124 4,709,870 3 Financial Report
Financial Statements of Dufry AG
DUFRY ANNUAL REPORT 2018
214NOTES TO THE FINANCIAL STATEMENTS 1. CORPORATE INFORMATIONDufry AG (the company) is a publicly listed company. The shares of the Company are listed on the Swiss Stock Exchange (SIX) in Zurich.Dufry AG was incorporated in 1865 and is registered with the commercial register in the canton of Basel Stadt, Switzerland.2. ACCOUNTING POLICIES2.1 BASIS OF PREPARATIONThese financial statements of Dufry AG were prepared in accordance with the requirements of the Swiss law on Accounting and Financial Reporting (32nd title of the Swiss Code of Obligations).Where not prescribed by law, the significant accounting and valuation principles applied are described below.2.2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESFinancial AssetsFinancial assets include loans. A valuation adjustment reserve has not been accounted for. Loans granted in foreign currencies are translated at the rate at the balance sheet date, whereby unrealized losses are recorded through the income statement whereas unrealized profits are deferred within accrued liabilities.Treasury SharesTreasury shares are recognized at acquisition cost and deducted from shareholders’ equity. A gain or loss is recognized as financial income or expenses through the income statement when these shares are sold. 3 Financial Report
Financial Statements of Dufry AG
DUFRY ANNUAL REPORT 2018
215Intangible assetsIntangible assets are recognized at cost, or when generated internally they must meet additionally all the following conditions at the date of recognition: –To be identifiable and controlled by the entity; –They generate a measurable benefit for more than one year for the entity; –The costs incurred in relation with the internally generated intangible assets can be separately recognized and measured; –It is likely that the resources required to complete and market or use the intangible assets for the entity’s own purposes are available or will be made available.Intangible assets are amortized using the straight-line method. As soon as there are indications that book values may be overstated, these are reviewed and, if necessary, adjusted.Share-based paymentsThe company recognizes as personnel expenses the accrued cost of the share-base plan for the respective period against the deferred income and accrued liabilities. Any difference between the acquisition costs of treasury shares and the reserve created for this plan will be recognized in retained earnings, when the shares are assigned to the member of the share-based payment. Current and non-currnt interest-bearing liabilitiesInterest-bearing liabilities are recognized at nominal value in the balance sheet.Exchange rate differencesAll assets and liabilities denominated in foreign currencies are translated into Swiss francs (CHF) using year-end exchange rates, except investments which are recog-nized at historical values. Net unrealized exchange losses are recognized in the income statement and net unrealized gains are deferred within accrued expenses. Realized exchange gains or losses arising from business transactions denominated in foreign currencies are recognized in the income statement. Cash flow statement and additional disclosures in the notesDufry AG desisted to present additional disclosures in the notes like interest- bearing liabilities, audit fees and a cash flow statement as required by law, as this information is presented in the consolidated financial statements prepared on International Financial Reporting Standards (IFRS) basis.3. SIGNIFICANT INVESTMENTSSHARE IN CAPITAL AND VOTING RIGHTSSHARE CAPITALIN THOUSANDS OF CHF2018201720182017Dufry International AG, Switzerland100 % 100 % 1,000 1,000 Dufry Management AG, Switzerland100 % 100 % 100 100 Dufry Corporate AG, Switzerland100 % 100 % 100 100 Dufry Holdings & Investments AG, Switzerland100 % 100 % 1,000 1,000 4. RELEASE OF HIDDEN RESERVESIN THOUSANDS OF CHF20182017Intangible assets (trademarks)– 34,544 3 Financial Report
Financial Statements of Dufry AG
DUFRY ANNUAL REPORT 2018
2165. SIGNIFICANT SHAREHOLDERS’ PARTICIPATION IN PERCENTAGE (%) OF OUTSTANDING REGISTERED SHARES31.12.201831.12.2017Hainan Province Cihang Foundation20.92 % 20.92 % Group of shareholders consisting of various companies and legal entities representing the interests of: Andrés Holzer Neumann, Julián Díaz González, Juan Carlos Torres Carretero, James S. Cohen, James S. Cohen Family Dynasty Trust, Dimitrios Koutsolioutsos and Nucleo Capital Co-Investment Fund I Ltd.16.34 % 18.27 % State of Qatar6.92 % 6.92 % Franklin Resources, Inc.5.09 % –Government of Singapore5.05 % –Compagnie Financiere Rupert5.00 % 5.00 % Black Rock, Inc.3.25 % 2.64 % JP Morgan Chase0.77 % –Morgan Stanley0.48 % –Paul E. Singer–5.57 % Norges Bank (the Central Bank of Norway)–3.30 % 6. SHARE CAPITAL6.1 ORDINARY SHARESIN THOUSANDS OF CHFNUMBER OF SHARESSHARE CAPITALCAPITAL CONTRIBUTION RESERVEBalance at January 1, 2017 53,871,707 269,359 4,290,806 Balance at December 31, 2017 53,871,707 269,359 4,290,806 Distribution––(198,703)Balance at December 31, 2018 53,871,707 269,359 4,092,103 6.2 CONDITIONAL SHARE CAPITAL IN THOUSANDS OFSHARESCHFBalance at January 1, 2017 888 4,442 Balance at December 31, 2017 888 4,442 Balance at December 31, 2018 888 4,442 7. TREASURY SHARES IN THOUSANDS OFSHARESCHFBalance at January 1, 2017 100.2 14,983 Assigned to holders of RSU Awards 2014(16.0)(2,479)Share purchases––Balance at December 31, 2017 84.2 12,504 Assigned to holders of RSU Awards 2015(97.3)(14,310)Share purchases 3,392.2 413,922 Balance at December 31, 2018 3,379.1 412,116 3 Financial Report
Financial Statements of Dufry AG
DUFRY ANNUAL REPORT 2018
2178. PERSONNEL EXPENSESThe personnel expenses correspond to the share-based payments for selected members of the senior management, as described in Note 24 of Dufry Annual Report 2018, as well as in the remuneration report.Dufry AG employed less than 10 people in 2018 and 2017. 9. GUARANTEE COMMITMENT REGARDING SWISS VALUE ADDED TAX (VAT)The following companies form a tax group for the Swiss Federal Tax Administration – Main division VAT:DUFRY International AGDUFRY Management AGInternational Operations & Services (CH) AGDUFRY Corporate AGDUFRY Samnaun AGDUFRY Holdings & Investments AGDUFRY Participations AGDUFRY AGDUFRY Russia Holding AGDUFRY Altay AGDUFRY Trading AGThe Nuance Group AGDUFRY Basel Mulhouse AG10. CONTINGENT LIABILITIESDufry AG jointly and severally with Dufry International AG and Dufry Financial Services B. V. guaranteed the following credit facilities:DRAWN AMOUNT IN CHFIN MILLIONS OFMATURITYCOUPON RATECURRENCYNOMINAL IN LOCAL CURRENCY31.12.201831.12.2017MAIN BANK CREDIT FACILITIESCommitted 5-year term loan03.11.2022USD 700.0 687.0 682.0 Committed short-term financing03.11.2018EUR 500.0 – 584.6 Committed 5-years term loan (multi-currency)03.11.2022EUR 500.0 551.4 581.8 5 + 1 + 1 -year revolving credit facility (multi-currency)03.11.2023EUR 1,300.0 700.5 584.5 Uncommitted revolving credit agreementn. a.CHF 50.0 ––Subtotal 1,938.9 2,432.9 SENIOR NOTESSenior notes15.10.20242.50 % EUR 800.0 900.7 935.4 Senior notes01.08.20234.50 % EUR 700.0 788.1 818.4 Subtotal 1,688.8 1,753.8 GUARANTEE FACILITYUncomitted guarantee facilityn. a.EUR 49.0 26.2 –Subtotal 26.2 –Total 3,653.9 4,186.7 There are no assets pledged in 2018 and 2017. 3 Financial Report
Financial Statements of Dufry AG
DUFRY ANNUAL REPORT 2018
21811. PARTICIPATIONS OF THE MEMBERS OF THE BOARD OF DIRECTORS AND THE GROUP EXECUTIVE COMMITTEE IN DUFRY AGThe following members of the Board of Directors or of the Group Executive Committee of Dufry AG (including related parties) hold directly or indirectly shares or share options of the Company as at December 31, 2018 or December 31, 2017 (members not listed do not hold any shares or options):31.12.201831.12.2017IN THOUSANDSSHARESFINANCIAL INSTRUMENTS 1PARTICIP.SHARESFINANCIAL INSTRUMENTS 1PARTICIP.MEMBERS OF THE BOARD OF DIRECTORSJuan Carlos Torres Carretero, Chairman 1,001.0 71.1 11.99 % 970.3 118.3 12.02 % Andrés Holzer Neumann, Director (2017: Vice-Chairman) 4,334.4 55.2 18.15 % 4,324.0 220.8 18.44 % Jorge Born, Vice-Chairman (2017: Director) 22.0 30.9 20.10 % 22.0 30.9 20.10 % Julián Diáz Gonzalez, Director and CEO 230.0 35.1 10.49 % 263.1 43.8 10.57 % H. Jo Min, Director 0.5 –0.00 % ––0.00 % George Koutsolioutsos, Director (until June 2018)n. a. n. a. n. a. 1,608.4 200.0 3.36 % Total Board of Directors 5,587.9 192.310.73 % 7,187.8 613.8 14.48 % MEMBERS OF THE GLOBAL EXECUTIVE COMMITTEEJulián Diáz Gonzalez, CEO 230.0 35.1 10.49 % 263.1 43.8 10.57 % Andreas Schneiter, CFO 12.9 –0.02 % 7.5 –0.01 % José Antonio Gea, GCEO 14.4 –0.03 % 4.1 –0.01 % Luis Marin, CCO 4.3 –0.01 % 1.8 –0.00 % J. Gonzalez, Global Marketing and Digital Innovation Director 2.0 –0.00 % n. a. n. a. n. a. ADDITIONAL MEMBERS OF FORMER GROUP EXECUTIVE COMMITTEE (IN 2017)Jordi Martin-Consuegra, CRDn. a. n. a. n. a. 1.1 –0.00 % René Riedi, Division CEO Latin American. a. n. a. n. a. 0.9 –0.00 % Joseph DiDomizio, Division CEO North American. a. n. a. n. a. 1.0 –0.00 % Gustavo Magalhães Fagundes, GM Brazil and Bolivian. a. n. a. n. a. 6.9 –0.01 % Total Global Executive Committee (2017: Group Executive Committee) 263.6 35.1 0.55 % 286.4 43.8 0.61 % 1 The detailed terms of the various financial instruments disclosed above are as disclosed to the SIX Swiss Exchange and published on December 28, 2018, for the year 2018 and December 28, 2017, for the year 2017.2 European Capped Calls on 30,940 shares of Dufry AG. The transaction is divided into 5 tranches of 6,188 shares each, which expire on 29.07.2019, 30.07.2019, 31.07.2019, 04.08.2019 and 05.08.2019, respectively. Each tranche is automatically exercised, and the differences are to be cash settled. The strike price for each option is CHF 160, and the cap is CHF 260 per option.At December 31, 2018, a Dufry share quoted at CHF 93.04 (2017: 144.90) each. 3 Financial Report
Financial Statements of Dufry AG
DUFRY ANNUAL REPORT 2018
219In addition to the above, the shareholders’ group consisting, among others, of different legal entities controlled by Andrés Holzer Neumann, Juan Carlos Torres, Julián Díaz González (and Dimitrios Koutsolioutsos for 2017) holds sale positions of 5.09 % through options (2.739.430 voting rights) as of December 31, 2018 (as of December 31, 2017: sale positions of 7.31 % through options 3,937,130 voting rights). The detailed terms of these financial instruments are as disclosed to the SIX Swiss Exchange and published on December 28, 2018 (for sales position as of December 31, 2017: publication of disclosure notice on December 28, 2017. Disclosure notices are available on the SIX Swiss Exchange website:www.six-exchange-regulation.com/en/home/publications/ significant-shareholders.html12. PROPOSED APPROPRIATION OF RETAINED EARNINGS AND CAPITAL DISTRIBUTION IN THOUSANDS OF CHF20182017Proposed appropriation of retained earningsResult carried forward 90,499 90,637 Loss for the year (30,572) (138)Retained earnings at December 31 59,927 90,499 Proposed distribution out of capital contribution reserves 1Balance at beginning of the year 4,290,806 4,290,806 Distribution of capital reserves (198,703) - Reserves for treasury shares held by the company's subsidiaries 2 (108,699) - Reserve from capital contribution at December 31 3,983,404 4,290,806 Proposed distribution of CHF 4.00 per registered share for the financial year 2018 (199,141)Reserve from capital contribution after proposed distribution 3,784,263 4,290,806 1 Distributions are free of Swiss withholding tax and are not subject to income tax for Swiss resident individuals holding the shares as a private investment.2 Reclassification to reserve from capital contribution for own shares held in subsidiaries.Assuming that this proposal by the Board of Directors is approved by the AnnualGeneral Meeting of shareholders, payment of the distribution will be made as fromMay 16, 2019. The last trading day with entitlement to receive the dividend is May 13, 2019. As from May 14, 2019 the shares will be traded ex-dividend. 3 Financial Report
Financial Statements of Dufry AG
DUFRY ANNUAL REPORT 2018
220To the General Meeting of Dufry AG, BaselBasel, 6 March 2019Report of the statutory auditor on the financial statementsAs statutory auditor, we have audited the financial statements of Dufry AG, which comprise the income statement, statement of financial position and notes (pages 212 to 219), for the year ended 31 December 2018.Board of Directors’ responsibilityThe Board of Directors is responsible for the preparation of the financial statements in accordance with the require-ments of Swiss law and the company’s articles of incorporation. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.Auditor’s responsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity’s preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control system. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appro-priate to provide a basis for our audit opinion.OpinionIn our opinion, the financial statements for the year ended 31 December 2018 comply with Swiss law and the company’s articles of incorporation. 3 Financial Report
Financial Statements of Dufry AG
DUFRY ANNUAL REPORT 2018
221Report on key audit matters based on the circular 1 / 2015 of the Federal Audit Oversight AuthorityKey audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.We have fulfilled the responsibilities described in the Auditor’s responsibilities section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the financial statements.Recoverability of investments in subsidiariesArea of focusAs of December 31, 2018, investments in subsidiaries amounted to CHF 4’238 million and accounted for 100% of the Company’s total assets. Investments in subsidiaries are initially recorded at cost. At every balance sheet date, the carrying value of each investment is compared to its equity balance as of that date. In those cases where the equity value is below the carrying value, management tests the investment for impairment. The impairment assessment depends on the estimation of future cash flows and the discount rates applied. Due to the significance of the carrying values of the investments in subsidiaries and the judgment involved in performing the impairment tests, this matter was considered to be significant to our audit. Further details on the Company’s investments in subsidiaries are disclosed in note 3 to the financial statements.Our audit responseWe assessed the difference between the carrying amounts of the investments in subsidiaries and their equity balances. Further we examined the Company’s valuation model and evaluated management’s key assumptions. Our audit proce-dures did not lead to any reservations concerning the valuation of investments in subsidiaries.Report on other legal requirementsWe confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our independence.In accordance with article 728a para. 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of financial statements according to the instructions of the Board of Directors.We further confirm that the proposed appropriation of available earnings complies with Swiss law and the company’s articles of incorporation. We recommend that the financial statements submitted to you be approved.Ernst & Young Ltd Christian Krämer Philipp BaumannLicensed audit expert Licensed audit expert(Auditor in charge) 3 Financial Report
Financial Statements of Dufry AG
DUFRY ANNUAL REPORT 2018
222The financial reports are available under:https://www.dufry.com/en/investors/ir-reports-presentations-and-publications Page section “Presentation of results and other publications” – select Financial ReportsFor the Investor Relations and Corporate Communications contacts as well as a summary of anticipated key dates in 2019 please refer to pages 260 / 261 of this Annual Report. CORPORATE
GOVERNANCE
Listed company as of December 31, 2018
COMPANY
Dufry AG, Brunngässlein 12, 4052 Basel, Switzerland
(hereinafter “Dufry AG” or the “Company”)
INTRODUCTION
This Report is prepared in accordance with the
Corporate Governance Directive (DCG) of the SIX
Swiss Exchange. All information within this Corporate
Governance Report and within the Remuneration
Report (see page 245) refers to the Company Organi-
zation, Internal Regulations and Articles of Incor-
poration that were in effect as of December 31, 2018
(if not specifically mentioned otherwise).
The Articles of Incorporation are available on the
Company website, www.dufry.com, section Investors –
Corporate Governance – Articles of Incorporation.
www.dufry.com
Link:
www.dufry.com/en/investors/corporate-governance
page section “Featured downloads –
Articles of Incorporation”
1. GROUP STRUCTURE AND SHAREHOLDERS
1.1 GROUP STRUCTURE
For an overview of the management organizational
chart and operational Group structure, please refer
to page 18 of this Annual Report.
LISTING
Registered shares: SIX Swiss Exchange
MARKET CAPITALIZATION
CHF 5,016,533,356 as of December 31, 2018
PERCENTAGE OF SHARES HELD BY DUFRY AG
7.74 % of Dufry AG share capital as of December 31, 2018. This includes
3,304,541 registered shares (6.13 % of share capital) purchased as part
of a share buyback program of CHF 401 million, which was successfully
completed by October 31, 2018. The Company will propose to the Annual
General Meeting of Shareholders in May 2019 to cancel these shares
held as a result of the share buyback program.
SECURITY NUMBERS
Registered shares:
ISIN-Code CH0023405456, Swiss Security-No. 2340545,
Ticker Symbol DUFN
Listed consolidated subsidiary as of December 31,
2018
As of February 1, 2018, Hudson Ltd. is separately listed
on the New York Stock Exchange.
