Market Overview

Hudson Group Reports First Quarter 2018 Results

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Hudson Ltd. (NYSE:HUD) ("Hudson Group"), a leader in North American
travel retail, announced today its results for the quarter ended March
31, 2018.

Highlights for the Quarter:

  • Turnover of $427 million, a year-over-year increase of 9.2%;
  • Organic sales growth of 9.4%; like-for-like sales growth of 5.5%;
  • Adjusted EBITDA of $37 million, a year-over-year increase of 55.3% (or
    20.7% assuming the reduced franchise fee rates we currently pay Dufry1
    had been in effect in the first quarter of 2017);
  • Successfully won, extended or expanded six concession contracts;
  • Signed agreement with FAO Schwarz to serve as the exclusive airport
    retailer for FAO Schwarz and FAO Schweetz products and shops;
  • Completed initial public offering on the New York Stock Exchange.

"Our impressive first quarter organic sales growth reinforces the
attractive and resilient nature of the travel retail industry as well as
the multiple levers we have to expand our concession portfolio," stated
Joe DiDomizio, President and CEO of Hudson Group. "We made significant
progress in executing our strategic initiatives, highlighted by the
ongoing development of our grab & go offerings as well as capturing
additional white space opportunities through key wins at Phoenix and
Seattle airports. As we look ahead, we are confident our performance
year-to-date, combined with the continued execution of our strategic
priorities, will position Hudson Group to deliver continued growth."

First Quarter 2018 Summary

  • Turnover increased $36.1 million or 9.2% to $426.8 million for
    the first quarter 2018 compared to $390.7 million in the first quarter
    of 2017.
    • Net sales increased $34.0 million or 8.9% to $415 million from the
      year-ago period;
    • Organic sales growth, which is a combination of like-for-like
      sales growth and net new business and expansions, was 9.4%,
      compared to 8.5% in the year-ago period;
    • Like-for-like sales growth was 5.5% (4.5% in constant currency),
      despite the high comparison base of 6.1% (5.3% in constant
      currency) in the year-ago period, and benefited from an increase
      in average ticket size and the number of overall transactions.
  • Gross profit increased $24.7 million or 10.2% to $268.0 million
    in the first quarter compared to $243.3 million in the year-ago
    period. Gross margin increased 50 bps to 62.8% in the quarter due to
    sales mix shift to higher margin categories and additional vendor
    promotions reimbursements.
  • Selling expenses increased $6.2 million or 6.5% to $100.9
    million in the first quarter as compared to the year-ago period,
    driven primarily by concession fees, which comprise the majority of
    this item and is a variable expense driven by net sales. For the
    quarter, selling expenses as a percentage of turnover totaled 23.6%
    compared to 24.2% in the prior year quarter, primarily due to a rent
    reduction in one of our concession contracts.
  • Personnel expenses increased $9.7 million or 11.0% to $97.6
    million in the first quarter as compared to the year-ago period
    primarily due to new hires associated with opening new store
    locations. As a percentage of turnover, personnel expenses increased
    from 22.5% to 22.9% this quarter.
  • General and administrative expenses decreased $4.1 million or
    11.1% to $32.8 million in the first quarter as compared to the year
    ago period due to the reduction of franchise fees paid to Dufry
    starting January 1, 2018. As a percentage of turnover, this item
    decreased from 9.4% to 7.7%.
  • Adjusted EBITDA increased $13.1 million or 55.3% to $36.8
    million in the first quarter as compared to the prior year quarter,
    and adjusted EBITDA margin increased from 6.1% to 8.6%. Assuming the
    reduced franchise fee rates we currently pay Dufry had been in effect
    in the first quarter of 2017, adjusted EBITDA for the quarter would
    have increased $6.3 million or 20.7% instead of 55.3%, as compared to
    the year ago period.
  • Reported net earnings attributable to equity holders of the parent improved
    $5.0 million to a loss of $5.7 million in the first quarter compared
    to a loss of $10.7 million in the year ago quarter while reported
    diluted earnings per share increased from a loss per share of $0.12 to
    a loss per share of $0.06.
  • Adjusted net earnings attributable to equity holders of the parent increased
    $5.8 million to $6.1 million in the first quarter compared to $0.3
    million in the year ago quarter, while adjusted earnings per share
    increased from $0.00 to $0.07.

Balance Sheet and Cash Flow Highlights

  • Cash flows from operating activities for the year were $50.5 million
    compared to $35.9 million in the prior year quarter due to improvement
    in operating performance.
  • Capital expenditures in the quarter totaled $11.2 million compared to
    $15.3 million in the prior year quarter.
  • At March 31, 2018, the Company's net debt was $379.9 million resulting
    in net debt leverage of 2.0 times, compared to net debt of $288.2
    million and net debt leverage of 1.8 times at March 31, 2017.

