Passenger traffic drop, change in sales mix reduce profits of Hellenic Duty Free Shops

Lower sales at airports and border outlets drove down Hellenic Duty Free Shops (HDFS) net profit last year, below analysts’ forecasts, as the retailer’s 2005 net earnings fell 9.8 percent. HDFS reported net profit of 37.9 million euros for the year versus an average forecast of 43.03 million euros in a Reuters poll of nine analysts. HDFS has exclusive rights to run duty-free and other retail stores in airports, ports and border stations throughout Greece until 2048. Airports are the retailer’s largest revenue contributor. «The significant decrease in passenger traffic and the change in the sales mix during the last quarter of the year were the main reasons for not fully achieving management’s financial targets for 2005,» the company said. HDFS said passenger traffic in border crossings fell 8.7 percent in Q4, while total passenger traffic in Greece dropped 2.5 percent. The company said results were also hit by one-off gains that HDFS booked in 2004 from the sale of its stake in Efsimon, which had exclusive rights to produce and sell Olympic Games-related products. Sales grew 11.3 percent to 261.5 million euros, but fell short of management’s target of 265-270 million euros. Earnings before interest, tax, depreciation and amortization (EBITDA) dropped 1.0 percent to 58 million euros. The retailer said it expects double-digit earnings and sales growth this year due to new business projects already on track. HDFS will propose a dividend per share of 0.8 euro, translating to a yield of 4.8 percent. It paid 0.7 euros in 2004. HDFS trades on 20 times 2005 earnings, a premium to the 17.8 times multiple for retailers in the European Union, according to Reuters data. Shares in the company, 49 percent-owned by Greek retailers Folli Follie and Germanos, ended 0.84 percent down at 16.56 euros before the figures were released. They have gained 12 percent since the start of the year in line with the broader market. (Reuters)

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