COMPANY
Hudson Ltd., 2 Church Street, Hamilton, HM 11, Bermuda
LISTING
Class A common shares: New York Stock Exchange
MARKET CAPITALIZATION
USD 1,586,565,022 as of December 31, 2018
PERCENTAGE OF SHARES HELD BY DUFRY AG
53,093,315 Class B common shares, being 57.39 % of Hudson Ltd. share
capital (93.1 % of voting rights) as of December 31, 2018
SECURITY NUMBERS
Class A common shares (listed):
ISIN-Code BMG464081030, Ticker Symbol HUD
Non-listed consolidated entities as of December 31,
2018
For a table of the operational non-listed consolidated
entities please refer to page 206 in the section Finan-
cial Statements of this Annual Report*.
*
Including the company names, locations, percentage of shares
held, share capital. The list of consolidated entities does not include
all subsidiaries of the Company, but the most important subsidiaries
in terms of sales for Retail and Distribution Center companies and
total assets for holding companies.
223
4 Governance ReportDUFRY ANNUAL REPORT 2018 1.2 SIGNIFICANT SHAREHOLDERS
Pursuant to the information provided to the Company
by its shareholders in compliance with the Financial
Market Infrastructure Act during 2018, the following
shareholders disclosed significant positions as of
December 31, 2018 1.
SHAREHOLDER
Through shares
Long position
through
financial
instruments 2
Short positions 3
Net long position
Group of shareholders consisting of various companies and legal
entities including Travel Retail Investment S.C.A., Folli Follie
Commercial Industrial and Technical S.A. and Hudson Media, Inc.,
such group representing the interests of Andrés Holzer Neumann,
Julián Díaz González, Juan Carlos Torres Carretero, James S. Cohen,
James S. Cohen Family Dynasty Trust, Dimitrios Koutsolioutsos
and Nucleo Capital Co-Investment Fund I Ltd. 4
Hainan Province Cihang Foundation 5
State of Qatar 6
Franklin Resources, Inc. 7
Government of Singapore 8
Compagnie Financiere Rupert 9
BlackRock, Inc. 10
Morgan Stanley 11
JP Morgan Chase & Co. 12
16.34 %
20.92 %
6.92 %
5.09 %
5.05 %
5.00 %
3.25 %
0.48 %
0.77 %
1.51 %
–
–
–
–
–
0.02 %
6.13 %
24.79 %
– 5.09 %
– 20.92 %
–
–
–
–
– 0.67 %
– 2.64 %
– 7.42 %
12.76 %
–
6.92 %
5.09 %
5.05 %
5.00 %
2.60 %
3.97 %
18.14 %
1
2
3
4
5
The percentage of voting rights has to be read in context with
the relevant and applicable stock exchange and disclosure rules.
The actual shareholdings may differ from the figures indicated
in the table, as the Company must only be notified by its shareholders
if one of the thresholds defined in Article 120 of the Financial Market
Infrastructure Act is crossed.
Financial instruments such as conversion and share purchase rights,
granted (written) share sale rights.
Share sale rights (especially put options) and granted (written)
conversion and /or share purchase rights as well as financial
instruments that provide for or permit cash settlement as well
as other differential transactions (e.g. contracts for difference
and /or financial futures).
Beneficial owners of these shares are: Andrés Holzer Neumann,
Wilen (Sarnen)/Switzerland, Julián Díaz González, Altendorf/Switzer-
land, Juan Carlos Torres Carretero, Meggen/Switzerland, James S.
Cohen, Alpine NJ/USA, James S. Cohen Family Dynasty Trust,
Teaneck, NJ/USA, Dimitrios Koutsolioutsos, Agios Stephanos/Greece
and Nucleo Capital Co-Investment Fund I Ltd, Grand Cayman/
Cayman Islands. Shares are directly held by the following companies
and legal entities: Travel Retail Investment S.C.A., Luxembourg/
Grand Duchy of Luxembourg, Petrus PTE Ltd, Singapore/Singapore,
Witherspoon Investments LLC, Wilmington, DE/USA, Petrus AG,
Basel/Switzerland, Laguna Partners AG, Luzern/Switzerland,
JDG Partners AG, Luzern/Switzerland, JLC Investments, LLC,
Teaneck, NJ/USA, Hudson Media, Inc., Teaneck, NJ/USA, Folli Follie
Commercial Industrial and Technical S.A., Agios Stephanos/
Greece, and Strenaby Finance Ltd., Tortola/British Virgin Islands.
Shares directly held by Hong Kong Huihaisheng Investment Co.
Limited, Hong Kong/Hong Kong and Success Horizon Limited, Hong
Kong/Hong Kong. The indirect holder of the shares is Hainan Province
Cihang Foundation, Haikou, Hainan Province/People’s Republic
of China. The only donor of Hainan Province Cihang Foundation is
the Hainan Airlines Company Limited Employees Union Committee,
Haikou, Hainan Province/People’s Republic of China. Hong Kong
Huihaisheng Investment Co. Limited and Success Horizon Limited are
indirectly fully owned by HNA Group Co,, Ltd., Haikou, Hainan Prov-
ince/People’s Republic of China, which in turn is indirectly controlled
by Hainan Province Cihang Foundation. On February 1, 2019, the
Hainan Province Cihang Foundation disclosed that it no longer held
any Company securities or financial instruments.
Shares directly held by Qatar Holding LLC, Doha/Qatar. The indirect
holder of the shares is the State of Qatar, Doha/Qatar. Qatar Holding
LLC is owned by the Qatar Investment Authority, which was founded
and is controlled by the State of Qatar.
Shares directly held by Franklin Mutual Advisors, LLC, Short Hills,
NJ/USA and Franklin Advisers, Inc., San Mateo, CA/USA. The indirect
holder of the shares is Franklin Resources, Inc., San Mateo, CA/USA.
Of the total share position of 5.09%, 0.01% relate to delegated voting
rights.
Shares directly held by GIC Private Limited (“GIC”), Singapore/
Singapore. The indirect holder of the shares is the Government
of Singapore, Singapore/Singapore. GIC is wholly owned by the
Government of Singapore (“GoS”) and manages the reserves of
Singapore. GIC acts as the fund manager for GoS and the Monetary
Authority of Singapore.
Shares directly held by Richemont Luxury Group Ltd, St Heller/
Jersey. The indirect holder of the shares is Compagnie Financiere
Rupert, Geneva/Switzerland.
6
7
8
9
10 BlackRock, Inc., New York, NY/USA. Of the total share position
of 3.27 %, 0.2 % relate to securities lending and similar transactions,
and 0.61 % to delegated voting rights.
11 Shares and financial instruments held through several affiliates.
The indirect holder of the shares and financial instruments is Morgan
Stanley, Wilmington, DE/USA. Of the total share position of 0.48 %,
0.24 % relate to securities lending and similar transactions, and
0.002 % to delegated voting rights.
12 Shares and financial instruments directly held by J.P. Morgan Securi-
ties PLC, London/UK and JPMorgan Chase Bank, N.A., Ohio/USA. The
indirect holder of the shares and financial instruments is JPMorgan
Chase & Co., New York, NY/USA.
224
4 Governance ReportDUFRY ANNUAL REPORT 2018 Further details regarding these shareholders and
shareholder groups as well as additional information
regarding the individual disclosure notices in 2018 are
available on the website of SIX Swiss Exchange at:
2. CAPITAL STRUCTURE
2.1 SHARE CAPITAL
www.six-exchange-regulation.com/en/home/
publications/significant-shareholders.html
Shareholders’ agreements
The type of understanding among the members of the
group of shareholders consisting of various compa-
nies and legal entities representing the interests of
Andrés Holzer Neumann, Julián Díaz González, Juan
Carlos Torres Carretero, James S. Cohen, James S.
Cohen Family Dynasty Trust, Dimitrios Koutsolioutsos
and Nucleo Capital Co-Investment Fund I Ltd is one
or more shareholder agreements.
1.3 CROSS-SHAREHOLDINGS
Dufry AG has not entered into cross-shareholdings
with other companies in terms of capital sharehold-
ings or voting rights in excess of 5 %.
As of December 31, 2018, the Company’s capital struc-
ture is as follows:
ORDINARY SHARE CAPITAL
CHF 269,358,535 (nominal value) divided in 53,871,707 fully paid
registered shares with nominal value of CHF 5 each
CONDITIONAL SHARE CAPITAL
CHF 4,442,160 (nominal value) divided in 888,432 fully paid registered
shares with nominal value of CHF 5 each
AUTHORIZED SHARE CAPITAL
None
For the website link regarding the Articles of Incorpo-
ration referred to in the following chapters please see
page 244 of this Corporate Governance Report.
2.2 DETAILS TO CONDITIONAL AND AUTHORIZED
SHARE CAPITAL
Conditional share capital
Article 3bis of the Articles of Incorporation, dated
March 8, 2016, reads as follows:
1. The share capital may be increased in an amount not
to exceed CHF 4,442,160 by the issuance of up to
888,432 fully paid registered shares with a nominal
value of CHF 5 each through the exercise of conver-
sion and /or option rights granted in connection with
the issuance of newly or already issued convertible
debentures, debentures with option rights or other
financing instruments by the Company or one of its
group companies.
2. The preferential subscription rights of the share-
holders shall be excluded in connection with the is-
suance of convertible debentures, debentures with
option rights or other financing instruments. The
then current owners of conversion and /or option
rights shall be entitled to subscribe for the new
shares.
3. The acquisition of shares through the exercise of
conversion and /or option rights and each subse-
quent transfer of the shares shall be subject to the
restrictions set forth in Article 5 of these Articles
of Incorporation.
4. The Board of Directors may limit or withdraw the
right of the shareholders to subscribe in priority to
convertible debentures, debentures with option
rights or similar financing instruments when they
are issued, if:
225
4 Governance ReportDUFRY ANNUAL REPORT 2018 a) an issue by firm underwriting by a consortium of
banks with subsequent offering to the public with-
out preferential subscription rights seems to be
the most appropriate form of issue at the time,
particularly in terms of the conditions or the time
plan of the issue; or
b) the financing instruments with conversion or
option rights are issued in connection with the
financing or refinancing of the acquisition of an
enterprise or parts of an enterprise or with partici-
pations or new investments of the Company.
5. If advance subscription rights are denied by the
Board of Directors, the following shall apply:
a) Conversion rights may be exercised only for up to
15 years; and option rights only for up to 7 years
from the date of the respective issuance.
b) The respective financing instruments must be is-
sued at the relevant market conditions.
The conditional share capital of CHF 4,442,160 repre-
sents 1.65 % of the issued ordinary share capital of the
Company registered in the commercial register as of
December 31, 2018.
Authorized share capital
As of December 31, 2018, the Company has no autho-
rized share capital.
2.3 CHANGES IN CAPITAL OF DUFRY AG
NOMINAL SHARE CAPITAL
December 31, 2016
December 31, 2017
December 31, 2018
CONDITIONAL SHARE CAPITAL
December 31, 2016
December 31, 2017
December 31, 2018
AUTHORIZED SHARE CAPITAL
December 31, 2016
December 31, 2017
December 31, 2018
CHF 269,358,535
CHF 269,358,535
CHF 269,358,535
CHF
CHF
CHF
4,442,160
4,442,160
4,442,160
None
None
None
Changes in capital
The capital of Dufry AG remained unchanged in fiscal
years 2016, 2017 and 2018.
2.4 SHARES
As of December 31, 2018, the share capital of Dufry AG
is divided into 53,871,707 fully paid in registered shares
with a nominal value of CHF 5 each.
226
The Company has only one category of shares. The
shares are issued in registered form. All shares are en-
titled to dividends if declared. Each share entitles its
holder to one vote. The Company maintains a share
register showing the name and address of the share-
holders or usufructuaries. Only persons registered as
shareholders or usufructuaries of registered shares in
the share register shall be recognized as such by the
Company.
2.5 PARTICIPATION CERTIFICATES AND
PROFIT SHARING CERTIFICATES
The Company has not issued any non-voting equity
securities, such as participation certificates (“Par-
tizipationsscheine”) or profit sharing certificates
(“Genussscheine”).
2.6 LIMITATION ON TRANSFERABILITY AND
NOMINEE REGISTRATION OF REGISTERED SHARES
– Only persons registered as shareholders or usu-
fructuaries of registered shares in the share regis-
ter shall be recognized as such by the Company. In
the share register, the name and address of the
shareholders or usufructuaries is recorded. Changes
must be reported to the Company.
– Acquirers of registered shares shall be registered
as shareholders with the right to vote, provided that
they expressly declare that they acquired the shares
in their own name and for their own account.
– The Board of Directors may register nominees with
the right to vote in the share register to the extent
of up to 0.2 % of the registered share capital as set
forth in the commercial register. Registered shares
held by a nominee that exceed this limit may be reg-
istered in the share register with the right to vote if
the nominee discloses the names, addresses and
number of shares of the persons for whose account
it holds 0.2 % or more of the registered share capi-
tal as set forth in the commercial register. Nominees
within the meaning of this provision are persons who
do not explicitly declare in the request for registra-
tion to hold the shares for their own account and
with whom the Board of Directors has entered into
a corresponding agreement (see also Article 5 of the
Articles of Incorporation). Nominees are only enti-
tled to represent registered shares held by them at
a General Meeting of Shareholders provided that
they are registered in the share register and they
hold a valid written proxy granted by the beneficial
owner of the registered shares instructing the nom-
inee how to vote at the General Meeting of Share-
holders. Shares held by a nominee for which it is not
able to produce such a proxy count as not repre-
sented at the General Meeting of Shareholders.
4 Governance ReportDUFRY ANNUAL REPORT 2018 – Corporate bodies and partnerships or other groups
of persons or joint owners who are interrelated
to one another through capital ownership, voting
rights, uniform management or otherwise linked as
well as individuals or corporate bodies and partner-
ships who act in concert to circumvent the regula-
tions concerning the nominees (esp. as syndicates),
shall be treated as one single nominee within the
meaning of the above mentioned regulation.
– The Board of Directors may cancel the registration,
with retroactive effect if appropriate, if the regis-
tration was effected based on false information or
in case of breach of the agreement between the
nominee and the Board of Directors.
– After consulting the party involved, the Company
may delete entries in the share register if such en-
tries occurred in consequence of false statements
by the purchaser. The purchaser must be informed
immediately of the deletion.
Exceptions granted in the year under review
The Company was registered as a foreign issuer with
the Brazilian Securities and Exchange Commission
(Comissão de Valores Mobiliários – CVM) until De-
cember 28, 2018 and had listed its shares in the form
of Brazilian Depositary Receipts (BDRs) on the São
Paulo Stock Exchange (B3 – Brasil, Bolsa, Balcão S.A.).
Each BDR issued by Itaú Unibanco S.A. (“Depositary
Institution”) of the BDR program represented one
share issued by the Company and was held in custody
by Bank of New York Mellon Depository (Nominees)
Limited, in London (“Custodian”).
BDR holders did not own, from a legal point of view,
the Dufry AG shares underlying their BDRs. As a
consequence, BDR holders were prevented from di-
rectly exercising any of the shareholders’ rights pro-
vided for by the Company’s Articles of Incorporation
and by Swiss corporate law. For example, BDR holders
were not entitled to personally participate in the Gen-
eral Meetings of the Company. However, BDR holders
were entitled to instruct the Depositary Institution to
vote the Dufry AG shares underlying their BDRs, ac-
cording to the instructions sent to them by the Depos-
itary Institution.
To facilitate voting by BDR holders, the Company had
entered into arrangements with the Depositary Insti-
tution and the Custodian in 2010 to enable, by way of
exception, registration of the Custodian in the share
register as nominee with voting rights for the number
of registered shares corresponding to the total num-
ber of outstanding BDRs. BDR holders who wished to
be in a position to directly exercise any of the share-
holders’ rights granted by Swiss corporate law or the
Company’s Articles of Incorporation had to convert
their BDRs into shares of Dufry AG and ask to be reg-
istered in the share register of the Company, pursuant
to Article 5 of the Company’s Articles of Incorporation.
The Company terminated its BDR program on No-
vember 27, 2018 and completed its delisting from the
Brazilian market pursuant to the approval by the CVM
granted on December 28, 2018.
No other exceptions have been granted during the year
under review.
Required quorums for a change
of the limitations of transferability
A change of the limitations on the transfer of regis-
tered shares or the removal of such limitations re-
quires a resolution of the General Meeting of Share-
holders passed by at least two thirds of the votes
represented and the absolute majority of the nominal
value of shares represented.
2.7 CONVERTIBLE BONDS AND OPTIONS
As of December 31, 2018, there are no outstanding
bonds that are convertible into, or warrants or options
to acquire shares issued by or on behalf of the Com-
pany. Dufry has certain share-based payments, the es-
sentials of which are disclosed in the “Remuneration
Report” on page 245 ff.
227
4 Governance ReportDUFRY ANNUAL REPORT 2018 3. BOARD OF DIRECTORS
3.1 MEMBER OF THE BOARD OF DIRECTORS
As of December 31, 2018, the Board of Directors com-
prised eight Board members compared with nine
members as of December 31, 2017.
The members of the Board of Directors are elected in-
dividually and for a term of office extending until com-
pletion of the next Ordinary General Meeting of Share-
holders. The Chairman of the Board of Directors and
the members of the Remuneration Committee are di-
rectly elected by the General Meeting of Shareholders.
The following table sets forth the name and year of
first election as a member of the Board of Directors
for each respective member, followed by their Curri-
cula Vitae with a short description of each member’s
business experience, education and activities.