Operational Update

As of March 31, 2018, Hudson Group operated 1,005 stores, across 88
locations, totaling 1.1 million square feet of retail space.

During the first quarter, Hudson expanded its business though RFP wins
at Phoenix Sky Harbor, Seattle-Tacoma and Billy Bishop Toronto City
Airport.

The Company also successfully extended existing contracts in Pittsburgh,
JFK Terminal 7, and Clinton National in Little Rock.

As part of Hudson's strategy to continue expanding its portfolio of
concepts, the Company entered into an agreement to serve as the
exclusive airport retailer for FAO Schwartz toys and FAO Schweetz candy
products and shops.

Other Developments

On February 5, 2018, the Company completed its initial public offering
of common stock ("IPO") on the New York Stock Exchange in which its
parent company, Dufry International AG, sold 39,417,765 shares of common
stock. The shares of the Company's common stock were sold at an IPO
price of $19.00 per share, which generated net proceeds of approximately
$714.4 million after deducting underwriting discounts and commissions
and other offering expenses for Dufry International AG, the selling
shareholder. Hudson Group did not receive any of the proceeds from the
offering.

Earnings Conference Call Information

Hudson Group will host a conference call to review its first quarter
financial performance today, May 8, at 10:00 a.m. ET. Participants can
pre-register for the conference by navigating to http://dpregister.com/10119855.
The conference call also will be available in listen-only mode via our
investor relations website: https://investors.hudsongroup.com/.
To participate in the live call, interested parties may dial
1-866-777-2509 (toll free) or 1-412-317-5413. A web replay will be
available at https://services.choruscall.com/links/hson180508.html
for three months following the call.

Website Information:

We routinely post important information for investors on the Investor
Relations section of our website, investors.hudsongroup.com. We intend
to use this website as a means of disclosing material information.
Accordingly, investors should monitor the Investor Relations section of
our website, in addition to following our press releases, SEC filings,
public conference calls, presentations and webcasts. The information
contained on, or that may be accessed through, our website is not
incorporated by reference into, and is not a part of, this document.

Non-IFRS and Other Measures:

Adjusted EBITDA is a non-IFRS measure and is not a uniformly or legally
defined financial measure. Adjusted EBITDA is not a substitute for IFRS
measures in assessing our overall financial performance. Because
Adjusted EBITDA is not determined in accordance with IFRS, and is
susceptible to varying calculations, Adjusted EBITDA may not be
comparable to other similarly titled measures presented by other
companies. We believe that Adjusted EBITDA is useful to investors
because it is frequently used by securities analysts, investors and
other interested parties in their evaluation of the operating
performance of companies in industries similar to ours. We also believe
Adjusted EBITDA is useful to investors as a measure of comparative
operating performance from period to period as it is reflective of
changes in pricing decisions, cost controls and other factors that
affect operating performance, and it removes the effect of our capital
structure (primarily interest expense), asset base (depreciation and
amortization) and non-recurring transactions, impairments of financial
assets and changes in provisions (primarily relating to costs associated
with the closing or restructuring of our operations). Our management
also uses Adjusted EBITDA for planning purposes, including financial
projections. Adjusted EBITDA has limitations as an analytical tool, and
you should not consider it in isolation, or as a substitute for an
analysis of our results as reported under IFRS as issued by IASB. A
reconciliation of Adjusted EBITDA to net earnings is provided in the
attached schedules.

Adjusted net earnings attributable to equity holders of parent is a
non-IFRS measure. We define Adjusted net earnings attributable to equity
holders of parent as net earnings attributable to equity holders of
parent adjusted for the items set forth in the table below. Adjusted net
earnings attributable to equity holders of parent is a non-IFRS measure
and is not a uniformly or legally defined financial measure. Adjusted
net earnings attributable to equity holders of parent is not a
substitute for IFRS measures in assessing our overall operating
performance. Because Adjusted net earnings attributable to equity
holders of parent is not determined in accordance with IFRS, and is
susceptible to varying calculations, Adjusted net earnings attributable
to equity holders of parent may not be comparable to other similarly
titled measures presented by other companies. Adjusted net earnings
attributable to equity holders of parent is included in this press
release because it is a measure of our operating performance and we
believe that Adjusted net earnings attributable to equity holders of
parent is useful to investors because it is frequently used by
securities analysts, investors and other interested parties in their
evaluation of the operating performance of companies in industries
similar to ours. We also believe Adjusted net earnings attributable to
equity holders of parent is useful to investors as a measure of
comparative operating performance from period to period as it removes
the effects of purchase accounting for acquired intangible assets
(primarily concessions), non-recurring transactions, impairments of
financial assets and changes in provisions (primarily relating to costs
associated with the closing or restructuring of our operations).
Management does not consider such costs for the purpose of evaluating
the performance of the business and as a result uses Adjusted net
earnings attributable to equity holders of parent for planning purposes.
Adjusted net earnings attributable to equity holders of parent has
limitations as an analytical tool, and you should not consider it in
isolation, or as a substitute for an analysis of our results as reported
under IFRS as issued by IASB. A reconciliation of Adjusted net earnings
attributable to equity holders of parent to net earnings attributable to
equity holders of parent is provided in the attached schedules.

