UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16

OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of June, 2020

Commission File Number: 001-38378

 

Hudson Ltd.

(Translation of registrant’s name into English)

 

4 New Square

Bedfont Lakes

Feltham, Middlesex TW14 8HA

United Kingdom

(Address of principal executive office)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

 

Form 20-F ☒     Form 40-F ☐

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐

  

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	Hudson Ltd.
	By:	/s/ Adrian Bartella
		Name:  Adrian Bartella
		Title:    Chief Financial Officer

 

Date: June 17, 2020

 

 

 

 

 

 

 

EXHIBIT INDEX

 

Exhibit No.		Description
99.1		Hudson Ltd. Interim Report (unaudited) for the three months ended March 31, 2020

 

 

 

 

 

 

 

 

HUDSON LTD.

 

INTERIM REPORT

MARCH 2020

 

CONTENT

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

2

 

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2020 AND 2019 (UNAUDITED)

 

Interim Consolidated Statements of Comprehensive Income	F-2
Interim Consolidated Statements of Financial Position	F-3
Interim Consolidated Statements of Changes in Equity	F-4
Interim Consolidated Statements of Cash Flows	F-5
Notes to the Interim Consolidated Financial Statements	F-6

 

 

HUDSON

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General information and forward-looking statements

The following Management’s Discussion and Analysis should be read in conjunction with the interim consolidated financial statements and notes thereto included as part of this report and the Company’s Annual Report filed on Form 20-F. This interim report contains “forward-looking statements”. 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, the effects of the novel coronavirus (COVID-19) on the demand for air and other travel, our supply chain, as well as the impact on our business, financial condition and results of operations 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 interim report. 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 interim report, 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 interim report 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, 2019 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.

 

Overview

Hudson Ltd. ("Hudson" or "the Company"), anchored by our iconic Hudson brand, is a travel experience leader committed to enhancing the journey for travelers every day in the continental United States and Canada. Our first concession opened in 1987 with five Hudson News stores in a single airport in New York City and today, our reach expands to airports, commuter hubs, and some of the most visited landmarks and tourist destinations in the world. In everything we do, we are guided by a unifying core purpose: to be “The Traveler’s Best Friend.” It is this guiding purpose that has allowed us to meet the evolving needs of the traveler through product offerings and store concepts centered on the four pillars of our business: travel convenience, specialty retail, duty free, and food and beverage. Through our unwavering dedication to this purpose, as part of the global Dufry Group, we have become one of the largest travel concession operators in the continental United States and Canada.

 

Our business is impacted by fluctuations in economic activity and traveler volumes in the continental United States and Canada and, to a lesser extent, economic activity and international tourism from around the world. Our turnover is generated by travel-related retail and food and beverage sales and income from advertising activities. Apart from the cost of sales, our operating expense structure consists of lease expenses, lease-related depreciation and interest, personnel expenses and other expenses associated with our retail operations.

COVID-19 Business Update

COVID-19-related concerns, event cancellations, and business and government-imposed restrictions have led to a significant decrease in passenger travel, which has resulted in sharply reduced customer traffic and sales across Hudson’s retail stores in North America. Initially impacting only inbound passenger traffic from Asia during the first two months of the year, the global spread of the pandemic resulted in a material adverse impact on our results of operations and financial position by the end of the first quarter. Due to the uncertain timing and extent of a recovery in travel, we expect the adverse impact to grow in the second quarter of 2020. While we are planning for travel demand to begin to increase in the third quarter of 2020, the exact timing and speed of the recovery is uncertain, considering the current state of the overall North American and global economy and uncertainty around future developments relating to COVID-19, including a possible "second wave" of infections. We will continue to review and adjust our expense management and liquidity measures based on the recovery of North American travel.

 

In order to preserve liquidity, we have implemented and continue to maintain the following actions:

 

  

In addition, to help minimize exposure to and the spread of COVID-19, we have taken a number of steps, including: adhering to guidance provided by the U.S. Centers for Disease Control and Prevention ("CDC") and local; state and federal health officials; equipping stores and warehouses with necessary supplies for enhanced cleaning protocol and personal protection; implementing standardized measures and procedures in stores and offices to enforce social distancing to the fullest extent possible; activating our emergency response team to assess and address potential exposure throughout the Company; and enabling the majority of the corporate support team to work remotely.