BOARD OF DIRECTORS AS OF DECEMBER 31, 2018
NAME
PROFESSION
Juan Carlos Torres Carretero
Chairman of Dufry AG
Jorge Born
CEO of Bomagra S.A
Claire Chiang
Senior Vice President of
Banyan Tree Holdings Limited
POSITION
WITH DUFRY
DATE OF
FIRST ELECTION
NATIONALITY
Spanish
Argentinian
Chairman
Vice-Chairman 1
Singaporean
Director
2003
2010
2016
2013
2004
2016
2018
2018
Julián Díaz González
Group CEO of Dufry AG
Spanish
Andrés Holzer Neumann
President of Grupo Industrial Omega
Mexican
Director, Group CEO
Director 2
Heekyung Jo Min
Steven Tadler
Lynda Tyler-Cagni
Executive Vice President
of CJ Cheiljedang
Managing Partner Advent
International
CEO of Tyler Cagni Consulting Ltd
British and Italian
American
Director
Director
American
Director
1 Vice-Chairman as of October 31, 2018
2 Vice-Chairman until October 30, 2018
Changes in the Board of Directors in fiscal year 2018
Xavier Bouton and Joaquín Moya-Angeler Cabrera,
both long-time Board members of the Company since
2005, decided not to stand for re-election at the
Ordinary General Meeting of Shareholders held on
May 3, 2018. Steven Tadler and Lynda Tyler-Cagni were
elected as new members of the Board of Directors by
the same General Meeting of Shareholders. George
Koutsolioutsos resigned from the Board of Directors
on June 22, 2018, in order to focus on his other activ-
ities. As of October 31, 2018, Jorge Born has assumed
the duties of Vice-Chairman of the Board of Directors
from Andrés Holzer Neumann.
228
4 Governance ReportDUFRY ANNUAL REPORT 2018 3.2 EDUCATION, PROFESSIONAL BACKGROUND, OTHER ACTIVITIES AND FUNCTIONS
JUAN CARLOS TORRES
CARRETERO
Chairman, born 1949, Spanish
JORGE BORN
Vice-Chairman, born 1962,
Argentinian
CLAIRE CHIANG
Director, born 1951,
Singaporean
JULIÁN DÍAZ GONZÁLEZ
Director, Group Chief Executive
Officer, born 1958, Spanish
Education
MS in physics from Universidad
Complutense de Madrid and MS
in management from MIT’s Sloan
School of Management.
Professional Background
Many years of private equity and
senior management operating
experience. 1988 Joined Advent
International, a private equity
firm, in Boston as a partner.
1991 – 1995 Partner at Advent
International in Madrid. 1995 – 2016
Managing Director and Senior
Partner in charge of Advent Inter-
national Corporation’s investment
activities in Latin America.
Current Board Mandates
Dufry AG, Moncler S.p.A., and
Hudson Ltd.
Education
B.S. in economics from the
Wharton School of the University
of Pennsylvania.
Professional Background
2001 – 2010 Deputy Chairman
of Bunge Ltd. 1992 – 1997 Head
of Bunge’s European operations.
Before 1997 various capacities in
the commodities trading, oil seed-
ing processing and food products
areas in Argentina, Brazil, the
United States and Europe for
Bunge Ltd. 2004 – 2005 Board
member of Dufry AG. Since 1997
President and Chief Executive
Officer of Bomagra S.A., Argentina.
Current Board Mandates
Dufry AG, Hochschild Mining, Ltd.
and Fundación Bunge y Born
(Chairman).
Mr. Born served as a member
of the Board of Directors of Dufry
South America, Ltd. until its
merger with Dufry Holdings &
Investments AG in March 2010.
Education
Masters in Philosophy from the
University of Hong Kong and an
Undergraduate Degree from the
University of Singapore.
Education
Degree in business
administration from Universidad
Pontificia Comillas I.C.A.D.E.,
de Madrid.
Professional Background
Founder and Managing Director
of Banyan Tree Gallery, and Co-
founder and Senior Vice President
of Banyan Tree Resort Group
(part of Singapore stock exchange
listed Banyan Tree Holdings
Limited) since 1994. Member of
Parliament for the Government
of Singapore from 1997 to 2001.
Current Board Mandates
Dufry AG, ISS A/S, Banyan Tree
Holdings Limited, Banyan Tree
Gallery (Singapore) Pte. Ltd.
and Mandai Safari Park Holdings
Pte. Ltd.
Professional Background
1989 – 1993 General Manager
at TNT Leisure, S.A. 1993 – 1997
Division Director at Aldeasa.
1997 – 2000 various managerial
and business positions at
Aeroboutiques de Mexico, S.A.
de C.V. and Deor, S.A. de C.V.
2000 – 2003 General Manager
of Latinoamericana Duty-Free,
S.A. de C.V. Since 2004 Chief
Executive Officer at Dufry AG.
Current Board Mandates
Dufry AG, Distribuidora Interna-
cional de Alimentacion, S.A. (DIA),
and Hudson Ltd.
229
4 Governance ReportDUFRY ANNUAL REPORT 2018 independent
ANDRÉS HOLZER NEUMANN
Director, born 1950,
Mexican
HEEKYUNG JO MIN
Director, born 1958,
American
STEVEN TADLER
Director, born 1949,
American
LYNDA TYLER-CAGNI
Director, born 1956,
British and Italian
Education
Graduate of Boston University,
holds an MBA from Columbia
University.
Professional Background
Since 1973 President of Grupo
Industrial Omega, S.A. de C.V.,
the holding company of Holzer
y CÌA, S.A. de C.V., Industria
Nacional de Relojes Suizos, S.A.
de C.V., Consorcio Metropolitano
Inmobiliario, S.A. de C.V.,
Inmobiliara Coapa Larca, S.A.
de C.V., Inmobiliara Castellanos,
S.A. de C.V., and Negocios
Creativos, S.A. de C.V.
Current Board Mandates
Dufry AG and Inversiones (SOHO)
Amilena, Inc.
Education
Master in Business Administration
from Columbia Graduate School
of Business (Columbia University
of New York) and an Undergradu-
ate Degree from Seoul National
University.
Professional Background
2004 – 2005 Executive Vice
President at Prudential Investment
and Securities Co. in Korea.
2006 Country Advisor, Global
Resolutions in Korea. 2007 – 2010
Director General at Incheon Free
Economic Zone in Korea. Since
2011, Executive Vice President
of Global Creating Shared Value
of CJ Cheiljedang, focusing on
Corporate Social Responsibility
and Sus tainability of CJ
Corporation, a publicly-listed
multi- industry Korean conglom-
erate with retail operations.
Current Board Mandates
Dufry AG, Asia New Zealand
Foundation (Honorary Advisor),
CJ Welfare Foundation, and
Hudson Ltd.
Education
Master in Business Administration
from Harvard Business School.
B.S., with distinction, from the
University of Virginia.
Education
B.A. (Hons) in Languages,
Economics & Politics from the
University of Kingston, London.
Professional Background
1985 Joined Advent International
as Managing Partner. Serves as a
Director of Advent International
Corp (since 2002) and Bojangles’,
a restaurant operator and fran-
chisor listed on the NASDAQ
and wTe Corporation (since 1989).
Previous board mandates include
Dufry AG (2010 – 2013), Skill-soft
(2020 – 2014) and Transunion
(2012 – 2017).
Current Board Mandates
Dufry AG, Advent International
Corp, Bojangles’, and wTe Corpo-
ration.
Professional Background
Lynda Tyler-Cagni is the founder
and CEO at Only the Best Agency
Ltd, a consulting company advising
and representing talent primarily
in the fashion, retail and FMCG
sectors since 2015. She also served
as a Director at Atlantia SpA, an
Italian listed global oper ator in the
motorway and airport infrastruc-
ture sector until November 2018.
Ms. Tyler-Cagni previously served
on the Board of World Duty Free
Group as a non-executive and inde-
pendent member and chair of
the HR & Remuneration Committee
(from 2013 until the acquisition
of World Duty Free Group by
Dufry AG). She was also an advisor
to the management Board of
Bonpoint and held various manage-
ment positions with Fast Retailing
Group, Uniqlo and Ermenegildo
Zegna.
Current Board Mandates
Dufry AG and EDHEC Paris.
230
4 Governance ReportDUFRY ANNUAL REPORT 2018
Messrs. Juan Carlos Torres Carretero (Chairman),
Andrés Holzer Neumann and Julián Díaz González
(Directors) are members of a group of shareholders,
which held a 17.85 % purchase position of Dufry AG as
of December 31, 2018 (participation mentioned in-
cludes financial instruments). See for details the dis-
closure under “1.2 Significant Shareholders” on page
224 of this Annual Report.
Due to his intense involvement with the Company’s
management, the Chairman of the Board of Directors,
Mr. Juan Carlos Torres Carretero is considered an ex-
ecutive Chairman. Mr. Julián Díaz González acts as
Group Chief Executive Officer. All other members of the
Board of Directors are non-executive members. None
of the current members of the Board of Directors (ex-
cept Julián Díaz González as Group CEO) have ever been
in a managerial position at Dufry AG or any of its sub-
sidiaries. For information on related parties and related
party transactions please refer to Note 41 on page 203
and to the information provided in the Remuneration
Report on page 245 ff. of this Annual Report.
3.3 RULES IN THE ARTICLES OF INCORPORATION
REGARDING THE NUMBER OF PERMITTED
MANDATES OUTSIDE THE COMPANY
For the website link regarding the Articles of Incorpo-
ration referred to in the following chapters please see
page 244 of this Corporate Governance Report.
In accordance with Article 24 para. 2 of the Articles of
Incorporation, dated March 8, 2016, no member of the
Board of Directors may hold more than four additional
mandates in listed companies and ten additional man-
dates in non-listed companies. The following mandates
are not subject to the limitations under para. 2 of this
Article:
a) mandates in companies which are controlled by the
Company or which control the Company;
b) mandates held at the request of the Company or any
company controlled by it. No member of the Board
of Directors may hold more than ten such mandates;
and
c) mandates in associations, charitable organizations,
foundations, trusts and employee welfare founda-
tions. No member of the Board of Directors may
hold more than ten such mandates.
Mandates shall mean mandates in the supreme gov-
erning body of a legal entity which is required to be
registered in the commercial register or a comparable
foreign register. Mandates in different legal entities
that are under joint control or the same beneficial
ownership are deemed one mandate.
3.4 ELECTION AND TERMS OF OFFICE
In accordance with Article 13 of the Articles of Incor-
poration, dated March 8, 2016:
– The Board of Directors shall consist of at least three
and at most nine members.
– Members of the Board of Directors and the Chair-
man of the Board of Directors shall be elected for
a term of office extending until completion of the
next Ordinary General Meeting of Shareholders.
– The members of the Board of Directors and the
Chairman of the Board of Directors may be re-
elected without limitation.
– If the office of the Chairman of the Board of Direc-
tors is vacant, the Board of Directors shall appoint
a Chairman from among its members for a term of
office extending until completion of the next Ordi-
nary General Meeting of Shareholders.
– Except for the election of the Chairman of the Board
of Directors and the members of the Remuneration
Committee by the General Meeting of Sharehold-
ers, the Board of Directors determines its own or-
ganization. The Board of Directors shall elect a Vice-
Chairman. It shall appoint a Secretary who does not
need to be a member of the Board of Directors.
Article 24 para. 1 of the Articles of Incorporation
stipulates the following: As members of the Board
of Directors only persons may be elected who served
a minimum of four years in aggregate on the Board
of Directors or on the Executive Management of each
of (i) one or several travel retail company(ies) with
operations in more than one continent at the end of at
least one year of the years of activity of such person,
and (ii) one or several publicly listed retail company(ies)
with an annual turnover of at least CHF 3 billion at the
end of at least one year of the years of activity of such
person. The requirements under (i) and (ii) above can
be fulfilled by the same or several cumulated position(s)
held by such person.
All members of the Board of Directors were elected in
individual elections at the Ordinary General Meeting
of Shareholders held on May 3, 2018. The same
General Meeting re-elected Juan Carlos Torres Carret-
ero as Chairman of the Board of Directors. Mr. Jorge
Born was re-elected, and Ms. Claire Chiang and Ms.
Lynda Tyler-Cagni were elected in individual elections
as members of the Remuneration Committee.
231
4 Governance ReportDUFRY ANNUAL REPORT 2018 THE BOARD COMMITTEES AS OF DECEMBER 31, 2018
MEMBER OF THE BOARD
OF DIRECTORS
BOARD OF DIRECTORS
AUDIT COMMITTEE
NOMINATION COMMITTEE
Juan Carlos Torres Carretero
Jorge Born 1
Chairman
–
Vice-Chairman
Committee Chairman
Claire Chiang
Director
Julián Díaz González
Andrés Holzer Neumann 1
Heekyung Jo Min
Steven Tadler 2
Lynda Tyler-Cagni 2
Number of meetings
in fiscal year 2018
Average attendance ratio 3
Director / Group CEO
Director
Director
Director
Director
8
94 %
–
–
–
Committee Member
Committee Member
–
6
89 %
Committee Member
Committee Chairman 1
–
–
Committee Member 1
–
–
–
2
100 %
REMUNERATION
COMMITTEE
–
Committee Member
Committee Member
–
–
–
–
Committee Chairwoman
4
83 %
1 Andrés Holzer Neumann temporarily renounced his additional function as Vice-Chairman of the Board of Directors and Chairman of the Nomination
Committee as of October 30, 2018. He continues to serve as a Board member. The Board of Directors has elected Jorge Born to assume the duties
of Vice-Chairman of the Board as well as Chairman of the Nomination Committee from Mr. Holzer Neumann as of October 31, 2018.
3 Members of the Board of Directors since the Ordinary General Meeting of Shareholders held on May 3, 2018.
3 The average attendance ratio regarding the Committees refers directly to the members of the respective Committee. Additional participants
who participate as guests in Committee meetings are not included in the percentage calculations. For the newly elected Board members, their
attendance ratios are calculated as of the date of their election at the Ordinary General Meeting of Shareholders in 2018.
3.5 INTERNAL ORGANIZATIONAL STRUCTURE
Except for the election of the Chairman of the Board
of Directors and the members of the Remuneration
Committee (which are to be elected by the General
Meeting of Shareholders), the Board of Directors
determines its own organization. It shall elect its
Vice-Chairman, the members of the Audit Committee
and of the Nomination Committee, and appoint a
Secretary who does not need to be a member of the
Board of Directors.
As of December 31, 2018, Dufry AG has three com-
mittees: the Audit Committee, the Nomination Com-
mittee and the Remuneration Committee. All three
Committees are assisting the Board of Directors in
fulfilling its duties and have also decision authority to
the extent described below.
Audit Committee
Members as of December 31, 2018: Jorge Born (Chair-
man Audit Committee), Heekyung Jo Min, Steven Tadler.
The members of the Audit Committee are all non-
executive and independent members of the Board of
Directors. Pursuant to item 14 of the Swiss Code of Best
Practice for Corporate Governance (SCBP), an inde-
pendent member is a non-executive member, who has
not been an executive member of the Dufry Group in
the last three years and has no or comparatively mi-
nor business relations with the Company. The mem-
bers shall be appointed, as a rule, for the entire dura-
tion of their mandate as Board members and be
re-eligible.
The Audit Committee assists the Board of Directors
in fulfilling its duties of supervision of management. It
is responsible for the review of the performance and
independence of the Auditors, the review of and the
decision on the audit plan and the audit results and the
monitoring of the implementation of the findings by
management, the review of the internal audit plan, the
assessment of the risk management and the decision
on proposed measures to reduce risks, the review of
the compliance levels and risk management, as well as
the review to propose whether the Board of Direc-
tors should accept the Company’s accounts. The
Audit Committee regularly reports to the Board of
Directors on its decisions, assessments, findings and
proposes appropriate actions. The Audit Committee
generally meets at the same dates the Board of Direc-
tors meetings take place (usually 4 – 5 times per year),
although the Chairman may call meetings as often as
business requires. The length of the meetings lasted
usually for approximately 2 to 3 hours in fiscal year
2018, during which the Audit Committee held 6 meet-
232
4 Governance ReportDUFRY ANNUAL REPORT 2018 ings. The auditors attended 3 meetings of the Audit
Committee in 2018. The Chairman of the Board of
Directors usually participates as a guest in the Audit
Committee meetings. Members of the Global Execu-
tive Committee attended meetings of the Audit Com-
mittee as follows: Group CEO 5 meetings, the CFO
(who acts as Secretary of the Audit Committee) 6
meetings, and the Group Deputy CEO 1 meeting.
Nomination Committee
Members as of December 31, 2018: Jorge Born (Chair-
man Nomination Committee), Juan Carlos Torres
Carretero, Andrés Holzer Neumann.
The members of the Nomination Committee, with ex-
ception of the executive Chairman of the Board of Di-
rectors, are non-executive and independent members
of the Board of Directors. Pursuant to item 14 of the
Swiss Code of Best Practice for Corporate Gover-
nance (SCBP), an independent member is a non-ex-
ecutive member, who has not been an executive mem-
ber of the Dufry Group in the last three years and has
no or comparatively minor business relations with the
Company. The members shall be appointed, as a rule,
for the entire duration of their mandate as Board
members and be re-eligible.
The Nomination Committee assists the Board of
Directors in fulfilling its nomination related matters.
It is responsible for assuring the long-term planning
of appropriate appointments to the positions of the
Group CEO and the Board of Directors, reviewing the
curriculum vitae, credentials and experience of the
candidates proposed by the Board of Directors to fill
vacancies on the Board of Directors or for the posi-
tion of the Group CEO, making recommendations on
Board composition and balance, presenting to the
Board a proposal of succession plan for the position
of the Group CEO at least once a year, and reviewing
the adequacy of the selection system and criteria used
for the appointment of the members of the Global Ex-
ecutive Committee. The Nomination Committee meets
as often as business requires (usually 2 – 4 meetings
per year). The 2 meetings held in the fiscal year 2018
lasted about 1 to 2 hours. Members of the Global Ex-
ecutive Committee attended meetings of the Nomina-
tion Committee as follows: Group CEO 2 meetings.
Remuneration Committee
Members as of December 31, 2018: Lynda Tyler-Cagni
(Chairwoman Remuneration Committee), Jorge Born,
Claire Chiang.
The members of the Remuneration Committee are all
non-executive and independent members of the Board
of Directors. Pursuant to item 14 of the Swiss Code of
Best Practice for Corporate Governance (SCBP), an
independent member is a non-executive member, who
has not been an executive member of the Dufry Group
in the last three years and has no or comparatively
minor business relations with the Company. The mem-
bers shall be appointed by the General Meeting of
Shareholders until the next Ordinary General Meeting
of Shareholders and be re-eligible.
The Remuneration Committee assists the Board of
Directors in fulfilling its remuneration related matters.