Organic sales growth represents the combination of growth in aggregate
monthly sales from (i) like-for-like sales growth and (ii) net new
business and expansions. Like-for-like sales growth represents the
growth in aggregate monthly net sales in the applicable period at stores
that have been operating for at least 12 months. Like-for-like sales
growth excludes growth attributable to (i) net new business and
expansions until such stores have been part of our business for at least
12 months, (ii) acquired stores until such stores have been part of our
business for at least 12 months and (iii) acquired wind-down stores,
consisting of eight stores acquired in the 2014 acquisition of The
Nuance Group AG ("Nuance") and 46 stores acquired in the 2015
acquisition of World Duty Free S.p.A. ("World Duty Free Group") that
management expected, at the time of the applicable acquisition, to wind
down. Net new business and expansions consists of growth from (i)
changes in the total number of our stores (other than acquired stores),
(ii) changes in the retail space of our existing stores and (iii)
modification of store retail concepts through rebranding. Net new
business and expansions excludes growth attributable to (i) acquired
stores until such stores have been part of our business for at least 12
months and (ii) acquired wind-down stores. Like-for-like sales growth in
constant currency is calculated by keeping exchange rates constant for
each month being compared from period to period. We believe that the
presentation of like-for-like sales growth in constant currency basis
assists investors in comparing period to period operating results as it
removes the effect of fluctuations in foreign exchange rates.

Net debt leverage represents total debt less cash at March 31, 2018
divided by Adjusted EBITDA for the trailing twelve months ended March
31, 2018.

About Hudson Group

Hudson Group, one of the largest travel retailers in North America, is
committed to enhancing the travel experience for over 300,000 travelers
every day in the continental United States and Canada. The Company is
anchored by its iconic Hudson, Hudson News and Hudson Bookseller brands
and operates over 1,000 duty-paid and duty-free stores in 88 locations,
including airports, commuter terminals, hotels and some of the most
visited landmarks and tourist destinations in the world. Our wide range
of store concepts include travel essentials and convenience stores,
bookstores, duty-free shops, branded specialty stores, electronics
stores, and quick-service food and beverage outlets. For more
information, visit www.hudsongroup.com and www.dufry.com

Forward-Looking Statements

This press release contains "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995 (Reform
Act). Forward-looking statements are based on our beliefs and
assumptions and on information currently available to us, and include,
without limitation, statements regarding our business, financial
condition, strategy, results of operations, certain of our plans,
objectives, assumptions, expectations, prospects and beliefs and
statements regarding other future events or prospects. Forward-looking
statements include all statements that are not historical facts and can
be identified by the use of forward-looking terminology such as the
words "believe," "expect," "plan," "intend," "seek," "anticipate,"
"estimate," "predict," "potential," "assume," "continue," "may," "will,"
"should," "could," "shall," "risk" or the negative of these terms or
similar expressions that are predictions of or indicate future events
and future trends. By their nature, forward-looking statements involve
risks and uncertainties because they relate to events and depend on
circumstances that may or may not occur in the future. We caution you
that forward-looking statements are not guarantees of future performance
and that our actual results of operations, financial condition and
liquidity, the development of the industry in which we operate and the
effect of acquisitions on us may differ materially from those made in or
suggested by the forward looking statements contained in this press
release. In addition, even if our results of operations, financial
condition and liquidity, the development of the industry in which we
operate and the effect of acquisitions on us are consistent with the
forward-looking statements contained in this press release, those
results or developments may not be indicative of results or developments
in subsequent periods. Forward-looking statements speak only as of the
date they are made, and we do not undertake any obligation to update
them in light of new information or future developments or to release
publicly any revisions to these statements in order to reflect later
events or circumstances or to reflect the occurrence of unanticipated
events. Factors that may cause our actual results to differ materially
from those expressed or implied by the forward-looking statements in
this press release, or that may impact our business and results more
generally, include, but are not limited to, the risks described under
"Item 3. Key Information—D. Risk factors" of our Annual Report on Form
20-F for the year ended December 31, 2017 which may be accessed through
the SEC's website at https://www.sec.gov/edgar.
You should read these risk factors before making an investment in our
shares.

