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ANNUALREPORT2019

DUFRY GROUP - A LEADING

GLOBAL TRAVEL RETAILER

DUFRY AG (SIX: DUFN)

IS A LEADING GLOBAL

TRAVEL RETAILER OPERATING

OVER 2,400 DUTY-FREE

AND DUTY-PAID SHOPS

IN AIRPORTS, CRUISE

LINES, SEAPORTS, RAILWAY

STATIONS AND DOWNTOWN

TOURIST AREAS.

DUFRY EMPLOYS OVER

31,000 (FTE) PEOPLE. THE

COMPANY, HEADQUARTERED

IN BASEL, SWITZERLAND,

OPERATES IN 65 COUNTRIES

ON ALL SIX CONTINENTS.

3

ANNUAL

REPORT

2019

CONTENT

1

MANAGEMENT REPORT

Dufry at a Glance 4 - 5

Highlights 2019 6 - 7

Message from the Chairman of the Board of Directors 8 - 11 Statement from the Chief Executive Officer 12 - 16

Organizational Structure 17

Board of Directors 18 - 19

Global Executive Committee 20 - 21

Dufry Investment Case 22 - 23

Dufry Strategy 24 - 77

Dufry Divisions 48 - 65

2

SUSTAINABILITY REPORT

Sustainability 78 - 101

Community Engagement 102 - 108

3

FINANCIAL REPORT

Report from the Chief Financial Officer 110 - 114

Financial Statements 115 - 228

Consolidated Financial Statements 116 - 214

Financial Statements Dufry AG 215 - 227

4

GOVERNANCE REPORT

Corporate Governance 229 - 251

Remuneration Report 252 - 269

Information for Investors and Media 272 - 273

Address Details of Headquarters 273

Read the full focus story

on page 30 - 37 4

5,200 69 %

4,800 68 %

4,400 67 %

4,000 66 %

3,600 65 %

3,200 64 %

2,800 63 %

2,400 62 %

2,000 61 %

1,600 60 %

1,200 59 %

800 58 %

400 57 %

0 56 %

1 Management Report

DUFRY ANNUAL REPORT 2019

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 2018
2018
2019
2019
400
300
200
100
0

20182019201520162017

4 % CRUISE LINERS

AND SEAPORTS

3 % BORDER, DOWNTOWN

AND HOTEL SHOPS

DUFRY

AT A GLANCE

TURNOVER

IN MILLIONS OF CHF

EQUITY FREE CASH FLOW

IN MILLIONS OF CHF

20152016

GROSS PROFIT

IN MILLIONS OF CHF MARGIN

201520162017

2017
5 NET SALES BY CHANNEL 2019NET SALES BY MARKET SECTOR 2019

88 % AIRPORT

NET SALES BY DIVISION 2019

15 % ASIA PACIFIC

AND MIDDLE EAST

NET SALES BY PRODUCT CATEGORY 2019

5 % OTHER

2 % ELECTRONICS

11 % TOBACCO

GOODS

17 % WINE

AND SPIRITS

13 % LUXURY

GOODS

18 % FOOD,

CONFECTIONERY

AND CATERING

32 % PERFUMES

AND COSMETICS

2 % LITERATURE AND PUBLICATIONS

39 % DUTY-PAID

61 % DUTY-FREE

4 % CRUISE LINERS

AND SEAPORTS

3 % BORDER, DOWNTOWN

AND HOTEL SHOPS

5 % RAILWAY STATIONS AND OTHER

44 % EUROPE

AND AFRICA

22 % NORTH

AMERICA

18 % CENTRAL

AND SOUTH

AMERICA

1 % DISTRIBUTION

CENTERS

6

1 Management Report

DUFRY ANNUAL REPORT 2019

HIGHLIGHTS

2019

STRENGTHENING

AND EXTENDING

THE CONCESSION

PORTFOLIO

Dufry extended its concession contract

with AENA to operate duty-free shops up to 5 years in all Spanish airports and signed several new contracts across the globe, such as in Mexico, Brazil and

Finland.

Driven by like-for-like growth and

contribution from new concessions, organic growth sequentially improved during 2019 and stood in line with the mid-term average organic growth target.

ORGANIC

GROWTH

ACCELERATION

The roll-out of our loyalty

program has accelerated and RED by Dufry is becoming an important part of our digital strategy focused on driving sales. 5 million customers included in our CRM system.

In 2019, Dufry generated an Equity Free Cash Flow

of CHF 383.3 million in line with our annual target of CHF 350 - 400 million, growing with top line.