It is responsible for the review of the remuneration
system of the Company and for proposals in relation
thereto to the Board of Directors. The Remuneration
Committee makes recommendations regarding the
proposals of the Board of Directors in relation to the
maximum aggregate amount of compensation of the
Board and of the Global Executive Committee to be
submitted to the General Meeting of Shareholders of
the Company for approval, as well as in relation to the
remuneration package of the Group CEO and the
members of the Board. The Remuneration Committee
makes proposals on the grant of options or other se-
curities under any other management incentive plan
of the Company, if any. The Remuneration Committee
reviews and recommends to the Board of Directors
the Remuneration Report. The Remuneration Commit-
tee meets as often as business requires (usually 4
meetings per year). The 4 meetings held in the fiscal
year 2018 lasted about 1 to 2 hours. The Chairman of
the Board of Directors usually participates as a guest
in the Remuneration Committee meetings. Members
of the Global Executive Committee attended meetings
of the Remuneration Committee as follows: Group
CEO 4 meetings.
Work method of the Board of Directors
As a rule, the Board of Directors meets about six to
seven times a year (usually at least once per quarter).
Additional meetings or conference calls are held as and
when necessary. The Board of Directors held 8 meet-
ings during fiscal year 2018, of which one was held as
a telephone conference. The meetings of the Board of
Directors usually lasted about 3 hours. The Chairman
determines the agenda and items to be discussed
at the Board meetings. All members of the Board of Di-
rectors can request to add further items on the agenda.
The Group CEO, the CFO, the Deputy Group CEO and
the Group General Counsel, also acting as Secretary
to the Board, attend the meetings of the Board of Di-
rectors. Other members of the Global Executive
Committee may attend meetings of the Board of Di-
rectors as and when required. Members of the Global
233
4 Governance ReportDUFRY ANNUAL REPORT 2018 Executive Committee attended meetings of the Board
of Directors in 2018 as follows: Group CEO 8 meetings,
CFO 8 meetings, Deputy Group CEO 5 meetings,
Group General Counsel 8 meetings, Global Market-
ing and Digital Innovation Director 2 meetings.
The Board of Directors also engages specific advisors
to address specific matters when required. External
financial advisors attended pertinent portions of
4 meetings of the Board of Directors in 2018. The ex-
ternal Auditors attended 3 meetings of the Audit
Committee in 2018.
3.6 DEFINITION OF AREAS OF RESPONSIBILITY
The Board of Directors is the ultimate corporate body
of Dufry AG. It further represents the Company to-
wards third parties and shall manage all matters
which by law, the Articles of Incorporation or the
Board regulations have not been delegated to an-
other body of the Company.
In accordance with the Board regulations (“Organisa-
tionsreglement”), the Board of Directors has delegated
the operational management of the Company to the
Group CEO who is responsible for overall management
of the Dufry Group. The following responsibilities re-
main with the Board of Directors:
– Ultimate direction of the business of the Company
and the power to give the necessary directives;
– Determination of the organization of the Company;
– Administration of the accounting system, financial
control and financial planning;
– Appointment and removal of the members of the
committees installed by itself as well as the persons
entrusted with the management and representation
of the Company, as well as the determination of
their signatory power;
– Ultimate supervision of the persons entrusted with
the management of the Company, in particular with
respect to their compliance with the law, the Arti-
cles of Incorporation, regulations and directives;
– Preparation of the business report, the remunera-
tion report and the General Meetings of Sharehold-
ers and to carry out the resolutions adopted by the
General Meeting of Shareholders;
– Notification of the judge if liabilities exceed assets;
– Passing of resolutions regarding the subsequent
payment of capital with respect to non-fully paid in
shares;
– Passing of resolutions confirming increases in share
capital and the amendments of the Articles of In-
corporation entailed thereby;
– Non-delegable and inalienable duties and powers of
the Board of Directors pursuant to the Swiss Merger
Act;
– To approve any non-operational or non-recurring
transaction not included in the annual budget and
exceeding the amount of CHF 10,000,000;
– To issue convertible debentures, debentures with
option rights or other financial market instruments;
– To approve the annual investment and operating
budgets of the Company and the Dufry Group;
– To approve the executive regulations promulgated
in accordance with the board regulations; and
– To propose an independent voting rights represen-
tative for election to the General Meeting of Share-
holders, and to appoint an independent voting rights
representative in the event of a vacancy.
Except for the Chairman of the Board of Directors,
who has single signature authority, the members of the
Board have joint signature authority, if any.
3.7 INFORMATION AND CONTROL INSTRUMENTS
VIS-À-VIS THE SENIOR MANAGEMENT
The Board of Directors ensures that it receives suffi-
cient information from the management to perform
its supervisory duty and to make the decisions that
are reserved to the Board through several means:
– Dufry Group has an internal management informa-
tion system that consists of financial statements,
performance indicators and risk management. In-
formation to management is provided on a regular
basis according to the cycles of the business: sales
on a weekly basis; income statement, cash manage-
ment and key performance indicator (KPI) including
customer, margins and investment information,
balance sheet and other financial statements on
a monthly basis. The management information is
prepared on a consolidated basis as well as per
division. Financial statements and key financial
indicators / ratios are submitted to the entire Board
of Directors on a quarterly basis.
– During Board meetings, each member of the Board
may request information from the other members
of the Board, as well as from the members of the
management present on all affairs of the Company
and the Group.
– Outside of Board meetings, each member of the
Board may request from the Group CEO information
concerning the course of business of the Company
and the Group and, with the authorization of the
Chairman, about specific matters.
– The Group CEO reports at each meeting of the
Board of Directors on the course of business of the
Company and the Group in a manner agreed upon
234
4 Governance ReportDUFRY ANNUAL REPORT 2018 – Dufry has in place an Enterprise Risk Management
program which sets out the approach for assessing
compliance with: relevant laws, corporate policies
and procedures, tax regulations, agreements or
contracts and integrity policy, anticipating exter-
nally imposed guidelines and preventing losses.
The program is sponsored by the Global Executive
Committee and based on the concept of direct
stakeholder assurance feedback, and is distributed
among all operations and areas.
– All the results of these Global Internal Audit activi-
ties are communicated to key management in charge
and to the Group’s senior management, including all
the members of the Global Executive Committee on
an on-going basis, and also to the Audit Committee.
– Detailed information on the financial risk manage-
ment is provided in Notes 36 to 40 in the Financial
Statements of this Annual Report.
from time to time between the Board and the Group
CEO. Apart from the meetings, the Group CEO
reports immediately any extraordinary event and
any change within the Company and within the
Dufry Group to the Chairman.
– For attendance of the members of the Global Exec-
utive Committee at meetings of the Board of Direc-
tors or meetings of the Board Committees please
refer to section “3.5 Internal organizational struc-
ture” above.
– The Audit Committee met 6 times in 2018 with man-
agement to review the business, better understand
laws, regulations and policies impacting the Dufry
Group and its business and support the manage-
ment in meeting the requirement and expectations
of stakeholders. In meetings of the Audit Committee,
the CFO acts as Secretary to the Committee. The
Auditors are invited to the meetings of the Audit
Committee and attended 3 meetings of the Audit
Committee in 2018. Among these meetings some or
part of them are also held without management.
– The Global Internal Audit department provides
independent risk-based and objective assurance
reviews, loss prevention advice, and risk exposure
analysis to group companies through three differ-
ent activities streams: Internal Audit, Investigations
and Enterprise Risk Management.
– Internal auditing is an independent function that pro-
vides objective assurance and consulting activity,
aiming to improve the organization’s operations. The
selection of Internal Audit reviews to be executed
during the year is based on specific methodology
throughout the Dufry Group and includes the
consideration of internal and external factors.
In fiscal year 2018, the Global Internal Audit con-
ducted 17 reviews, examining Headquarters activi-
ties, Divisional functions and Distribution Centers
in addition to 55 operations in all Divisions, repre-
senting a coverage of more than 90 % of 2018 group
net sales including non-consolidated entities. Reg-
ular follow-up is performed to ensure that risk mit-
igation and control improvement measures are im-
plemented on a timely basis.
– The Global Investigations activity was created to
prevent losses and misappropriations within the
group. The day-to-day work is designed to leverage
profitability using advanced data mining and anti-
fraud techniques. Currently, validations are per-
formed monthly or bi-monthly for all group com-
panies and results are proven to provide valuable
information for loss prevention purposes. Addition-
ally, Dufry is continuously trying to use new data
mining techniques to establish validations that can
enhance the coverage and create a higher assur-
ance level over the key retail risks.
235
4 Governance ReportDUFRY ANNUAL REPORT 2018 4. GLOBAL EXECUTIVE COMMITTEE
4.1 MEMBERS OF THE GLOBAL
EXECUTIVE COMMITTEE
The following table sets forth the name and year of ap-
pointment of the respective members, followed by their
Curricula Vitae with a short description of each mem-
ber’s business experience, education and activities.
As of December 31, 2018, the Global Executive Com-
mittee comprised seven executives compared to the
former Group Executive Committee with twelve mem-
bers as of December 31, 2017.
All agreements entered into with the members of the
Global Executive Committee are entered for an indefi-
nite period of time.
The Global Executive Committee under the control of
the Group CEO, conducts the operational management
of the Company pursuant to the Company’s board reg-
ulations. The Group CEO reports to the Board of Direc-
tors on a regular basis.
GLOBAL EXECUTIVE COMMITTEE AS OF DECEMBER 31, 2018
NAME
NATIONALITY
POSITION
Julián Díaz González
Andreas Schneiter
José Antonio Gea
Luis Marin
Pascal C. Duclos
Eugenio Andrades
Javier Gonzalez
Spanish
Swiss
Spanish
Spanish
Swiss
Spanish
Spanish
Group Chief Executive Officer (Group CEO)
Chief Financial Officer (CFO)
Deputy Group Chief Executive Officer (Deputy Group CEO)
Global Chief Corporate Officer (GCCO)
Group General Counsel (GGC)
Chief Executive Officer Europe, Africa and Strategy
Global Marketing and Digital Innovation Director
ADDITIONAL GLOBAL EXECUTIVE COMMITTEE MEMBERS AS OF JANUARY 18, 2019
NAME
NATIONALITY
POSITION
Andrea Belardini
René Riedi
Roger Fordyce
Italian
Swiss
Divisional Chief Executive Officer (Asia Pacific and Middle East)
Divisional Chief Executive Officer (Central and South America)
American
Divisional Chief Executive Officer (North America)
ADDITIONAL GLOBAL EXECUTIVE COMMITTEE MEMBER AS OF APRIL 1, 2019
NAME
NATIONALITY
POSITION
Yves Gerster
Swiss
Chief Financial Officer (CFO)
GEC MEMBER
SINCE YEAR
2004
2012
2004
2014
2005
2016
2018
GEC MEMBER
SINCE YEAR
2019
2019
2019
GEC MEMBER
SINCE YEAR
2019
236
4 Governance ReportDUFRY ANNUAL REPORT 2018 4.2 EDUCATION, PROFESSIONAL BACKGROUND, OTHER ACTIVITIES AND VESTED INTERESTS
Members of Global Executive Committee (as of December 31, 2018)
JULIÁN DÍAZ GONZÁLEZ
Group Chief Executive Officer,
born 1958, Spanish
ANDREAS SCHNEITER
Chief Financial Officer,
born 1970, Swiss
JOSÉ ANTONIO GEA
Deputy Group Chief Executive
Officer, born 1963, Spanish
LUIS MARIN
Global Chief Corporate Officer,
born 1971, Spanish
Education
Degree in business administration
from Universidad Pontificia
Comillas I.C.A.D.E., de Madrid.
Professional Background
1989 – 1993 General Manager
at TNT Leisure, S.A. 1993 – 1997
Division Director at Aldeasa.
1997 – 2000 various managerial
and business positions at
Aeroboutiques de Mexico, S.A.
de C.V. and Deor, S.A. de C.V.
2000 – 2003 General Manager
of Latinoamericana Duty-Free,
S.A. de C.V. Since 2004 Chief
Executive Officer at Dufry AG.
Current Board Mandates
Dufry AG, Distribuidora Interna-
cional de Alimentacion, S.A. (DIA),
and Hudson Ltd.
Education
Degree in business administration
and specialization in finance at
School of Economy and Business
Administration Berne.
Professional Background
1998 – 2003 various positions
at UBS Warburg in Zurich in the
area of Mergers and Acquisitions.
Joined Dufry in 2003 as Head
Corporate Controlling.
2004 – 2012 Head Group Treasury
and since 2005 additionally
Investor Relations at Dufry.
Since 2012 Chief Financial Officer
at Dufry AG.
Education
Degree in economics and business
sciences from Colegio Universitario
de Estudios Financieros.
Education
Degree in Economic Sciences
and Business Administration from
Universidad de Barcelona.
Professional Background
1989 – 1995 various positions at
TNT Express Espana, S.A. Director
of Blue Cow Division (1993 – 1995).
1995 – 2003 various managerial
positions at Aldeasa. Left Aldeasa
as Director of Operations.
2004 – 2017 Global Chief Operating
Officer at Dufry AG. Since 2018
Deputy Group Chief Executive
Officer at Dufry AG.
Professional Background
1995 – 1998 Auditor at Coopers &
Lybrand. 1998 – 2001 Financial
Controller at Derbi Motocicletas –
Nacional Motor S.A. 2001 – 2004
Head of Finance and Administra-
tion of Spanish subsidiaries of
Areas (member of the French
group Elior). Joined Dufry in 2004,
as Business Controlling Director
and since 2012, also responsible
for mergers and acquisitions.
Since 2014 Chief Corporate
Officer, since 2018 Global Chief
Corporate Officer at Dufry AG.
237
4 Governance ReportDUFRY ANNUAL REPORT 2018
PASCAL C. DUCLOS
Group General Counsel,
born 1967, Swiss
EUGENIO ANDRADES
Chief Executive Officer Europe,
Africa and Strategy, born 1968,
Spanish
JAVIER GONZALEZ
Global Marketing and Digital
Innovation Director, born 1976,
Spanish
Education
Licence en droit from Geneva
University School of Law, L.L.M.
from Duke University School of
Law. Licensed to practice law in
Switzerland and admitted to the
New York Bar.
Professional Background
1991 – 1997 Senior attorney at law
at Geneva law firm Davidoff &
Partners. Also academic assistant
at the University of Geneva School
of Law (1994 – 1996). 1999 – 2001
Attorney at law at New York law
firm Kreindler & Kreindler.
2001 – 2002 Financial planner at
UBS AG in New York. 2003 –2004
Senior foreign attorney at law at
the Buenos Aires law firm Beretta
Kahale Godoy. Since 2005 General
Counsel and Secretary to the
Board of Directors at Dufry AG.
Education
Degree in Mining Engineering at
Politécnica University of Madrid.
MS of Economics and Strategy
of Colorado School of Mines,
Colorado/USA.
Professional Background
Prior to 1996 Consultant at
McKinsey & Co and Carboex,
a subsidiary of Endesa. 1996 – 2001
Director of Strategy & Develop-
ment and Investor Relations at
Aldeasa. 2001 Chief Executive
Officer Jordan and Middle East
region at Aldeasa. 2002 – 2007
Director of Strategy & Develop-
ment and Investor Relations at
Aldeasa. 2007 – 2010 Commercial
Director and Operations Coordi-
nator at Aldeasa. 2011 – 2014 Chief
Commercial Officer at World Duty
Free Group. 2014 – 2015 Chief
Executive Officer at World Duty
Free Group. 2016 – 2017 Chief
Executive Officer Division UK,
Central and Eastern Europe at
Dufry AG. 2018 Chief Executive
Officer Operations and Strategy
at Dufry AG. Since January 2019
Chief Executive Officer Europe,
Africa and Strategy at Dufry AG.
Education
Executive MBA from La Salle
University Philadelphia, Basel.
Degree in Business Administration
and Economics, EBS, Madrid.
Professional Background
1998 – 1999 Marketing Executive
at Coca Cola. 1999 – 2001
In-Store & Events Manager at
Lego Iberia. 2001 – 2002 In-Store
Marketing Manager at British
American Tobacco. 2002 – 2004
Sales Manager at British American
Tobacco. 2004 – 2005 Business
Unit Marketing Manager at British
American Tobacco. 2005 – 2009
International Senior Brand
Manager at British American
Tobacco. 2009 – 2011 Senior
Marketing Manager at Dufry AG.
2011 – 2014 Global Marketing
Director at Dufry AG. 2014 – 2016
Global Retail Operations and
Marketing Director at Dufry AG.
Since 2016 Global Marketing
and Digital Innovation Director
at Dufry AG.
238
4 Governance ReportDUFRY ANNUAL REPORT 2018
Additional members of the Global Executive Committee (as of January 18, 2019 and April 1, 2019)
ANDREA BELARDINI
Chief Executive Officer Division
Asia Pacific and Middle East,
born 1968, Italian
RENÉ RIEDI
Chief Executive Officer Division
Central and South America, born
1960, Swiss
ROGER FORDYCE
Chief Executive Officer Division
North America, born 1955,
American
YVES GERSTER
Chief Financial Officer, born 1978,
Swiss
Education
Degree in Business and
Economics, University of Rome
(La Sapienza).
Education
Degree in business administration
from the School of Economy and
Business Administration Zurich.
Education
Bachelor of Arts in Psychology
from SUNY Stony Brook.
Education
Degree in Business Administration
& Finance, University of Basel.
Professional Background
1999 – 2003 Assistant Group
Treasurer at Danzas Management
AG. 2003 – 2006 Assistant Group
Treasurer at Bucher Industries AG.
Nov 2006 – 2019 Global Head
Group Treasury at Dufry Interna-
tional AG. As of April 2019 Chief
Financial Officer at Dufry AG.
Professional Background
1991 – 1996 various positions
as Controller and Project Manager
at Carlson Wagonlit Travel.
1997 – 1999 Director of Operations
Italy at Carlson Wagonlit Travel.
1999 – 2000 Vice President
Operations South Europe
at Carlson Wagonlit Travel.