____________

1 Dufry AG (SIX: DUFN) is the ultimate parent and
controlling shareholder of Hudson Ltd.
 
     
CONSOLIDATED
INCOME
STATEMENT
 
FOR THE QUARTER ENDED MARCH 31, 2018 (UNAUDITED)
 
 
QUARTER ENDED QUARTER ENDED
IN MILLIONS OF USD (EXCEPT PER SHARE DATA)   3/31/2018     3/31/2017
 
Turnover 426.8 390.7
Cost of sales (158.8 ) (147.4 )
Gross profit   268.0       243.3  
Selling expenses (100.9 ) (94.7 )
Personnel expenses (97.6 ) (87.9 )
General expenses (32.8 ) (36.9 )
Share of result of associates 0.1 (0.1 )
Depreciation, amortization and impairment (28.8 ) (27.0 )
Other operational result (2.6 ) (1.8 )
Operating Profit (EBIT)   5.4       (5.1 )
Interest expenses (7.9 ) (7.2 )
Interest income 0.5 0.5
Foreign exchange gain / (loss) (0.4 ) 0.2
Earnings before taxes (EBT)   (2.4 )     (11.6 )
Income tax 2.4 6.2
Net earnings   -       (5.4 )
 
NET EARNINGS ATTRIBUTABLE TO
Equity holders of the parent (5.7 ) (10.7 )
Non-controlling interests   5.7       5.3  
 
 
EARNINGS/LOSS PER SHARE(1)
Basic (0.06 ) (0.12 )
Diluted (0.06 ) (0.12 )
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING (000's)
Basic 92,511 92,511
Diluted 92,511 92,511
(1)   Gives effect to our Class A and Class B common shares outstanding
following the completion of our initial public offering on February
5, 2018.
 
         
CONSOLIDATED
STATEMENT OF
FINANCIAL POSITION
 
AT MARCH 31, 2018 (UNAUDITED)
 
 

      MARCH 31,

DECEMBER 31,
IN MILLIONS OF USD     2018     2017
 
ASSETS
Property, plant and equipment 255.2 264.9
Intangible assets 666.8 685.8
Investments in associates 3.5 3.1
Deferred tax assets 93.3 90.3
Other non-current assets 25.8 24.9
Non-current assets     1,044.6     1,069.0
 
Inventories 181.6 186.0
Trade receivables 3.1 4.6
Other accounts receivable 46.9 59.4
Income tax receivables 1.5 1.4
Cash and cash equivalents 205.3 137.4
Current assets     438.4     388.8
 
Total assets     1,483.0     1,457.8
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Equity attributable to equity holders of the parent 530.7 493.7
Non-controlling interests 81.9 78.7
Total equity     612.6     572.4
 
Financial debt 519.2 520.4
Deferred tax liabilities 57.7 50.1
Post-employment benefit obligations 0.9 0.9
Non-current liabilities     577.8     571.4
 
Trade payables 92.0 97.1
Financial debt 66.0 80.7
Income tax payables 1.1 4.1
Other liabilities 133.5 132.1
Current liabilities     292.6     314.0
 
Total liabilities     870.4     885.4
Total liabilities and shareholders' equity     1,483.0     1,457.8
 
   
CONSOLIDATED
STATEMENT OF
CASH FLOWS
 
FOR THE QUARTER ENDED MARCH 31, 2018 (UNAUDITED)
 
 
QUARTER ENDED QUARTER ENDED
IN MILLIONS OF USD 3/31/2018   3/31/2017
 
CASH FLOWS FROM OPERATING ACTIVITIES
Total earnings before taxes (EBT) (2.4 )   (11.6 )
 
ADJUSTMENTS FOR
Depreciation, amortization and impairment 28.8 27.0
Loss / (gain) on sale of non-current assets 0.7 -
Increase / (decrease) in allowances and provisions 3.9 3.9
Loss / (gain) on unrealized foreign exchange differences 0.5 0.1
Other non-cash items 2.4 0.2
Share of result of associates (0.1 ) 0.1
Interest expense 7.9 7.2
Interest income (0.5 ) (0.5 )
Cash flow before working capital changes 41.2     26.4  
 
Decrease / (increase) in trade and other accounts receivable 12.7 (29.1 )
Decrease / (increase) in inventories 0.8 (20.8 )
Increase / (decrease) in trade and other accounts payable (3.1 ) 61.3
Cash generated from operations 51.6     37.8  
Income taxes paid (1.1 ) (1.9 )
Net cash flows from operating activities 50.5     35.9  
 