EQUITY FREE

CASH FLOW

CHF 383.3

MILLION

7

STRATEGIC

ACQUISITIONS

Dufry executed three important acquisitions, increasing its footprint in both duty-free and duty-paid, and adding new F & B concessions in North America.

DEBT REDUCED

AND FINANCING

FURTHER

OPTIMIZED

As per December, 2019 net debt

reached CHF 3,102 million, the lowest level since 2015. New EUR 750 million

Senior Notes were issued at lower rates,

thus refinancing the existing Senior

Notes as well as reducing bank debt

and financing costs.

REFINING

GOVERNANCE

AND EVOLVING

ESG

REPORTING

Dufry has further refined

its corporate governance structure and evolved its ESG reporting in accordance with the Global Reporting Initiative (GRI) CORE option.

EXPANDING

ALTERNATIVE

CHANNELS

Dufry opened its first border

duty-free shop in Brazil and further expanded the cruise channel.

In line with its geographic diversification

strategy, Dufry has further expanded its footprint. 65

Present in

65 countries

8

1 Management Report

DUFRY ANNUAL REPORT 2019

MESSAGE FROM

THE CHAIRMAN

OF THE BOARD

OF DIRECTORS

DEAR SHARE-

HOLDERS

In the financial year 2019, Dufry once again delivered re- silient results with respect to organic growth and equity free cash flow generation thereby meeting our expecta- tions. We have also successfully executed three impor- tant acquisitions - one in Russia and two in the United States - which further increase our footprint in duty-free and duty-paid, and contribute to strengthen our capabil- ities to access new avenues of growth within the impor- tant food & beverage market in North America. At the corporate governance level, we have continued to evolve the structure of the Board of Directors by welcoming a new member to the Board, introducing the new Lead In- dependent Director function, and fostering efforts in our Environment, Social and Governance (ESG) engagement. From a performance perspective, turnover increased by 1.9 % to CHF 8,848.6 million, resulting in a new all- time high. Our diversification strategy focusing on op- erating in different geographic regions and accessing various travel retail channels has once more proven effective, generating positive organic growth of 3.0 % despite adverse trading conditions in some key markets. Adjusted net profit reached CHF 349.3 mil- lion, resulting in an Adjusted EPS of CHF 7.00. Equity free cash flow reached CHF 383.3 million, confirming Dufry"s resilient cash flow generation capability and meeting its average mid-term expectation¹. While in 2018 Dufry focused on improving its opera- tional efficiency by implementing the Business Oper- ating Model and on building our digital initiatives to drive operational excellence, in 2019 we resumed the focus on growth in strategic areas. In Russia, we ex- panded our presence in Moscow by acquiring a partic- ipation in RegStaer Vnukovo. In North America, we acquired 34 Brookstone shops in the U.S. as well as the majority stake in OHM Concession Group LLC. These three acquisitions perfectly showcase our growth strategy for the future, which besides organic growth also focusses on small and mid-sized acquisitions pav- ing the way into new growth avenues. In the context of growth and the resilience of our busi- ness, I want to highlight - amongst several other con- tract extensions and new wins - the important renewal of the AENA concession contract covering all Spanish airports, the extension of the Toronto Pearson con- cession for another eight years, as well as the new contract won at Mexico City International Airport to operate three additional duty-free shops.

Dividend of CHF 4.00

per share proposed to AGM in 2020. In 2019, we have continued returning cash to sharehold- ers by paying a CHF 4.00 dividend per share (previous year: CHF 3.75 per share); equal to a yield of 4.3 %. Fol- lowing approval by the 2019 Annual General Meeting, we also cancelled the 3.3 million shares bought during the share buyback program executed in 2018. For the financial year 2019, the Board of Directors" proposal to the annual shareholders" meeting 2020 will be a div- idend of CHF 4.00 per share corresponding to a yield of 4.2 %. This dividend level will allow us to maintain our flexibility to further reduce debt or allocate capital into M&A.

Our market capitalization at December 31, 2019,

amounted to CHF 4.9 billion. Daily trading volumes on all platforms reached CHF 66.5 million, confirming the good liquidity of our shares. The SIX Swiss Ex- ¹ For a glossary of financial terms and key performance indicators please see page 270 of this Annual Report. 9

1 Management Report

DUFRY ANNUAL REPORT 2019

change remains our most important trading platform, where the average daily volume of Dufry shares reached CHF 27.3 million in 2019. In this context it has to be mentioned that the SIX Swiss Exchange lost its EU stock market equivalence on 30 June 2019.