2000 – 2004 Executive Vice
President Strategy & Development
at Aeroporti di Roma. 2004 – 2009
Executive Vice President
Commercial Business Manage-
ment & Development at Aeroporti
di Roma. 2009 – 2015 Chief
Executive Officer Europe at
Nuance Group (since 2013 also
Global Chief Commercial Officer
at Nuance Group). Since 2016,
Chief Executive Officer Division
Asia Pacific and Middle East at
Dufry AG.
Professional Background
Prior to 1993 worked in product
marketing and international sales
of the multinational FMCG (Fast
Moving Consumer Goods) company
Unilever. 1993 – 2000 Joined
Dufry as Sales Manager Eastern
Europe. Product Category Manager
Spirits & Tobacco (1995 – 1996).
Head of Product Marketing
(1996 – 1997). Director Division
Spirits & Tobacco (Weitnauer
Distribution Ltd. 1998 – 2000).
2000 – 2012 Chief Operating
Officer Region Eurasia at
Dufry AG. 2012 – 2015 Chief Oper-
ating Officer Region America I
at Dufry AG. Since 2016 Chief
Executive Officer Division Central
and South America at Dufry AG.
Professional Background
Prior to 1988 positions as Manag-
er at Dobbs /Aeroplex, WH Smith,
and Greenman Bros. 1988 Joined
Hudson Group as a District Man-
ager. 1992 – 1996 Vice President
of Operations at Hudson Group.
1996 – 2008 Senior Vice President
of Operations at Hudson Group.
2008 – 2018 Executive Vice Presi-
dent and Chief Operating Office
at Hudson Group. Since January
2019 Chief Executive Officer
Division North America (Hudson
Group) at Dufry AG.
Current Board Mandates
Hudson Ltd.
239
4 Governance ReportDUFRY ANNUAL REPORT 2018
Other activities and vested interests
As of December 31, 2018 none of the members of the Global Executive Committee of Dufry AG has had other activities in governing and
supervisory bodies of important Swiss or foreign organizations, institutions or foundations under private and public law with the exception
of the Board mandates of Mr. Julián Díaz mentioned above. The business Division North America is separately listed on the New York Stock
Exchange under the name of Hudson Ltd. (see also comments about Hudson Ltd. in section 1.1 Group Structure). Roger Fordyce is the Chief
Executive Officer of Division North America and therefore also Chief Executive Officer and a member of the Board of Directors of the
listed entity Hudson Ltd. No member of the Global Executive Committee has permanent management or consultancy functions for impor-
tant Swiss or foreign interest groups, nor holds any official functions and political posts.
4.3 RULES IN THE ARTICLES OF INCORPORATION
REGARDING THE NUMBER OF PERMITTED
MANDATES OUTSIDE THE COMPANY
In accordance with Article 25 para. 1 of the Articles of
Incorporation, dated March 8, 2016, no member of the
Global Executive Committee may hold more than two
additional mandates in listed companies and four ad-
ditional mandates in non-listed companies. The follow-
ing mandates are not subject to the limitations under
para. 1 of this Article:
a) mandates in companies which are controlled by the
Company or which control the Company;
5. COMPENSATION, SHAREHOLDINGS
AND LOANS
5.1 CONTENT AND METHOD
OF DETERMINING THE COMPENSATION
AND SHAREHOLDING PROGRAMS
Detailed information of compensation, shareholdings
and loans to active and former members of the Board
of Directors and of the Global Executive Committee
in fiscal year 2018 is included in the Remuneration
Report on pages 245 to 258 of this Annual Report.
b) mandates held at the request of the Company or any
company controlled by it. No member of the Global
Executive Committee may hold more than ten such
mandates; and
5.2 DISCLOSURE OF RULES IN THE ARTICLES
OF INCORPORATION REGARDING COMPENSATION
OF THE BOARD OF DIRECTORS AND OF THE
EXECUTIVE MANAGEMENT
c) mandates in associations, charitable organizations,
foundations, trusts and employee welfare founda-
tions. No member of the Global Executive Commit-
tee may hold more than ten such mandates.
For definition of “mandate” please refer to section 3.3
above. For the website link regarding the Articles of
Incorporation please see page 244 of this Corporate
Governance Report.
4.4 MANAGEMENT CONTRACTS
Dufry AG does not have management contracts with
companies or natural persons not belonging to the
Group.
For rules in the Articles of Incorporation regarding the
approval of compensation by the General Meeting of
Shareholders, the supplementary amount for changes
in the executive management as well as the general
compensation principles please refer to Articles
20 – 22 of the Articles of Incorporation. The Articles of
Incorporation do not contain any rules regarding
loans, credit facilities or post-employment benefits
for the members of the Board of Directors and exec-
utive management. The rules regarding agreements
with members of the Board of Directors and of the ex-
ecutive management in terms of duration and termi-
nation are stipulated in Article 23.
Dufry’s Articles of Incorporation are available on the
Company website www.dufry.com – section Investors –
Corporate Governance – Articles of Incorporation.
For the website link regarding the Articles of Incorpo-
ration please see page 244 of this Corporate Gover-
nance Report.
240
4 Governance ReportDUFRY ANNUAL REPORT 2018 6. SHAREHOLDERS’ PARTICIPATION RIGHTS
6.2 THE INDEPENDENT VOTING RIGHTS
REPRESENTATIVE
For the website link regarding the Articles of Incorpo-
ration referred to in the following chapters please see
page 244 of this Corporate Governance Report.
6.1 VOTING RIGHTS AND REPRESENTATION
Each share recorded as a share with voting rights in
the share register confers one vote on its registered
holder. Each shareholder duly registered in the share
register on the record date may be represented at the
General Meeting of Shareholders by the independent
voting rights representative or any person who is au-
thorized to do so by a written proxy. A proxy does not
need to be a shareholder. Shareholders entered in the
share register as shareholders with voting rights on a
specific qualifying date (record date) designated by the
Board of Directors shall be entitled to vote at the
General Meeting of Shareholders and to exercise their
votes at the General Meeting of Shareholders. See
section 6.5 below.
Nominees are only entitled to represent registered
shares held by them at a General Meeting of Share-
holders if they are registered in the share register
in accordance with Article 5 para. 4 of the Articles of
Incorporation and if they hold a valid written proxy
granted by the beneficial owner of the registered
shares instructing the nominee how to vote at the
General Meeting of Shareholders. Shares held by a
nominee for which it is not able to produce such a
proxy count as not being represented at the General
Meeting of Shareholders.
See section 2.6 above for the former BDR program,
which was terminated in 2018.
In accordance with Article 10 para. 3 of the Articles of
Incorporation, dated March 8, 2016, the independent
voting rights representative shall be elected by the
General Meeting of Shareholders for a term of office
extending until completion of the next Ordinary
General Meeting of Shareholders. Re-election is possi-
ble. If the Company does not have an independent vot-
ing rights representative, the Board of Directors shall
appoint the independent voting rights representative
for the next General Meeting of Shareholders.
The Company may also make arrangements for elec-
tronic voting (Article 11 para. 5). Resolutions passed by
electronic voting shall have the same effect as votes
by ballot.
The Ordinary General Meeting of Shareholders held on
May 3, 2018, re-elected Altenburger Ltd legal + tax,
Kuesnacht-Zurich, as the independent voting rights
representative until the completion of the Ordinary
General Meeting of Shareholders in 2019. Altenburger
Ltd legal + tax is independent from the Company and
has no further mandates for Dufry AG.
For the upcoming Ordinary General Meeting of Share-
holders on May 9, 2019, the Company will enable its
shareholders to send their voting instructions elec-
tronically to the independent voting rights represen-
tative Altenburger Ltd legal + tax through the platform:
www.netvote.ch/dufry
The corresponding instructions regarding registration
and voting procedures on this electronic platform will
be sent to the shareholders together with the invitation
to the General Meeting of Shareholders.
241
4 Governance ReportDUFRY ANNUAL REPORT 2018 6.4 CONVOCATION OF THE GENERAL MEETING
OF SHAREHOLDERS
The General Meeting of Shareholders shall be called
by the Board of Directors or, if necessary, by the
Auditors. One or more shareholders with voting rights
representing in the aggregate not less than 10 % of the
share capital can request, in writing, that a General
Meeting of Shareholders be convened. Such request
must be submitted to the Board of Directors, specify-
ing the items and proposals to appear on the agenda.
The General Meeting of Shareholders shall be con-
vened by notice in the Swiss Official Gazette of
Commerce (SOGC) not less than 20 days before the
date fixed for the Meeting. Registered shareholders
will also be informed by ordinary mail.
6.5 AGENDA
The invitation for the General Meeting of Sharehold-
ers shall state the day, time and place of the Meeting,
and the items and proposals of the Board of Directors
and, if any, the proposals of the shareholders who de-
mand that the General Meeting of Shareholders be
called or that items be included in the agenda.
One or more shareholders with voting rights whose
combined holdings represent an aggregate nominal
value of at least CHF 1,000,000 may request that an
item be included in the agenda of a General Meeting of
Shareholders. Such a request must be made in writing
to the Board of Directors at the latest 60 days be-
fore the Meeting and shall specify the agenda items
and the proposals made.
6.6 REGISTRATION INTO THE SHARE REGISTER
The record date for the inscription of registered share-
holders into the share register in view of their partici-
pation in the General Meeting of Shareholders is de-
fined by the Board of Directors. It is usually around
2 weeks before the Meeting. Shareholders who dispose
of their registered shares before the General Meeting
of Shareholders are no longer entitled to vote with such
disposed shares.
6.3 QUORUMS
The General Meeting of Shareholders shall be duly
constituted irrespective of the number of sharehold-
ers present or of shares represented. Unless the law
or Articles of Incorporation provide for a qualified
majority, an absolute majority of the votes repre-
sented at a General Meeting of Shareholders is re-
quired for the adoption of resolutions or for elec-
tions, with abstentions, blank and invalid votes having
the effect of “no” votes. The Chairman of the Meet-
ing shall have a casting vote.
A resolution of the General Meeting of Shareholders
passed by at least two thirds of the votes repre-
sented and the absolute majority of the nominal value
of shares represented shall be required for:
1. a modification of the purpose of the Company;
2.
3.
the creation of shares with increased voting powers;
restrictions on the transfer of registered shares
and the removal of such restrictions;
restrictions on the exercise of the right to vote and
the removal of such restrictions;
4.
5. an authorized or conditional increase in share
6.
capital;
an increase in share capital through the conversion
of capital surplus, through a contribution in kind or
in exchange for an acquisition of assets, or a grant
of special benefits upon a capital increase;
7. the restriction or denial of pre-emptive rights;
8. the change of the place of incorporation of the
Company;
the dismissal of a member of the Board of Directors;
9.
10. an increase in the maximum number of members
of the Board of Directors;
11. a modification of the eligibility requirements of the
members of the Board of Directors (Article 24 para. 1
of the Articles of Incorporation);
12. the dissolution of the Company;
13. other matters where statutory law provides for
a corresponding quorum.
242
4 Governance ReportDUFRY ANNUAL REPORT 2018 7. CHANGE OF CONTROL
AND DEFENSE MEASURES
8. AUDITORS
For the website link regarding the Articles of Incorpo-
ration referred to in the following chapters please see
page 244 of this Corporate Governance Report.
7.1 DUTY TO MAKE AN OFFER
An investor who acquires more than 33 ¹⁄³ % of all vot-
ing rights (directly, indirectly or in concert with third
parties) whether they are exercisable or not, is re-
quired to submit a takeover offer for all shares out-
standing (Article 135 Financial Market Infrastructure
Act, FMIA). The Articles of Incorporation of the Com-
pany contain neither an opting-out nor an opting-up
provision (Article 125 para. 4 FMIA).
7.2 CLAUSES ON CHANGE OF CONTROL
In case of change of control, the share-based payments
as disclosed in the Remuneration Report shall vest
immediately.
In case of change of control, all amounts drawn
under the USD 700,000,000, EUR 500,000,000 and
EUR 1,300,000,000 multicurrency term and revolving
credit facilities agreements shall become immediately
due and payable. Furthermore, upon the occurrence
of a change of control, Dufry may be required to repur-
chase the EUR 800,000,000 Senior Notes due 2024
and the EUR 700,000,000 Senior Notes due 2023 at a
purchase price equal to 101 % of their principal amount,
plus accrued and unpaid interest.
According to Article 23 of the Articles of Incorporation,
employment and other agreements with the members
of the Global Executive Committee may be concluded
for a fixed term or for an indefinite term. Agreements
for a fixed term may have a maximum duration of one
year. Renewal is possible. Agreements for an indefinite
term may have a notice period of maximum twelve
months. The current contracts with the members of
the Global Executive Committee contain termination
periods of twelve months or less.
8.1 AUDITORS, DURATION OF MANDATE
AND TERM OF OFFICE OF THE LEAD AUDITOR
Pursuant to the Articles of Incorporation, the Audi-
tors shall be elected each year and may be re-elected.
Ernst & Young Ltd acted as Auditors and has held the
mandate as Auditors since 2004. Christian Krämer has
been the Lead Auditor in charge of the consolidated
financial statements and the statutory financial state-
ments of the Company as of December 31, 2018.
Mr. Krämer took the existing auditing mandate in 2017.
8.2 AUDITING FEE
During fiscal year 2018, Dufry agreed with Ernst & Young
Ltd to pay a fee of CHF 5.7 million for services in
connection with auditing the statutory annual finan-
cial statements of Dufry AG and its subsidiaries, as
well as the consolidated financial statements of
Dufry Group (including quarterly reviews).
8.3 ADDITIONAL FEES
Additional fees amounting to CHF 0.2 million were paid
to Ernst & Young Ltd for tax services during fiscal year
2018.
8.3 SUPERVISORY AND CONTROL INSTRUMENTS
PERTAINING TO THE AUDIT
The Audit Committee as a committee of the Board of
Directors reviews and evaluates the performance and
independence of the Auditors at least once each year.
Based on its review, the Audit Committee recommends
to the Board of Directors which external Auditor
should be proposed for election at the General Meeting
of Shareholders. The decision regarding this agenda
item is then taken by the Board of Directors. When
evaluating the performance and independence of the
Auditors, the Audit Committee puts special emphasis
on the following criteria: Global network of the audit
firm, professional competence of the lead audit team,
understanding of Dufry’s specific business risks, per-
sonal independence of the lead auditor and indepen-
dence of the audit firm as a company, co-ordination of
the Auditors with the Audit Committee and the Senior
Management / Finance Department of Dufry Group,
practical recommendations with respect to the appli-
cation of IFRS regulations.
243
4 Governance ReportDUFRY ANNUAL REPORT 2018 or on any other matters of importance. The Company
undertakes roadshows for institutional investors on a
regular basis.
Details and information on the business activities,
Company structure, financial reports, media releases
and investor relations are available on the Company’s
website:
www.dufry.com
The official means of publication of the Company
is the Swiss Official Gazette of Commerce:
www.shab.ch
Web-links regarding the SIX Swiss Exchange push-/
pull-regulations concerning ad-hoc publicity issues
are:
www.dufry.com/en/media/press-releases
www.dufry.com/en/media/press-release-
registration-form
The current Articles of Incorporation are available
on Dufry’s website under:
www.dufry.com/en/investors/corporate-governance
page section “Featured downloads – Articles
of Incorporation”
The financial reports are available under:
www.dufry.com/en/investors/ir-reports-
presentations-and-publications
page section “Presentation of results and other
publications – select Financial Reports”
For the Investor Relations and Corporate Communi-
cations contacts, the Corporate Headquarter address
and a summary of anticipated key dates in 2019 please
refer to pages 260 / 261 of this Annual Report.
Within the yearly approved budget, there is also an
amount permissible for non-audit services that the
Auditors may perform. Within the scope of the ap-
proved and budgeted amount, the Chief Financial
Officer can delegate non-audit related mandates to
the Auditors.
The Audit Committee determines the scope of the
external audit and the relevant methodology to be
applied to the external audit with the Auditors and
discusses the results of the respective audits with the
Auditors. The Auditors prepare a management letter
addressed to the Senior Management, the Board of
Directors and the Audit Committee once per year,
informing them in detail on the result of their audit.
The Auditors also review the interim quarterly reports
before these publications are released.
Representatives of the Auditors are regularly invited
to meetings of the Audit Committee, namely to attend
during those agenda points that dealt with account-
ing, financial reporting or auditing matters.
In addition, the Audit Committee reviews regularly
the internal audit plan. Internal Audit reports are
communicated to management in charge and the Com-
pany’s senior management on an on-going basis and
6 briefings were done to the Audit Committee in 2018.
During the fiscal year 2018, the Audit Committee held
6 meetings. The Auditors were present at 3 of those
meetings. The Board of Directors has determined the
rotation interval for the Lead Auditor to be seven
years, as defined by the Swiss Code of Obligation; such
rotation occurred the last time in 2017.
9. INFORMATION POLICY
Dufry is committed to an open and transparent com-
munication with its shareholders, financial analysts,
potential investors, the media, customers, suppliers
and other interested parties.
Dufry AG publishes its financial reports on a quarterly
basis, and used to publish them in English and Por-
tuguese. As a result of the termination of the BDR
program on November 27, 2018, and the subsequent
delisting on December 28, 2018, the Portuguese lan-
guage version was discontinued. Financial reports
and media releases containing financial information
are available on the Company website.
In addition, Dufry AG organizes presentations and con-
ference calls with the financial community and media
to further discuss details of the reported earnings
244
4 Governance ReportDUFRY ANNUAL REPORT 2018 REMUNERATION
REPORT
DEAR SHARE-
HOLDERS
2018 was yet another very successful year for Dufry
with turnover, EBITDA and free cash flow reaching new
all-time highs. Based on our sound business model and
the vast opportunities that we see in the travel retail
market, we plan to grow our Company and to further
develop our market leadership position in the coming
years. For details on our operational and financial per-
formance in fiscal year 2018, please refer to the letters
of the CEO and CFO on pages 14 and 106, respectively.
The Remuneration Committee, elected at the General
Meeting of Shareholders on May 3, 2018, consists of
Claire Chiang, Jorge Born and myself, all of us being
non-executive and independent members of the Board
of Directors. Our Committee reviews the remuneration
system, including the bonus scheme and long-term in-
centive plans (Performance Share Unit plans) on an an-
nual basis to ensure alignment with shareholders’ inter-
ests and best practices, and to provide fair management
compensation.
