Dufry cancels dividend, plans private placement of 5.5 million shares, as sales nosedive 90% in April first half
Dufry, the world’s largest duty-free retailer, has cancelled its planned dividend for 2020 in a move to radically reduce short-term cash outflows; and announced plans to sell 5.5 million shares in a private placement.
The moves are designed to strengthen Dufry's capital structure, which has suffered a dramatic collapse in revenues since the massive fall in air travel caused by coronavirus.
“Dufry is taking a comprehensive set of initiatives to strengthen its capital structure and liquidity position, in addition to the cost saving and cash flow management measures already announced on March 12, 2020,” the Swiss-based company said in a release.
Back in March, Dufry cut jobs and began rent renegotiations across its global chain. Dufry has over 2,400 shops at airports, cruise lines, train stations and other tourist shopping locations.
After an initial strong start to 2020, sales have nosedived in recent weeks.
“In the first two weeks of April, Dufry has seen reduced sales levels in the amount of around 90% as compared to the same period in the previous year,” the company revealed.
In March, increasing travel restrictions and airport closures saw revenues fall 55.9%. All told, turnover in the first quarter of 2020 came to CHF 1,438.7 million, “resulting in an expected organic sales growth performance of around -22.0%,” the group said.
Dufry’ stock price has collapsed this year. From a high of $104.40 on Dec. 30, 2019 it had dropped to $26.60 today.
As the company scramble to withstand the financial shocks, Dufry revealed a series of bold financial measures, beginning with an additional credit facility from some of Dufry’s core banks for approximately CHF 425.0 million. Also, Dufry’s bank consortium agreed to waive existing financial covenants until end of June 2021.
Moreover, it noted that private placement of up to 5.5 million shares had “received strong indications of interest to participate from investors.” Members of the board and senior management will participate in the share placement, it noted.
“The Board of Directors is firmly convinced that these initiatives are in the best interest of the shareholders and will help Dufry to overcome this challenging situation caused by the impact and the uncertainties of the COVID-19 pandemic. Here, I would like to thank our long-term shareholders for their continued support and commitment to purchase additional shares and participating in the issuance of the convertible bond,” said Juan Carlos Torres, Chairman of Dufry’s Board of Directors.
Finally, the group plans to organize a CHF 300.0 million senior, unsecured, guaranteed convertible bond.
Added Julián Díaz, CEO of Dufry: “These equity measures, in addition to the new credit facility, the cancellation of the dividend and the other operational cost cutting measures being implemented, will significantly strengthen Dufry's capital base and liquidity position. The initiatives are designed to help Dufry to weather the COVID-19 pandemic and current economic downturn even under a severe scenario, while also providing the company with enough flexibility to react to business opportunities arising in the context of the current situation. The company’s setup allows us to react fast and adapt to business requirements as needed, also in view of the travel recovery phase.”
Due to the downturn in global travel due to Covid-19, Dufry withdrew its guidance for the 2020 business year – previously disclosed on March 12, 2020. The company now plans to issue its interim trading update for the first quarter as planned on May 12, 2020.
The company took pains to stress that its cost savings and cash flow management measures will help it “considerably reduce its cash burn rate, allowing it to continue operations for a prolonged duration until the business environment normalizes, even in a scenario of sales reducing by 70%-80%.”
The company’s next Ordinary General Meeting will be held on Monday, May 18, 2020 at its Dufry offices in Basel, Switzerland, without the presence of shareholders.
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