Annual Review 2011 - The Nuance Group

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The Nuance Group Annual Review 2011 Review of 2011 Our marketplace Travel retail market overview In 2011, the global Duty Free market continued its recent upward trend and delivered a very strong performance, with global sales reaching US$46 billion. Key drivers included improved market conditions and rising consumer confidence as well as strong passenger traffic growth and a markedly enhanced performance in emerging market regions such as China, Brazil and India. Compared to last year, the travel retail market grew by 18%. This figure is to some extent distorted by the weakening US Dollar, and real market growth closer to 14% up on 2010. With a 60% share, airports constitute by far the largest channel within the industry, and generated some US$28 billion in global sales in 2011, up 19% on the previous year. This increase was achieved on the back of robust performances from developing markets, such as Asia and Latin America, together with improving growth rates in Europe and North America. In Europe, we saw growth driven primarily by Russian and Eastern European travellers, as well as by a general recovery in passenger movements, which had been impacted by the Icelandic volcanic ash event. In the Oceanic region, the strong AUS/NZD Dollar continues to negatively impact PSR. With future growth estimated to reach 8–10% per year, it is clear that the industry is back on a positive track. The bounce back experienced across all categories in 2010 continues apace, with all showing positive rises, especially P&C, liquor and luxury goods. In our view, international air travellers will reach three billion by 2015, underlining the bright future faced by the industry. Although air travel will continue to be tested by global events and other issues, it continues to demonstrate great resilience harnessed to an ability to overcome potential uncertainties. Industry estimates are for 5% growth per annum over the next three years. Building on last year’s achievements 2010 was an excellent year for Nuance and we built further on these foundations with an even better performance in 2011, with revenue of CHF 1,867.5 million and an EBITDA of CHF 112 million (6% of revenue). These are the Group’s best ever results, as we improved revenues and profitability across most regions. The Nuance Group has delivered great performance on par with the market, with the exceptional performance of our airport operations in Asia and North America helping to deliver total growth of 8% 1 . Dynamic growth across Asia resulted in an estimated uplift of some 22% 1 for the region. However, our Asian business performed better still, delivering 26% growth1 and achieving record revenue for the third year. This robust performance was aided by the success of various initiatives undertaken in the year, as well as strong first year results in Hong Kong and Singapore. Similarly, in North America, revenue grew by almost 12% 1 , compared to growth of 9% 1 for the overall market. In 2011, passenger traffic performed strongly across Europe and this was reflected in revenue, where we experienced an increase of 3% 1 . In some markets, such as Turkey, where we benefited from the refurbishment of our stores at Antalya’s T1, we recorded significant growth versus 2010, as well as rising passenger numbers and increased spending from Eastern and Northern European travellers. However, despite growing traveller numbers, the region is not without its challenges. Strengthening currencies such as the Swiss franc and Swedish krona continue to have a significant impact on customer behaviour in these important markets. Our Australian operation was negatively affected by the strengthening of the Australian Dollar against major currencies (vs. USD +12%,vs. NZD + 3%, vs EUR +7%). However, with a range of initiatives improving passenger spend rate, TNG Australia grew by 2%. Whilst airport retail comprises over 93% of Group revenues, the positive trend was also apparent in our Retail Services & Distribution division, which achieved almost 36% growth over the year. 1 Adjusted for currency – use 2010 exchange rate 20
The Nuance Group Annual Review 2011 Revenue growth comparison by region (2011 vs. 2010) Global airport market Nuance1 % % Global total 82 8 Asia retail channel 22 27 W. Europe retail channel 7 3 North America retail channel 9 12 Oceania retail channel 4 2 Global airport market are estimated figures and adjusted for currency. Strong category performance During the year, we achieved improved revenue across all categories compared to 2010. Significant gains were achieved in most categories, especially in P&C where we grew by 12% 1 , mainly driven by strong revenue in Asia (P&C +27% 1 ) and North America (P&C +17% 1 ). In addition, liquor and tobacco grew by 8% 1 over the previous year. 1 Adjusted for currency – use 2010 exchange rate 2 Like-for-like weighted by comparable geography and category Adjusted for currency – use 2010 exchange rate Key industry trends We have identified a number of trends that are likely to affect the Duty Free market in the coming years. These include: – Legislation In western markets, regulators are increasingly seeking to restrict or ban tobacco displays and to impose standard packaging for cigarettes. – Branding The creation of distinct identities is increasingly widespread, with many key industry players investing in initiatives to build brand recognition. 21 – Web 2.0 Increased investment and the development of online channels are helping travel retailers to improve consumer understanding and interaction. – Convenience Arrivals shopping is increasingly popular as it satisfies demand for more flexibility, with ‘shop on departure, collect on return’ options influencing passenger purchasing decisions at their home airports. Home delivery also seen as a potential way to win customers. Financial statements Review of 2011 Overview
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Annual Review 2011 - The Nuance Group

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