The Shareholders’ Meeting approved the Board of Di-
rectors’ proposal for the maximum aggregate amount
of compensation for the Board of CHF 8.7 million from
the AGM 2018 to AGM 2019 with a majority of 86.0 %.
The proposal for the maximum aggregate amount of
compensation for the Global Executive Committee of
CHF 37.1 million prospective for the fiscal year 2019 pe-
riod was accepted with a majority of 80.2 %. Our Remu-
neration Report 2017 was approved by the Sharehold-
ers’ Meeting in a consultative, non-binding vote by 91.7 %
of the votes represented. This year’s Remuneration Re-
port 2018 will again be submitted to a consultative vote
at our Shareholders’ Meeting on May 9, 2019. In fiscal
year 2018, the Remuneration Committee held four
meetings, with average attendance ratio of 83 %.
The following changes regarding compensation were
applied in fiscal year 2018:
– Board of Directors: Certain members of Dufry AG’s
Board of Directors are also members of the Board of
Directors of Hudson Ltd., our subsidiary listed on the
New York Stock Exchange. Two Board members
(Heekyung Jo Min and Joaquin Moya-Angeler Ca-
brera) received additional compensation for their
services in the Board of Directors at Hudson Ltd. No
other changes took place with regard to the Board
compensation in 2018.
– Global Executive Committee: The measures regard-
ing financial performance relevant for the annual bo-
nus have been adjusted. The relevant metrics for 2018
were 50 % EBITDA, 25 % Business Operating Model
Efficiency, 25 % Free Cash Flow (2017: 60 % EBITDA,
20 % Organic growth, 20 % Free Cash Flow). The
changes and especially the introduction of the new
Business Operating Model Efficiency were done in or-
der to align the whole organization on this crucial
project for Dufry. The successful implementation of
the Business Operating Model will create the basis
for further development of the Group going forward.
The adoption of IFRS 16, which becomes effective as of
January 1, 2019, will affect the way we account for our
concession agreements and lease agreements. This will
have an impact on the balance sheets and income state-
ments going forward. We will for example discontinue
using EBITDA as a key performance indicator and our
reported net earnings will also be different. The Remu-
neration Committee will examine in detail during 2019
what changes need to be made to the compensation
measures and system for the Global Executive Com-
mittee remuneration in order to align compensation to
new IFRS 16 accounting standard rules. For further de-
tails on this subject please see explanations on page 255
of this Report and in Note 4 of the Consolidated Finan-
cial Statements.
On behalf of the Remuneration Committee and the en-
tire Board of Directors, I would like to thank you, our
shareholders, for your contributions and continued
trust in Dufry.
Yours Sincerely,
Lynda Tyler-Cagni
Chairwoman of the Remuneration Committee
245
4 Governance ReportDUFRY ANNUAL REPORT 2018 INTRODUCTION
The continuous success of Dufry is dependent on its
ability to attract, motivate and retain outstanding in-
dividuals. Dufry’s aim is to provide appropriate and
competitive remuneration to its employees and to
support their development in a high performance en-
vironment.
This Remuneration Report provides information on the
remuneration system and compensation paid to the
members of the Board of Directors and of the Global
Executive Committee for fiscal year 2018. The Report
is prepared in accordance with Articles 13 – 17 of the
Ordinance against excessive Compensation (OaeC)
and item 5 of the Annex to the Corporate Governance
Directive (DCG) of the SIX Swiss Exchange, governing
disclosure of remuneration systems and compensa-
tion paid to members of the Board of Directors and
the Global Executive Committee (formerly Group Ex-
ecutive Committee).
The Remuneration Report will be presented to the
General Meeting of Shareholders on May 9, 2019, for a
consultative vote.
GOVERNANCE
Based on Dufry’s Articles of Incorporation and in line
with the OaEC, the Board of Directors has the overall
responsibility for defining the personnel and remuner-
ation policy used for the entire Group, as well as the
general terms and conditions of employment for mem-
bers of the Global Executive Committee. It approves
the individual compensation of the members of
the Board of Directors and of the Global Executive
Committee.
Since January 1, 2015, the General Meeting of Share-
holders has to approve the proposal of the Board of Di-
rectors in relation to the maximum aggregate amounts
of compensation of the Board of Directors for the pe-
riod until the next Ordinary General Meeting of Share-
holders and of the Global Executive Committee for the
following fiscal year. The vote at the Ordinary General
Meeting of Shareholders has binding effect for these
maximum aggregate amounts of compensation. There-
after, the approval of the individual compensation to the
members of the Board of Directors and of the Global Ex-
ecutive Committee (within the limits approved by the
General Meeting of Shareholders) is with the Board of
Directors.
Directors, supports the Board of Directors in fulfilling
all remuneration related matters. The General Meet-
ing of Shareholders held on May 3, 2018, re-elected
Mr. Jorge Born and elected Ms. Claire Chiang and Ms.
Lynda Tyler-Cagni (all individually elected) as members
of the Remuneration Committee for a term of office
until completion of the next Ordinary General Meet-
ing of Shareholders in 2019. Lynda Tyler-Cagni has
been appointed as Chairwoman of the Remuneration
Committee.
COMPENSATION COMPARISONS
During the course of 2018, the Board of Directors of
Dufry consulted PricewaterhouseCoopers AG (PwC) for
its annual review on the structure and level of executive
compensation arrangements, including both short- and
long-term components. As part of this annual review
process, PwC again conducted a benchmark ana ly sis on
compensation levels for members of the Global Execu-
tive Committee using third party compensation survey
data and disclosed information from 20 companies
which are comparable in size, geographic reach and mar-
ket profile, mostly from the SMI and SMIM universe.
Other divisions of PwC also provided services as Tax and
HR Advisors for other internal projects.
REMUNERATION OF THE MEMBERS
OF THE BOARD OF DIRECTORS
REMUNERATION SYSTEM
The remuneration of the members of the Board of
Directors is set to attract and retain highly qualified
individuals to serve on the Board of Directors. The Board
of Directors determines the amount of remuneration
of its members, taking into account their responsibil-
ities, experience and the time they invest in their ac-
tivity as members of the Board of Directors.
The total compensation of the members of the Board
of Directors, except for the Group Chief Executive Of-
ficer who does not receive any compensation in rela-
tion to his position as member of the Board, included
the following elements in fiscal year 2018:
– Fixed fee in cash as members of the Board of
Directors and members of Board Committees;
– For two members their fixed fee in cash as mem-
bers of the Board of Directors of Hudson Ltd.
(listed subsidiary); and
– Mandatory social security contributions.
The Remuneration Committee, which consists of three
non-executive independent members of the Board of
In addition, the Chairman of the Board of Directors, who
is intensely involved with the Company’s management
and is therefore considered an executive Chairman,
246
4 Governance ReportDUFRY ANNUAL REPORT 2018 and the Group CEO usually participate as guests in
these meetings without any voting rights. The Remu-
neration Committee then makes proposals in relation
to the compensation of each Board member to the en-
tire Board of Directors. Thereafter, the Board of Direc-
tors decides collectively on the compensation of its
members once per year, with all Board members being
present during such meeting (Group CEO compensa-
tion reviewed and decided separately as described in
the section Remuneration of the members of the
Global Executive Committee).
CHANGES IN THE REMUNERATION SYSTEM
IN 2018 – BOARD OF DIRECTORS
– No changes took place in terms of Board fees during
fiscal year 2018 compared with 2017.
– Certain members of Dufry AG’s Board of Directors
are also members of the Board of Directors of
Hudson Ltd., Dufry’s subsidiary which has been
separately listed on the New York Stock Exchange
as of February 1, 2018. The compensation of the
Board of Directors as shown in the table on page 249
includes such remuneration. Heekyung Jo Min and
Joaquin Moya-Angeler Cabrera were the only Board
members who received additional compensation
for their services on the Board of Directors of
Hudson Ltd. during fiscal year 2018.
may also receive a performance bonus. This bonus is
based on the growth of reported Cash EPS for the year
under review, which for fiscal year 2018 was a target
growth of 5 % (2017: target growth of 5 %). The bonus
has a minimum threshold (50 % of target growth) that
must be achieved otherwise no bonus will be paid and
a maximum threshold (150 % of target growth). The bo-
nus for fiscal year 2018 is capped at 150 % of the tar-
get bonus. The target bonus for fiscal year 2018 was
set at 100 % of the Chairman’s board fee (2017: target
bonus was also set at 100 % of Chairman’s board fee;
with the cap at 150 %). With the exception of the vari-
able compensation of the Chairman and of the Group
CEO (each in their capacity as Chairman and Group
Chief Executive Officer), the compensation of the
members of the Board of Directors is not tied to par-
ticular targets.
Extraordinary assignments or work which a member
of the Board of Directors would perform for the Com-
pany outside of his / her activity as a Board member
can be specifically remunerated and has to be ap-
proved by the Board of Directors. No extraordinary as-
signments outside Board activities have taken place in
fiscal year 2018 (2017: also no extraordinary assign-
ments). In addition, the members of the Board of Di-
rectors are reimbursed all reasonable cash expenses
incurred by them in the discharge of their duties.
The Remuneration Committee discusses the annual
compensation (board fees, committee fees, target bo-
nus for Chairman) in separate meetings. The Chairman
COMMITTEES AND COMMITTEE MEMBERSHIPS
AS OF DECEMBER 31, 2018
MEMBER OF THE BOARD OF DIRECTORS
REMUNERATION COMMITTEE
AUDIT COMMITTEE
NOMINATION COMMITTEE
Juan Carlos Torres Carretero, Chairman
Jorge Born, Vice-Chairman 1
–
–
Committee Member
Committee Chairman
Claire Chiang, Director
Committee Member
Julián Díaz González, Director / Group CEO
Andrés Holzer Neumann, Director 1
Heekyung Jo Min, Director
Steven Tadler, Director
Lynda Tyler-Cagni, Director
–
–
–
–
Committee Chairwoman
–
–
–
–
Committee Member
Committee Member
Committee Member
Committee Chairman 1
–
–
Committee Member 1
–
–
–
1 Andrés Holzer Neumann temporarily renounced his additional functions as Vice-Chairman of the Board of Directors and Chairman of the Nomination
Committee as of October 30, 2018. He continues to serve as a Board member. The Board of Directors has elected Jorge Born to assume the duties
of Vice-Chairman of the Board as well as Chairman of the Nomination Committee from Mr. Holzer Neumann.
For further details regarding the responsibilities of
the Remuneration Committee and the meetings held
in fiscal year 2018, please refer to section 3.5 Internal
Organizational Structure of the Corporate Governance
Report.
247
4 Governance ReportDUFRY ANNUAL REPORT 2018
POSITION / RESPONSIBILITY
Chairman
Vice-Chairman
Member of the Board of Directors 1
Member of the Remuneration Committee
Member of the Audit Committee
Member of the Nomination Committee
1 The Group CEO does not receive additional compensation as a Board member.
FEE 2018
IN THOUSANDS OF CHF
FEE 2017
IN THOUSANDS OF CHF
2,010.5
350.0
250.0
50.0
50.0
50.0
2,010.5
350.0
250.0
50.0
50.0
50.0
SUMMARY OF REMUNERATION IN
FISCAL YEARS 2018 AND 2017
OTHER COMPENSATION, LOANS
OR GUARANTEES (AUDITED)
For the years 2018 and 2017, no other compensation was
paid directly or indirectly to current or former mem-
bers of the Board of Directors, or to their related par-
ties. There are also no loans or guarantees received or
provided to these Board members, nor to their related
parties.
For 2018, each member of the Board of Directors (ex-
cept the Chairman, the Vice-Chairman and the Group
CEO) received a Board membership fee of TCHF 250 in
cash and an additional TCHF 50 in cash for each mem-
bership in a Board Committee. The level of these Board
fees remained unchanged for the last four years, i.e.
since the Ordinary General Meeting of Shareholders
in April 2015. The Board fees for the Chairman and
Vice-Chairman were last increased in 2017 and re-
mained unchanged in fiscal year 2018. The Chairman
of the Board of Directors will receive a cash bonus of
TCHF 2,763.0 (2017: TCHF 3,015.7). The bonus amounts
to 137 % of the Chairman’s board fee (2017: 150 % of
board fee).
On December 31, 2018, the Board of Directors com-
prised 8 members (December 31, 2017: 9 Board mem-
bers). For fiscal years 2018 and 2017, covering the
period between January 1 and December 31, the remu-
neration for the members of the Board of Directors is
shown in the table on the opposite page. The remuner-
ation difference compared with the previous year is
mainly due to the changes in the total number of Board
members and the composition of the Board of Direc-
tors and of its Committees, inclusion of Board com-
pensation for services on the Board of Directors of
Hudson Ltd. (if any) as well as the different amount of
bonus for the Chairman.
248
4 Governance ReportDUFRY ANNUAL REPORT 2018 COMPENSATION OF THE BOARD OF DIRECTORS (AUDITED)
2018
NAME, FUNCTION
IN THOUSANDS OF CHF
REMUNERATION
POST-
EMPLOYMENT
BENEFITS 8
TOTAL
REMUNERATION
POST-
EMPLOYMENT
BENEFITS 8
Juan Carlos Torres Carretero, Chairman 1, 6
Jorge Born, Vice-Chairman 2
Andrés Holzer Neumann, Director 2
Xavier Bouton, Director 3
Claire Chiang, Director
Julián Díaz González, Director and CEO 4, 6
George Koutsolioutsos, Director 5
Heekyung Jo Min, Director 6
Joaquin Moya-Angeler Cabrera, Director 3, 6
Steven Tadler, Director 7
Lynda Tyler-Cagni, Director 7
4,773.4
243.0
5,016.4
5,026.2
383.1
400.0
119.6
300.0
–
119.4
499.7
186.2
198.3
198.3
22.4
19.6
5.8
14.5
–
7.1
–
5.8
–
11.7
405.5
419.6
125.4
314.5
–
126.5
499.7
192.0
198.3
210.0
350.0
351.4
350.0
300.0
–
250.0
300.0
350.0
–
–
256.8
20.6
17.1
17.1
14.5
–
15.0
–
17.1
–
–
2017
TOTAL
5,283.0
370.6
368.5
367.1
314.5
–
265.0
300.0
367.1
–
–
Total
7,178.0
329.9
7,507.9
7,277.6
358.2
7,635.8
1 The remuneration for Mr. Torres Carretero includes Board fee of CHF 2.01 million and bonus of CHF 2.76 million
(2017: CHF 2.01 million Board fee and CHF 3.02 million bonus).
2 Mr. Holzer Neumann was Vice-Chairman and Chairman of the Nomination Committee in fiscal year 2017 and until October 30, 2018.
Mr. Born assumed these duties as of October 31, 2018.
3 Director until the AGM held on May 3, 2018.
4 Mr. Díaz González (Group CEO) does not receive any additional compensation as Board member.
5 Mr. Koutsolioutsos resigned from the Board of Directors on June 22, 2018.
6 Mr. Torres Carretero, Mr. Díaz González, Ms. Min and Mr. Moya-Angeler Cabrera also serve as members of the Board of Directors of Hudson Ltd.,
which has been separately listed on the New York Stock Exchange as of February 1, 2018. Included in the above table are for Ms. Min a Board fee
of USD 0.20 million (Jan-Dec) and for Mr. Moya-Angeler Cabrera Board fee of USD 0.07 million (Jan-Apr) for the services as members of the Board
of Directors of Hudson Ltd. Mr. Torres Carretero, and Mr. Díaz González did not receive additional fees for their services as Hudson Board members.
7 Director since the AGM held on May 3, 2018.
8 Amount includes mandatory employer social security contributions.
RECONCILIATION BETWEEN REPORTED
BOARD COMPENSATION FOR FISCAL YEAR 2018
AND THE AMOUNT APPROVED BY THE
SHAREHOLDERS AT THE AGM 2018 UNTIL
THE AGM 2019
The Ordinary General Meeting of Shareholders held on
May 3, 2018 approved a maximum aggregate amount
of compensation of the Board of Directors for the
term of office from the AGM 2018 to the AGM 2019 of
CHF 8.7 million. The following table shows the recon-
ciliation between the reported Board compensation
for fiscal year 2018 and the amount approved by the
shareholders at the AGM 2018.
BOARD
COMPENSATION
FOR FISCAL YEAR
2018 AS
REPORTED
LESS BOARD
COMPENSATION
TO BE ACCRUED
FOR THE PERIOD
JANUARY 1, 2018
TO THE AGM
ON MAY 3, 2018
(4 MONTHS)
PLUS BOARD
COMPENSATION
TO BE ACCRUED
FOR THE PERIOD
JANUARY 1, 2019
TO THE AGM
ON MAY 9, 2019
(4 MONTHS)
TOTAL BOARD
COMPENSATION
FOR THE PERIOD
FROM AGM 2018
TO AGM 2019
TOTAL
MAXIMUM
AMOUNT AS
APPROVED BY
SHAREHOLDERS
AT THE AGM 2018
FOR PERIOD OF
AGM 2018 TO
AGM 2019
COMPEN-
SATION
RATIO
IN THOUSANDS OF CHF
Total Board of Directors
7,507.9
1,644.8
1,462.6
7,325.7
8,700.0
84.2 %
249
4 Governance ReportDUFRY ANNUAL REPORT 2018 REMUNERATION OF THE MEMBERS
OF THE GLOBAL EXECUTIVE COMMITTEE
BASIC SALARY
On January 11, 2018, Dufry announced a new organi-
zational structure of its previous Group Executive
Committee with immediate effect. The Committee
was replaced with the newly created Global Executive
Committee, which consisted of 7 members as of De-
cember 31, 2018 (previous Group Executive Commit-
tee consisted of 12 members as of December 31, 2017).
Members of the Global Executive Committee in fiscal
year 2018 were the Group Chief Executive Officer,
Chief Financial Officer, Deputy Group Chief Executive
Officer, Global Chief Corporate Officer, Group Gen-
eral Counsel, Chief Executive Officer Operations and
Strategy, and the Global Marketing and Digital Inno-
vation Officer.
