April 10 2018  |  Retailers

Dufry to launch share buyback program amid strong cash flow generation

By Mary Jane Pittilla

Dufry’s Board of Directors has decided to launch a share buyback program of up to CHF 400 million (US$417 million) over a period of up to 12 months and is set to propose a cash dividend of CHF 3.75 (US$3.91) per share.

The proposals will be made at the company’s annual general meeting on May 3, 2018.

The Board will further propose the election of Lynda Tyler-Cagni and Steven Tadler as new independent members, as Xavier Bouton and Joaquín Moya-Angeler Cabrera will not stand for re-election.

The proposed cash dividend of CHF 3.75 per share will be paid out of capital contribution reserves, the company said.

“As Dufry has a strong cash flow generation and expects sustainable organic growth, the Board of Directors believes that returning cash to shareholders, including by means of annual dividend payments, should be part of Dufry’s capital allocation strategy,” the Swiss travel retailer said. “For future years, the Board of Directors intends to propose a dividend that is at least equal to the one paid in the previous year, and will target a sustainable return to shareholders of 40% of Dufry’s cash net earnings.”

In addition, the Board has decided to launch a share buyback program for the purpose of subsequent cancellation for up to CHF 400 million over a period of up to 12 months. The share buyback is planned as a one-time program.

“The Board of Directors view is that the company is currently undervalued and that buying back shares at current price levels represents an efficient way of returning additional capital to shareholders. The shares repurchased will be cancelled and the share buyback will therefore be accretive to earnings per share,” the company said.

It continued: “More generally, Dufry will continue to grow organically and make targeted investments at attractive returns through M&A bolt-on acquisitions. Dufry’s strong cash flow generation allows it to fund such investments while at the same time reward its shareholders with a sustainable dividend of at least CHF 200 million (US$208 million) going forward. Dufry’s approach to capital allocation will remain unchanged with the sustainable leverage ratio to remain in the range of 2.0x – 3.0x net debt to EBITDA.”

Changes in board composition

The Board is proposing Lynda Tyler-Cagni and Steven Tadler for election as new independent members for a one-year term.

Tyler-Cagni is the founder and CEO of Tyler Cagni Consulting Ltd, a consulting company advising primarily in the fashion, retail and FMCG sectors. She also serves as a director of AtlantiaSpA, an Italian listed global operator in the motorway and airport infrastructure sector. She previously served on the board of World Duty Free Group as a non-executive and independent member and chair of the HR & Remuneration Committee (until the acquisition by Dufry). She was also an advisor to the management board of Bonpoint and held various management positions with Fast Retailing Group and Ermenegildo Zegna.

Tadler is a Managing Partner and director of Advent International Corp, which he joined in 1985. He also serves as a director of Bojangles, a restaurant operator and franchisor listed on the Nasdaq, and wTe Corporation. Previous board mandates include Dufry (2010 to 2013), Skillsoft (2010 to 2014) and Transunion (2012 to 2017).

Xavier Bouton and Joaquín Moya-Angeler Cabrera have decided to step down from the Board at this year's annual meeting. Bouton has been a member since 2005 and was a member of the Audit and Remuneration Committees. Moya-Angeler Cabrera has also been a member of the Board of Directors since 2005 and was Chairman of the Audit Committee and a member of the Nomination Committee.

Juan Carlos Torres Carretero as Chairman and the other members of the Board will stand for re-election for a further one-year term.

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