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (14.2 ) (19.9 )
Purchase of intangible assets (1.1 ) (2.3 )
Net purchase of interest in associates (0.4 ) -
Proceeds from sale of property, plant and equipment 0.1 2.6
Interest received 0.8 0.4
Net cash flows used in investing activities (14.8 )   (19.2 )
 
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from sales of affiliated companies 60.1 -
Repayment of financial debt (13.1 ) (2.4 )
Proceeds from / (repayment of) 3rd party loans 0.4 0.1
Transaction costs paid for issuance of equity instruments (3.5 ) -
Dividends paid to non-controlling interest (5.7 ) (7.0 )
Net contributions from / (purchase of) non-controlling interests 0.8 -
Interest paid (0.5 ) (7.2 )
Net cash flows from / (used in) financing activities 38.5     (16.5 )
Currency translation on cash (6.3 ) 1.2
Increase in cash and cash equivalents 67.9     1.4  
 
CASH AND CASH EQUIVALENTS AT THE
– beginning of the period 137.4 187.6
– end of the period 205.3 189.0
 
       
NON-IFRS RECONCILIATIONS
 
 
ADJUSTED EBITDA TO NET EARNINGS
FOR THE QUARTER ENDED MARCH 31, 2018
 
 
QUARTER ENDED QUARTER ENDED
IN MILLIONS OF USD     3/31/2018     3/31/2017
 
Net earnings     -       (5.4 )
Income tax expense (2.4 ) (6.2 )
Earnings before taxes (EBT)     (2.4 )     (11.6 )
Foreign exchange (gain) / loss 0.4 (0.2 )
Interest income (0.5 ) (0.5 )
Interest expenses 7.9 7.2
Operating Profit (EBIT)     5.4       (5.1 )
Depreciation, amortization and impairment 28.8 27.0
Other operational result (1) 2.6 1.8
Adjusted EBITDA     36.8       23.7  
 
(1)   For the quarter ended March 31, 2018, other operational result
consisted of $0.7 million of asset write-offs related to conversions
and store closings, $0.5 million of uncollected receivables, $0.4
million of restructuring expenses, $0.4 million of IPO transaction
costs and $0.6 million of other non-recurring items. For the quarter
ended March 31, 2017, other operational result included $1.0 million
of restructuring expenses and $0.8 million of other non-recurring
items.
     
NET EARNINGS ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT TO
ADJUSTED NET EARNINGS ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
FOR THE QUARTER ENDED MARCH 31, 2018
 
 
QUARTER ENDED QUARTER ENDED
IN MILLIONS OF USD (EXCEPT PER SHARE DATA)   3/31/2018     3/31/2017
 
Net earnings attributable to equity holders of the parent   (5.7 )     (10.7 )
Amortization related to acquisitions (1) 9.9 9.9
Other operational result (2) 2.6 1.8
Income tax adjustment (3) (0.7 ) (0.7 )
Adjusted net earnings attributable to equity holders of the parent   6.1       0.3  
 
Diluted earnings / (loss) per share (0.06 ) (0.12 )
Adjusted diluted earnings / (loss) per share to equity holders of
the parent
  0.07       0.00  
Weighted average number of shares outstanding (000's)
(4)
  92,511       92,511  
 
(1)   Although the values assigned to the concession rights during the
purchase price allocation are fair values, we believe that their
additional amortization doesn't allow a fair comparison with our
existing business previous to the business combination, as the costs
of self-generated intangible assets have been expended.
 
(2) For the quarter ended March 31, 2018, other operational result
consisted of $0.7 million of asset write-offs related to conversions
and store closings, $0.5 million of uncollected receivables, $0.4
million of restructuring expenses, $0.4 million of IPO transaction
costs and $0.6 million of other non-recurring items. For the quarter
ended March 31, 2017, other operational result included $1.0 million
of restructuring expenses and $0.8 million of other non-recurring
items.
 
(3) Income tax adjustment represents the impact in income taxes we
actually accrued during the applicable period attributable to other
operational result. This assumption uses an income tax rate of 26.5%
and 39.0% for the adjustment for the quarters ended March 31, 2018
and 2017, respectively. Amortization expenses related to
acquisitions did not reduce the amount of taxes we paid during the
applicable periods, and therefore there are no corresponding income
tax adjustments in respect of the amortization expense adjustment.
 
(4) Gives effect to our Class A and Class B common shares outstanding
following the completion of our initial public offering on February
5, 2018.

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