REMUNERATION SYSTEM
Dufry aims to provide internationally competitive
compensation to the members of its Global Executive
Committee (GEC) that reflects the experience and the
area of responsibility of each individual member. The
members of the Global Executive Committee receive
compensation packages which consist of a fixed ba-
sic salary in cash, social benefits, allowances in kind,
a performance related bonus and share-based incen-
tive plans.
The annual basic salary is the fixed compensation re-
flecting the scope and key areas of responsibilities of
the position, the skills required to perform the role and
the experience and competencies of the individual
person. The basic salary is reviewed annually.
Salary increases for members of the Global Executive
Committee are generally done in line with increases
for the broader workforce. In case of promotions, typ-
ically a more substantial salary increase may be war-
ranted. Nevertheless, a newly promoted GEC member
would get a base salary at the lower end of the expected
range with a view to get above-average increases along-
side his growing experience and with a view to get into
the upper half of the target range within 3 – 5 years.
Also, higher salary increases may be warranted when
there is an increase in responsibilities.
ANNUAL BONUS
The annual bonus is defined once per year and is based
on a bonus target expressed as a percentage of the
annual basic salary. The target bonus corresponds
to the bonus award at 100 % achievement of the pre-
defined objectives. Each member of the Global Exec-
utive Committee has its own bonus. In the event that
an executive reaches the objectives in full, the bonus
pay-out will correspond to the targeted level. If one
REMUNERATION COMPONENTS
INSTRUMENT
PURPOSE
INFLUENCED BY
Basic salary
Bonus
– Basic compensation
– Paid in cash on monthly basis
– To attract and retain
management
– Annual bonus
– Paid in cash and / or rights to
receive shares after
completion of the relevant year
– Pay for performance
Share-based incentives
PSU
– Performance Share Units (PSU)
if any, vesting conditional on
performance
– Rewarding long-term
performance
– Aligning compensation to
shareholder interests
– Position
– Competitive market
environment
– Experience of the person
– For FY 2018: Achievement of
financial results of the Group
– For FY 2017: Achievement
of financial results of the Group
and of specific Divisions /
Countries (for the DCEOs and
the GM BRA / BOL)
– PSU Awards 2016 / 2017 / 2018:
Cumulative Cash EPS in CHF
over 3 years
Other indirect benefits,
post-employment benefits
– Allowances in kind
– Social pension and insurance
– To attract and retain
management
– Market practice and position
– Legal requirements of social
prerequisites
benefits
250
4 Governance ReportDUFRY ANNUAL REPORT 2018
PERFORMANCE OBJECTIVES
FISCAL YEAR 2018
FISCAL YEAR 2017
OBJECTIVES FOR THE GLOBAL EXECUTIVE COMMITTEE
OBJECTIVES FOR THE GROUP EXECUTIVE COMMITTEE
50 % EBITDA
25 % Business Operating Model Efficiency
25 % Free Cash Flow
60 % EBITDA1
20 % Organic growth
20 % Free Cash Flow
1 For fiscal year 2017, EBITDA for the 5 Division Chief Executive Officers and the General Manager Brazil/Bolivia was based on the EBITDA
of their respective division (or of the two countries in the case of the GM BRA / BOL, respectively).
or more objectives are not reached, the bonus will be
reduced. The bonus pay-out can be between a mini-
mum of zero and the maximum capped amount of
130 % of the target bonus for all members of the Global
Executive Committee, including the Group CEO.
The targets for the annual bonus are set to be stretch-
ing but achievable and focus on key operational met-
rics and metrics related to key strategic initiatives. The
Remuneration Committee considers the financial tar-
gets for the annual bonus are commercially sensitive
and that it would be detrimental to disclose details.
The annual bonus is usually paid out in cash in the sec-
ond quarter of the following year. As an exception, the
Board of Directors (upon proposal by the Remunera-
tion Committee) decided in 2016 that the bonus for fis-
cal year 2015 shall be settled 50 % in cash and 50 % in
rights to receive shares, which will vest if the GEC
member is still employed on January 1, 2019. The
shares that were used to settle the 2015 bonus pay-
ment had no dilutive effect, as they were sourced ex-
clusively from treasury shares. The bonus pay-outs for
fiscal years 2016, 2017 and 2018 are in cash.
For fiscal year 2018, the target bonus amounted to
100 % of the basic salary for the Group CEO and to be-
tween 38 % and 100 % of the basic salary for the other
members of the Global Executive Committee (fiscal
year 2017: 150 % for the Group CEO and between 45 %
and 150 % for the other members of the Group Exec-
utive Committee).
The bonus is mainly related to measures regarding
financial performance: in 2018, the relevant weightings
RANGE OF BONUS COMPONENTS
IN % OF BASIC SALARY
2018
2017
2016
Global (former Group)
Executive Committee
37 – 97 %
41 – 217 %
39 – 148 %
for all members of the Global Executive Committee
were 50 % EBITDA, 25 % Business Operating Model Ef-
ficiency and 25 % Free Cash Flow of the Group results.
For the previous year 2017 these weightings were 60 %
EBITDA , 20 % Organic growth and 20 % Free Cash Flow
of the Group results for the Group Chief Executive Of-
ficer, Chief Financial Officer, Global Chief Operating Of-
ficer, Global Chief Corporate Officer, Chief Resources
Director and the General Counsel. For the five Division
CEOs and the General Manager Brazil & Bolivia it was
60 % EBITDA of their respective division (of the 2 coun-
tries in the case of the General Manager Brazil & Bo-
livia), as well as 20 % Organic growth and 20 % Free Cash
Flow of the Group results.
The bonus accrued as part of the compensation for
the members of the Group Executive Committee rep-
resented in 2018 between 37 % and 97 % of their basic
salary and amounted to CHF 4.97 million in the aggre-
gate (2017: for the twelve members of the Group Exec-
utive Committee between 41 % and 217 % of their basic
salary and an amount of CHF 11.11 million in the aggre-
gate). The achievement ratio regarding the Group re-
sults’ targets of the three elements EBITDA, Business
Operating Model Efficiency and Free Cash Flow com-
bined was 96.9 % for fiscal year 2018 (2017: achieve-
ment ratio 91.6 % for the elements EBITDA, Organic
growth and Free Cash Flow). The achievement levels
for each of the components were between 90 % and
115 % of target for metrics at Group level (Group
EBITDA, Business Operating Model Efficiency and Free
Cash Flow) in 2018.
The bonus compensation for each of the members of the
Global Executive Committee, other than the Group CEO
bonus, is approved by the Remuneration Committee in
coordination with the Group CEO. The Group CEO’s bo-
nus compensation is determined based on achieved tar-
gets and proposed by the Remuneration Committee and
decided by the Board of Directors once per year. The Re-
muneration Committee as well as the Board of Directors
review the compensation of the members of the Global
Executive Committee on a yearly basis.
251
4 Governance ReportDUFRY ANNUAL REPORT 2018 TIMING OF THE PSU PLANS
YEAR 2015
YEAR 2016
YEAR 2017
YEAR 2018
YEAR 2019
YEAR 2020
YEAR 2021
PSU Award 2015
Grant date
Vesting period PSU Award 2015
Vesting condition
reached
PSU Award 2015
Vesting
PSU Award 2016
Grant date
Vesting period PSU Award 2016
Vesting condition
reached
PSU Award 2016
Vesting
PSU Award 2017
Grant date
Vesting period PSU Award 2017
Vesting condition
reached
(Yes / No?)
PSU Award 2017
PSU Award 2018
Grant date
Vesting period PSU Award 2018
Vesting condition
reached
(Yes / No?)
PSU Award 2018
SHARE-BASED INCENTIVES (PSU )
In 2013, Dufry introduced a Performance Share Unit
(PSU) plan for the members of the Global Executive
Committee (formerly Group Executive Committee). The
purpose of the plan is to provide the members of the
Global Executive Committee (and since fiscal year 2015
also selected members of the Senior Management team)
with an incentive to make significant and extraordinary
contributions to the long-term performance and growth
of Dufry Group, enhancing the value of the shares for
the benefit of the shareholders of the Company. The
share-based incentive is also increasing the ability of
Dufry Group to attract and retain persons of excep-
tional skills.
Since its separate listing on the New York Stock
Exchange, Dufry’s subsidiary Hudson Ltd. has its
own long-term incentive (LTI) plan for members of the
management of Hudson Ltd. Details of Hudson’s LTI
plan awards are available in the S-8 Securities docu-
ments, which can be downloaded from the Hudson
252
website www.hudsongroup.com – Download center
(link: www.hudsongroup.com/download-center). The
LTI plan awards granted by Hudson are directly vest-
ing into Hudson shares and are therefore not part of
the Dufry PSU plan.
From an economic point of view, Dufry’s PSU are stock
options with an exercise price of nil. However, they are
expected to have no dilutive effect, as the shares for
share-based incentives historically have been sourced
from treasury shares held by the Company.
Details of the Performance Share Units (PSU)
The number of PSU allocated to each member of the
Global Executive Committee in any given year takes into
account the basic salary as well as the prevailing share
price and assumes that the target will be achieved, i.e.
that one share vests for each PSU. The accrued value
of the PSU awards 2018 represented about 89 % of the
basic salary for the Group CEO and between 74 % and
92 % of the basic salary for the other members of the
Global Executive Committee (2017: 136 % for the Group
4 Governance ReportDUFRY ANNUAL REPORT 2018 PSU VESTING
PSU GRANTS 2018
PSU GRANTS 2017
CUMULATIVE CASH EPS
PSU VESTING
CUMULATIVE CASH EPS
PSU VESTING
< minimum threshold
(50 % of target)
at target
> maximum threshold
(150 % of target)
Between minimum
threshold and maximum
threshold
No vesting
100 % vesting
(1 share per PSU)
Maximum vesting
(2 shares per PSU)
Linear calculation
(between 0 and maximum
2 shares per PSU)
< minimum threshold
(50 % of target)
at target
> maximum threshold
(150 % of target)
Between minimum
threshold and maximum
threshold
No vesting
100 % vesting
(1 share per PSU)
Maximum vesting
(1.5 shares per PSU)
Linear calculation
(between 0 and maximum
1.5 shares per PSU)
CEO and between 110 % and 139 % for the other mem-
bers of the Group Executive Committee). The PSU
awards will only vest in the third year of the award pe-
riod and are linked to specific performance criteria (see
below). Once PSU are vesting, the shares will become
immediately unrestricted and available to the plan par-
ticipants.
Vesting conditions of the PSU are:
– The participant’s ongoing contractual relationship
on the vesting date; and
– The achievement of the performance target as de-
scribed below.
Performance target for 2018 and 2017 PSU grants
The number of shares allocated for each PSU for the
2018 and the 2017 grants directly depends on the
Company’s cumulative normalized Cash EPS as a
nominal amount in Swiss Francs of the three year
period preceding the vesting (Cumulative Cash EPS):
– For the 2018 grants, the Target Cumulative Cash
EPS has been set at CHF 29.23, based on the cash
EPS of the previous fiscal year 2017 and applying a
growth rate of 5 % per annum. This amount is sub-
ject to change from year to year by the Remunera-
tion Committee.
– For the 2017 grants, the Target Cumulative Cash EPS
has been set at CHF 25.97, based on the cash EPS of
the previous fiscal year 2016 and applying a growth
rate of 5 % per annum.
Depending on the Cumulative Normalized Cash EPS
achieved, each PSU will convert according to the fol-
lowing grid:
– Minimum threshold of 50 % of target must be
achieved; otherwise the PSU shall not vest and
will become nil and void. The participant will not be
allocated any shares from the PSU.
– For a Cumulative Cash EPS at target, the participant
shall be allocated one share for every PSU that has
vested.
– For a Cumulative Cash EPS of 150 % of target or
above, which represents the maximum threshold,
the participant shall be allocated two shares for
every PSU that has vested (for the 2017 grants, this
level had as an exception been set at 1.5 shares per
vested PSU).
– For a Cumulative Cash EPS higher than the minimum
threshold but lower than the maximum threshold,
the number of shares allocated from vested PSU is
calculated on a linear basis.
– The maximum number of shares allocated is capped
at two shares per vested PSU (for the 2017 grants,
the cap had as an exception been set at 1.5 shares
per vested PSU).
In 2018, the seven members of Global Executive Com-
mittee have been granted, in the aggregate, 55,612
PSU (2017: 79,895 PSU to twelve members of the
Group Executive Committee). Out of this amount,
16,823 PSU were granted to the Group CEO (2017:
16,823 PSU). The total number of shares that can be
allocated to these seven members of the Global Ex-
ecutive Committee would amount to the following: At
target, 55,612 shares for the PSU Award 2018, 54,073
shares for the PSU Award 2017 and 64,249 shares
which will vest for the PSU Award 2016. At maximum
(i.e. at 2 shares per vested PSU from the 2018 grant,
and 1.5 shares per vested PSU from the 2017 grant) it
would amount to 111,224 shares for the PSU Award
2018, 81,110 shares for the PSU Award 2017 and 64,249
shares for the PSU Award 2016.
Overall, the number of persons qualified to PSU awards
includes (since fiscal year 2015) not only the members
of the Global Executive Committee, but also further
selected members of the Senior Management team of
Dufry (about 60 senior managers). In addition to the PSU
253
4 Governance ReportDUFRY ANNUAL REPORT 2018 COMPENSATION OF THE MEMBERS OF THE GLOBAL EXECUTIVE COMMITTEE /
FORMER GROUP EXECUTIVE COMMITTEE (AUDITED)
REMUNERATION COMPONENT
IN THOUSANDS OF CHF
Basic salary
Bonus
Post-employment benefits 2
Other indirect benefits
Share-based payments accrued (3 years vesting period) 3
Total compensation accrued
GEC
(7 members)
6,661.8
4,966.0
1,610.1
330.9
5,405.3
18,974.2
2018
CEO 1
1,832.4
1,775.6
593.3
23.1
1,635.2
5,859.5
GEC
(12 members)
9,043.7
11,113.5
1,768.4
1,136.2
11,943.0
35,004.6
2017
CEO 1
1,851.6
2,543.0
481.5
23.1
2,514.8
7,414.1
Total compensation pay -out
20,021.6
6,611.5
26,065.9
5,950.5
Number of performance share units awarded (in thousands)
55.6
16.8
79.9
16.8
1 The Group CEO is the highest paid member.
2 Amount includes employer social security contributions and pension contributions.
3 For valuation details see Note 24 of the consolidated financial statements. The accrued values in the table reflect the different valuations
of the PSU in the different reporting years.
awarded to the members of the Global Executive Com-
mittee as shown above, this further group of Senior Man-
agers received in aggregate 80,831 PSU from the Award
2018 (2017: about 80 managers and 90,581 PSU from the
Award 2017; in 2016: about 70 managers and 101,340 PSU
which will vest for the PSU Award 2016). The conditions
of the PSU plans are identical for all plan participants
(whether members of the Global Executive Committee
or Senior Managers). The total number of shares that can
be allocated to the Senior Management team members
would amount to the following: At target, 80,831 shares
for the PSU Award 2018, 90,581 shares for the PSU
Award 2017 and 101,340 shares which will vest for the
PSU Award 2016. At maximum, 161,662 shares for the
PSU Award 2018, 135,872 shares for the PSU Award 2017
and 101,340 shares for the PSU Award 2016.
For the PSU plan 2014 that vested in May 2017, 44.9 % of
the target number of shares were allocated to the plan
participants. For the PSU plan 2015 that vested in
May 2018, 92.6 % of the target number of shares were al-
located to the plan participants.
The total number of shares that can be allocated to all
participants of the PSU Awards 2018, 2017, the vested
and allocated 165,589 shares from the PSU Award
2016 and the vested rights to receive shares from the
2015 bonus (which was split into 50 % cash and 50 % in
rights to receive shares, equivalent to 82,536 shares
in total, and which vested on January 1, 2019) would
amount to the following: At target 529,222 shares, rep-
resenting a total of 0.98 % of outstanding shares as at
December 31, 2018. At maximum (i.e. at 2 shares per
254
vested PSU from the 2018 grant, and 1.5 shares per
vested PSU from the 2017 grant) 737,993 shares, rep-
resenting a total of 1.37 % of outstanding shares as at
December 31, 2018.
Historically, Dufry has always sourced its share-based
compensation from treasury shares, so that no dilu-
tive effect is expected from the PSU.
For a description of the performance targets of PSU
grants in fiscal years 2015 and 2016 (with vesting in
2018 and 2019, respectively), please refer to the details
in the Remuneration Report 2016 on page 235 of the
Annual Report 2016.
Link to the Annual Report 2016:
www.dufry.com/en/investors/ir-reports-
presentations-and-publications
page section “Presentation of results and other
publications – select Financial Reports”
The PSU plans have been approved by the Remunera-
tion Committee and the Board of Directors. The Re-
muneration Committee reviews achievement of the
respective performance target at a specific vesting
date, upon proposal of the Group CEO, who as plan ad-
ministrator will analyze and adjust potential excep-
tional and non-recurring events to normalize Cash EPS
in relation to the PSU plan. The Group CEO acts as
Plan Administrator and therefore proposes the
amount of each specific grant to each individual plan
participant, which is reviewed by the Remuneration
4 Governance ReportDUFRY ANNUAL REPORT 2018 REMUNERATION STRUCTURE GROUP EXECUTIVE COMMITTEE IN 2018
10 % POST-EMPLOYMENT BENEFITS,
OTHER INDIRECT BENEFITS
35 % BASIC SALARY
28 % SHARE-BASED
PAYMENTS
BASIC SALARY
BONUS
SHARE-BASED PAYMENTS
POST-EMPLOYMENT
BENEFITS,
OTHER INDIRECT BENEFITS
IN THOUSANDS OF CHF
30.000
20.000
10.000
0
GEC
1.976
5.405
5.220
6.662
CEO
623
1.635
1.832
1.832
GEC
2.193
10.810
6.786
6.662
CEO
714
3.270
2.382
1.832
GEC
1.941
5.405
4.966
6.662
CEO
616
1.635
1.776
1.832
Target (100%)
Maximum potential
Accrued compensation
2018
26 % BONUS
Committee. The grants made to the Group CEO are
decided by the Remuneration Committee.