As a consequence, since July 2019, Dufry"s trad-

ing volumes were mainly concentrated at the SIX

61 % and BATS Chi-X OTC 39 % platforms. As is

our tradition, we have maintained a continuous dialogue with our shareholders and the financial community in 870 meetings, conference calls and emails in 2019.

Our long-term shareholders, Travel Retail Invest-

ments, Qatar Investment Authority, Richemont,

GIC Asset Management, Franklin Mutual Advi-

sors LLC as well as Blackrock and JP Morgan

Chase & Co continued to support Dufry with

participations above 3 %. Together, these major shareholders represent approximately 41 % of our share capital.

Strong support

by long-term and new shareholders.

In 2019, we welcomed Mr. Luis Maroto Camino

to our Board of Directors team. He was elected by our shareholders at the 2019 AGM and will contribute with his wealth of experience within the travel and tourism industry. We have also continued to develop the struc- ture and the functions of the Board of

Directors by unanimously resolving to es-

10

1 Management Report

DUFRY ANNUAL REPORT 2019

tablish the new position of Lead Independent Director. This decision formally recognizes the key importance and strategic role of the independent members of the Board of Directors, who constitute the majority of the Board and hold all the seats in all Board Committees.

Subsequently, Ms. Heekyung Jo Min has been ap-

pointed as Dufry"s first Lead Independent Director.

Moreover, based on her extensive experience Ms.

Heekyung Jo Min will also supervise the further devel- opment of our Environment, Social and Governance (ESG) engagement.

Evolution of Dufry"s

ESG program.

Engaging with our stakeholders on a regular basis to understand their expectations, needs and concerns is part of our ongoing commitment to sustainability. In this regard, during 2019 we have revised the social, en- vironmental and economic impacts of our business, and evolved the material matrix of our sustainability report- ing by including Data Privacy and IT Security amongst the material topics for the company. Moreover, we have further improved the granularity of our internal ESG data sourcing, refining the set of in- formation reflected in the KPIs disclosed in the ESG re- port, which is structured in accordance with the Core Option of the Global Reporting Initiative (GRI) Stan- dards. With respect to human resources KPIs, I am proud to announce that we now cover 100 % of our op- erations. In this context, we also expanded the reach of our Supplier Code of Conduct, receiving their respec- tive acknowledgements and improving acceptance from 82 % in 2018 to 84 % in 2019. Fostering a strong corporate culture is one of our primary concerns. In recent years we have thoroughly deployed our ONEDUFRY initiative to engage and align all Dufry employees, while at the same time offering comprehensive training and development opportuni- ties. The employee survey done in 2019 shows a very positive result of this initiative as 75 % of our employ- ees report to be satisfied working for our company. Last but not least, in early 2020 Dufry applied to be- come a signatory member of the UN Global Compact, and we renewed our support for the United Nation"s

Global Goal awareness-raising campaign #YouNeed-

ToKnow strengthening our ties with the initiative by supporting a program to reach more passengers using our airport stores. For a complete overview of all our ESG achievements please refer to our ESG report on pages 78 - 100.

Ongoing community

engagement.

Our community engagement programs continue to

support disadvantaged children and families around the world and assist communities in markets where we operate. It is now the 10 th year that we have supported the funding of SOS Children"s Villages initiatives in Brazil, Russia and Mexico. In 2019, we added commu- nity projects in many other parts of the world such as Haiti, Greece, Korea, Turkey, the United Kingdom,

Switzerland, the United States and Australia.

At the time we wrote this letter, Covid-19 started to create a potential temporary impact for the current business year in locations where we have Asian cus-

470,000 m

2

Dufry operates close to

470,000 m

2 of retail space. 11 tomers as well as in locations directly affected by the phenomena. Our first action has been the implemen- tation of measures to protect the health and safety of both our employees and customers. Moreover, we have established a dedicated committee at the Global Ex- ecutive Committee level who has implemented spe- cific action plans to protect the performance of our business. We keep monitoring developments on a daily basis and will activate and implement other initiatives as needed.

I thank our management and employees for the

impressive amount of work they have done in 2019 to further evolve and grow our company. I also thank our suppliers, landlords and business partners for their ongoing support and trust in our long-standing rela- tionships. We also extend our thanks to our sharehold- ers and bondholders who repeatedly foster our com- mon vision to further develop Dufry as a WorldClass.

WorldWide company.

Sincerely,

Juan Carlos Torres Carretero

12

1 Management Report

DUFRY ANNUAL REPORT 2019

STATEMENT

OF THE CHIEF

EXECUTIVE

OFFICER

DEAR ALL

In 2019, we have reactivated our strategy of profit- able growth based on organic growth as well as smallquotesdbs_dbs50.pdfusesText_50

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