OTHER INDIRECT BENEFITS
The Company limits further benefits to a minimum.
Fringe benefits such as health insurance, company car,
or housing allowances have been granted to certain
members of the Global Executive Committee. The total
amounted to CHF 0.3 million in the aggregate in fiscal
year 2018 (2017: CHF 1.1 million in aggregate for cer-
tain members of the Group Executive Committee).
CHANGES IN THE REMUNERATION SYSTEM
IN 2018 – GLOBAL EXECUTIVE COMMITTEE
The Board of Directors, upon proposal by the Remu-
neration Committee, has decided on the following
change to the remuneration system in fiscal year 2018:
– The measures regarding the financial performance
relevant for the annual bonus have been adjusted.
In 2018, the relevant metrics are 50 % EBITDA, 25 %
GEC REMUNERATION (ACCRUED) IN PERIODS 2014–2018
Maximum potential
Target (100%)
Actual accrued compensation in the year
2014
2015
2016
2017
2018
YE 2014: 9 GEC members; YE 2015: 7 GEC members;
YE 2016/2017: 12 GEC members; YE 2018: 7 GEC members.
Business Operating Model Efficiency and 25 % Free
Cash Flow (see also explanation under section “An-
nual bonus – performance objectives” on page 251).
In fiscal year 2017, the relevant metrics were 60 %
EBITDA, 20 % Organic growth and 20 % Free Cash
Flow. The change and especially the introduction of
the new metric Business Operating Model Efficiency
was done in order to focus the organization on this
key project for 2018. The Business Operation Model
initiative (BOM) was launched in 2017 in order to
streamline, standardize procedures, organization,
and systems to create the basis for Dufry’s future
development. The efficiency target for the full pro-
gramme is CHF 50 million to be fully reflected in the
2019 financials. The efficiencies are measured based
on the BOM related action plan and tracked specif-
ically against the 2017 cost base.
EXPECTED ADJUSTMENTS TO THE REMUNERATION
SYSTEM IN FUTURE, DUE TO THE IMPLEMENTATION
OF THE NEW FINANCIAL REPORTING STANDARD
IFRS 16
In fiscal year 2019, Dufry Group will adopt the new In-
ternational Financial Reporting Standard IFRS 16,
which became effective as of January 1, 2019. IFRS 16
is the new standard on lease accounting and will af-
fect the accounting of concession agreements, rent
agreements for office and warehouse buildings and
other lease agreements. Dufry has hundreds of con-
cession agreements and lease agreements and the
introduction of IFRS 16 will impact a number of items
in the balance sheet, the statement of income and
the cash flow statement. For further explanation of
IFRS 16 and its expected impacts on Dufry’s financial
255
4 Governance ReportDUFRY ANNUAL REPORT 2018
statements 2019 please refer to Note 4 in the Consol-
idated Financial Statements.
The adoption of IFRS 16 is also expected to have cer-
tain consequences on Dufry’s remuneration system as
of 2018:
– Under IFRS 16, EBITDA will not be reported in the in-
come statement any longer and Dufry will not use
it as a key performance indicator any longer. The Re-
muneration Committee is evaluating alternative
metric(s) to replace the EBITDA performance ob-
jective in the short-term incentive (annual bonus).
– For the Performance Share Units (PSU) granted in
the years 2017 and 2018 with nominal amounts ex-
pressed in Swiss Francs of CHF 29.93 for the 2018
grant and CHF 25.97 for the 2017 grant, it is planned
that the target values will remain unchanged and the
calculation of the Cumulative Normalized Cash EPS
will be reconciled to the accounting framework of
2018 and before (i.e. as if IFRS 16 had only been put
in place after the time of the vesting). This reconcil-
iation will be applied to reflect the old accounting
rules and its impact on the income statement.
– The Remuneration Committee is evaluating to either
recalibrate the PSU performance targets by using
new Cash EPS metrics or to identify new KPIs and
to carefully redesign the share-based incentive for
2019 and the following years.
COMPARISON AND COMPOSITION OF
REMUNERATION OF THE GLOBAL EXECUTIVE
COMMITTEE FOR FISCAL YEAR 2018
The charts on the previous page 255 reflect the com-
position of the different remuneration components as
well as the actual remuneration of the seven mem-
bers of the Global Executive Committee for fiscal
year 2018. In the chart, this actual remuneration is also
compared to the potential compensation if 100 % of
the target bonus was reached, and the maximum po-
tential of compensation possible based on the capped
bonus and the capped share-based compensation.
PAY-OUT COMPONENTS FOR FISCAL YEAR 2018
For fiscal year 2018, the achievement ratio in conjunc-
tion with the Group result targets for the three ele-
ments EBITDA, Business Operating Model Efficiency
and Free Cash Flow combined was 96.9 %. Based on this,
the pay-out of the bonus component for the Group CEO
amounts to CHF 1.78 million, which represents 97 % of
the Group CEO’s basic salary. The PSU Awards 2016 will
vest in fiscal year 2019 at a ratio of 104 %. This will lead
to 165,589 shares being vested, of which 22,748 reflect
the shares vested for the Group CEO.
The pay-out for the entire Global Executive Commit-
tee for fiscal year 2018 amounts to a total of CHF 20.02
million, of which CHF 6.61 million is the pay-out to the
Group CEO.
SUMMARY OF REMUNERATION
FOR FISCAL YEAR 2018
For fiscal year 2018, the remuneration of the Global
Executive Committee includes the compensation of
the seven GEC members (2017: twelve Group Execu-
tive Committee members). The remuneration for fis-
cal years 2018 and 2017, mentioned in the table on page
254 covers the period between January 1 and Decem-
ber 31.
The remuneration difference compared with the pre-
vious year is mainly due to the change in the number
of members of the Global Executive Committee com-
pared to the former Group Executive Committee, reg-
ular salary increases based on annual performance re-
view, individual bonus payments based on achievement
of yearly objectives set in advance, as well as the dif-
ferent values of the PSU awards.
RECONCILIATION BETWEEN REPORTED GLOBAL
EXECUTIVE COMMITTEE COMPENSATION FOR
FISCAL YEAR 2018 AND THE AMOUNT APPROVED
BY THE SHAREHOLDERS AT THE AGM 2017 FOR
FISCAL YEAR 2018
The Ordinary General Meeting of Shareholders held
on April 27, 2017, approved a maximum aggregate
amount of compensation for the members of the
Global Executive Committee (former Group Executive
Committee) for the fiscal year 2018 of CHF 53.5 mil-
lion. The approved maximum aggregate amount re-
flects the maximum possible pay-out calculated for
COMPENSATION RATIO FOR REMUNERATION OF GLOBAL EXECUTIVE COMMITTEE FOR 2018
IN THOUSANDS OF CHF
Total Global Executive
Committee
256
GEC COMPENSATION
FOR FISCAL YEAR 2018
AS REPORTED
TOTAL MAXIMUM AMOUNT FOR GEC
COMPENSATION AS APPROVED BY
SHAREHOLDERS AT THE AGM 2017 FOR
FISCAL YEAR 2018
COMPENSATION RATIO
18,974.2
53,500.0
35.5 %
4 Governance ReportDUFRY ANNUAL REPORT 2018 each compensation element and took into account
the twelve members of the Group Executive Commit-
tee at the time the proposal to the AGM 2017 was
made. The actual compensation ratio (accrued com-
pensation) compared with the amount approved by
the General Meeting of Shareholders was 35.5 %.
For fiscal year 2019, the Ordinary General Meeting of
Shareholders held on May 3, 2018, approved a maxi-
mum aggregate amount of compensation for the
members of the Global Executive Committee of
CHF 37.1 million. The compensation ratio for 2019 will
again be disclosed in the Remuneration Report 2019.
OTHER COMPENSATION, LOANS
OR GUARANTEES (AUDITED)
For the years 2018 and 2017, no other compensation was
paid directly or indirectly to current or former mem-
bers of the Global Executive Committee (former Group
Executive Committee), or to their related parties. There
are also no loans or guarantees received or provided to
the Global Executive Committee (former Group Exec-
utive Committee) members, or to related parties.
CONTRACTS OF EMPLOYMENT TERMS
According to Article 23 of the Articles of Incorporation,
employment and other agreements with the members
of the Global Executive Committee may be concluded
for a fixed term or for an indefinite term. Agreements
for a fixed term may have a maximum duration of one
year. Renewal is possible. Agreements for an indefinite
term may have a notice period of maximum twelve
months. Of the current contracts with the members
of the Global Executive Committee, three contracts
contain termination periods of twelve months, whereas
the other contracts have termination periods of six
months or less.
257
4 Governance ReportDUFRY ANNUAL REPORT 2018 PARTICIPATIONS IN DUFRY AG
The following members of the Board of Directors or of
the Global Executive Committee of Dufry AG (includ-
ing related parties) directly or indirectly hold shares
or share options of the Company as at December 31,
2018. The table for December 31, 2017 includes addi-
tional members of the then relevant Group Executive
Committee. Members not listed in the tables do not
hold any shares or options.
MEMBERS OF GLOBAL EXECUTIVE COMMITTEE
J. Díaz González, Director and Group CEO
230.0
35.1 1
IN THOUSANDS
MEMBERS OF BOARD OF DIRECTORS
J. C. Torres Carretero, Chairman
A. Holzer Neumann, Director (2017: Vice-Chairman)
J. Born, Vice-Chairman (2017: Director)
J. Díaz González, Director and Group CEO
H. Jo Min, Director
G. Koutsolioutsos (2017: Director)
Total Board of Directors
A. Schneiter, CFO
J. A. Gea, Deputy Group CEO
L. Marin, Global CCO
J. Gonzalez, Global Marketing and Digital Innovation Director
ADDITIONAL MEMBERS OF FORMER GROUP EXECUTIVE
COMMITTEE (IN 2017)
J. Martin-Consuegra, CRD
R. Riedi, Division CEO Latin America
J. DiDomizio, Division CEO North America
G. Magalhães Fagundes, GM Brazil and Bolivia
Total Global Executive Committee
(2017: Group Executive Committee)
DECEMBER 31, 2018
DECEMBER 31, 2017
SHARES
FINANCIAL
INSTRUMENTS 1
PARTICIP.
SHARES
FINANCIAL
INSTRUMENTS 1
PARTICIP.
1,001.0
4,334.4
22.0
230.0
0.5
n/a
71.1 1
55.2 1
30.9 2
35.1 1
–
n/a
1.99 %
8.15 %
0.10 %
0.49 %
0.00 %
n/a
5,587.9
192.3
10.73 %
970.3
4,324.0
22.0
263.1
–
1,608.4
7,187.8
118.3 1
220.8 1
30.9 2
43.8 1
–
200.0
613.8
12.9
14.4
4.3
2.0
n/a
n/a
n/a
n/a
–
–
–
–
n/a
n/a
n/a
n/a
0.49 %
0.02 %
0.03 %
0.01 %
0.00 %
n/a
n/a
n/a
n/a
263.1
43.8 1
7.5
4.1
1.8
n/a
1.1
0.9
1.0
6.9
–
–
–
n/a
–
–
–
–
2.02 %
8.44 %
0.10 %
0.57 %
0.00 %
3.36 %
14.48 %
0.57 %
0.01 %
0.01 %
0.00 %
n/a
0.00 %
0.00 %
0.00 %
0.01 %
263.6
35.1
0.55 %
286.4
43.8
0.61 %
1 The detailed terms of the various financial instruments disclosed are as disclosed to the SIX Swiss Exchange and published on December 28, 2018,
for the year 2018 and on December 28, 2017, for the year 2017.
2 European Capped Calls on 30,940 shares of Dufry AG. The transaction is divided into 5 tranches of 6,188 shares each,
which expire on 29.07.2019, 30.07.2019, 31.07.2019, 04.08.2019, and 05.08.2019, respectively. Each tranche is automatically exercised,
and the differences are to be cash settled. The strike price for each option is CHF 160, and the cap is CHF 260 per option.
In addition to the above, the shareholders’ group con-
sisting, among others, of different legal entities con-
trolled by Andrés Holzer Neumann, Juan Carlos Torres,
Julián Díaz González (and Dimitrios Koutsolioutsos for
2017) holds sale positions of 5.09 % through options
(2,739,430 voting rights) as of December 31, 2018 (as of
December 31, 2017: sale positions of 7.31 % through op-
tions (3,937,130 voting rights)).
The detailed terms of these financial instruments are as
disclosed to the SIX Swiss Exchange and published on
December 28, 2018 (for sale position as of December 31,
2017: publication of disclosure notice on December 28,
2017). Disclosure notices are available on the SIX Swiss
Exchange website:
www.six-exchange-regulation.com/en/home/
publications/significant-shareholders.html
258
4 Governance ReportDUFRY ANNUAL REPORT 2018 To the General Meeting of
Dufry AG, Basel
Basel, 6 March 2019
Report of the statutory auditor on the remuneration report
We have audited the remuneration report of Dufry AG for the year ended 31 December 2018. The audit
was limited to the information according to articles 14 – 16 of the Ordinance against Excessive
Compensation in Stock Exchange Listed Companies (Ordinance) contained in the tables labeled
“audited” on pages 249 to 254 of the remuneration report.
Board of Directors’ responsibility
The Board of Directors is responsible for the preparation and overall fair presentation of the
remuneration report in accordance with Swiss law and the Ordinance. The Board of Directors is also
responsible for designing the remuneration system and defining individual remuneration packages.
Auditor’s responsibility
Our responsibility is to express an opinion on the accompanying remuneration report. We conducted
our audit in accordance with Swiss Auditing Standards. Those standards require that we comply with
ethical requirements and plan and perform the audit to obtain reasonable assurance about whether
the remuneration report complies with Swiss law and articles 14–16 of the Ordinance.
An audit involves performing procedures to obtain audit evidence on the disclosures made in the
remuneration report with regard to compensation, loans and credits in accordance with articles
14–16 of the Ordinance. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatements in the remuneration report, whether due to fraud
or error. This audit also includes evaluating the reasonableness of the methods applied to value com-
ponents of remuneration, as well as assessing the overall presentation of the remuneration report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Opinion
In our opinion, the remuneration report for the year ended 31 December 2018 of Dufry AG complies
with Swiss law and articles 14 – 16 of the Ordinance.
Ernst & Young Ltd
Christian Krämer
Licensed audit expert
(Auditor in charge)
Philipp Baumann
Licensed audit expert
259
4 Governance ReportDUFRY ANNUAL REPORT 2018
INFORMATION
FOR INVESTORS
AND MEDIA
REGISTERED SHARES
Issuer
Listing
Type of security
Ticker symbol
ISIN-No.
Swiss Security-No.
Reuters
Bloomberg
Dufry AG
SIX Swiss Exchange
Registered shares
DUFN
CH0023405456
2340545
DUFN.S
DUFN:SW
KEY DATES IN 2019
March 14, 2019
Results Fiscal Year 2018,
Publication of Annual Report
Annual General Meeting
Results First Three Months 2019
Results First Half Year 2019
May 9, 2019
May 14, 2019
July 30, 2019
November 5, 2019 Results First Nine Months 2018
260
SENIOR NOTES
Issuer
Listing
Type of security
Size of issue
Interest rate
Maturity
ISIN-No.
Bloomberg
Issuer
Listing
Type of security
Size of issue
Interest rate
Maturity
ISIN-No.
Bloomberg
Dufry Finance SCA
ISE Irish Stock Exchange
Senior Notes
EUR 700 million
4.5 % p.a., paid semi-annually
August 1, 2023
XS1266592457 (Serie REG S)
XS1266592705 (Serie 144A)
DUFNSW
Dufry One B.V.
The International Stock
Exchange (“TISE”)
Senior Notes
EUR 800 million
2.5 % p.a., paid semi-annually
October 15, 2024
XS1699848914 (Serie REG S)
DUFNSW
4 Governance ReportDUFRY ANNUAL REPORT 2018
ADDRESS
CORPORATE
HEADQUARTERS
DUFRY AG
Brunngässlein 12
P.O. Box
4010 Basel
Switzerland
Phone +41 61 266 44 44
DUFRY.COM
Company’s website:
Latest news:
Articles of incorporation:
Financial reports:
261
INVESTOR AND MEDIA CONTACTS
Renzo Radice
Global Head Investor Relations
and Corporate Communications
Phone + 41 61 266 44 19
renzo.radice@dufry.com
INVESTOR RELATIONS
Rafael Duarte
Head Investor Relations
Phone + 41 61 266 45 77
rafael.duarte@dufry.com
Sara Lizi
Head Investor Relations Americas &
Communication Division 4
Phone + 55 21 21 57 99 01
sara.lizi@br.dufry.com
CORPORATE COMMUNICATIONS
Renzo Radice
Global Head Investor Relations and
Corporate Communications
Phone + 41 61 266 44 19
renzo.radice@dufry.com
Karen Sharpes
Global Media & Events Manager
Phone + 44 208 624 43 26
karen.sharpes@dufry.com
Sara Lizi
Head Investor Relations Americas &
Communication Division 4
Phone + 55 21 21 57 99 01
sara.lizi@br.dufry.com
4 Governance ReportDUFRY ANNUAL REPORT 2018 This Annual Report contains certain forward-looking statements, which can be identified by terms like “believe”, “assume”, “expect” or
similar expressions, or implied discussions regarding potential new projects or potential future revenues, or discussions of strategy,
plans or intentions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause
actual results to be materially different from any future results, performance or achievements expressed or implied by such statements.
All forward-looking statements are based only on data available to Dufry at the time of preparation of this Annual Report. Dufry does
not undertake any obligation to update any forward-looking statements contained in this Annual Report as a result of new information,
future events or otherwise.
Publisher Dufry AG, Basel
Concept, Production Tolxdorff Eicher, Horgen
Design, Production hilda design matters, Zurich
Print Neidhart + Schön Group AG, Zurich
© Dufry AG 2019
The Dufry
Selection.