 

RESULTS OF OPERATIONS

Comparison of the quarters ended March 31, 2020 and 2019

The following table summarizes changes in financial performance for the quarter ended March 31, 2020, compared to the quarter ended March 31, 2019:

 

		FOR THE QUARTER ENDED MARCH 31				PERCENTAGE CHANGE
IN MILLIONS OF USD		2020		2019 RESTATED1		in %
Turnover		341.5		445.0		(23.3)
Cost of sales		(128.2)		(161.2)		(20.2)
Gross profit		213.3		283.8		(24.8)
Lease (expenses) / income		(13.5)		(27.7)		(51.3)
Personnel expenses		(96.7)		(115.0)		(15.9)
Other expenses		(37.3)		(40.1)		(7.0)
Other income2		2.5		2.7		(7.4)
Depreciation, amortization and impairment		(144.6)		(88.6)		63.2
Operating profit / (loss)		(76.3)		15.1		(605.3)
Finance income		1.0		1.1		(9.1)
Finance expenses		(22.3)		(21.9)		1.8
Foreign exchange gain / (loss)		-		0.3		(100.0)
Profit / (loss) before tax		(97.6)		(5.4)		1,707.4
Income tax benefit		18.9		5.4		250.0
Net profit / (loss)		(78.7)		-		N/A
ATTRIBUTABLE TO3
Non-controlling interests		(1.5)		5.8		(125.9)
Equity holders of the parent		(77.2)		(5.8)		1,231.0

 

Turnover

Due to the impacts of COVID-19 on the travel industry, key sales metrics were significantly impacted. Turnover decreased by 23.3% to $341.5 million for the quarter ended March 31, 2020 compared to $445.0 million for the same period last year. Net sales represented 97.5% of turnover for the 2020 period, with advertising income representing the remainder.

 

Organic net sales decreased by 24.2% for the quarter ended March 31, 2020, representing a $105.2 million decline in net sales. Like-for-like net sales decreased by 22.5% and contributed $89.1 million of the decrease in net sales. On a constant currency basis, like-for-like sales decreased by 22.4%. Net sales from new stores, expansions and store closures decreased by $16.1 million compared to the prior year period.

 

The acquisition of Brookstone stores contributed an additional $3.4 million to net sales for the quarter ended March 31, 2020.

 

Gross profit

Gross profit was $213.3 million for the quarter ended March 31, 2020, compared to $283.8 million for the prior year period. Our gross profit margin was 62.5% for the first quarter 2020 compared to 63.8% for the prior year period. The decrease in gross profit margin was due to a $4.7 million (140 bps) inventory allowance charge for slow-moving or obsolete items, primarily as a result of COVID-19.

 

Lease expenses

Lease expenses were $13.5 million for the quarter ended March 31, 2020, compared to $27.7 million for the prior year period. As a percentage of turnover, lease expenses decreased to 4.0% for the quarter ended March 31, 2020, compared to 6.2% for the prior year period. The $14.2 million decrease primarily resulted from lower variable rent based on the decline in net sales and $3.3 million of rent waivers we secured from numerous airports and commuter terminals in light of challenges associated with COVID-19. The rent waivers are associated with rent payments that were primarily due in March 2020. As we continue to negotiate further rent relief with our landlords, we expect the value of these waivers to increase significantly in the second quarter due to the timing of rent waivers that have been granted.

 

Personnel expenses

Personnel expenses decreased to $96.7 million for the quarter ended March 31, 2020, from $115.0 million for the prior year period. As a percentage of turnover, personnel expenses increased to 28.3% for the quarter ended March 31, 2020, compared to 25.8% for the prior year period. The decrease in personnel expense was primarily due to $7.6 million of executive separation expenses recorded in the prior year period and our expense management steps taken toward the end of the quarter in response to COVID-19: reduced a majority of the workforce through furloughs and layoffs, decreased staffing and store hours in certain locations, and initiated salary reductions for corporate team members and field leadership.

 

Other expenses

Other expenses were $37.3 million for the quarter ended March 31, 2020, compared to $40.1 million in the prior year period. As a percentage of turnover, other expenses increased to 10.9% for the quarter ended March 31, 2020, compared to 9.0% for the prior year period. The decrease in other expenses was primarily related to variable selling expenses as a result of the net sales decline.

 

Other income

The other income line item was added in 2020 and primarily consists of sales related income, franchise and management fee income and other operational income. Other income was $2.5 million for the quarter ended March 31, 2020 compared to $2.7 million in the prior year period.

 

Depreciation, amortization and impairment

Depreciation, amortization and impairment increased to $144.6 million for the quarter ended March 31, 2020, compared to $88.6 million for the same period last year. Depreciation was $80.9 million for the quarter ended March 31, 2020, compared to $77.3 million for the same period last year. Amortization increased to $11.4 million for the quarter ended March 31, 2020 compared to $11.1 million for the prior year period. Impairment was $52.3 million for the quarter ended March 31, 2020, which related to goodwill, compared to $0.2 million of impairment to property, plant & equipment recorded for the prior year period. See Note 9 and 13.1 to the interim consolidated financial statements.

 

Finance expenses

Finance expenses increased to $22.3 million for the quarter ended March 31, 2020, compared to $21.9 million for the prior year period.

 

Income tax benefit

Income tax benefit for the quarter ended March 31, 2020 amounted to $18.9 million compared to $5.4 million for the same period last year. The main components of this change were a decrease in pretax income/loss (attributable to equity holders of the parent) of $84.6 million, offset by nondeductible goodwill impairment, the reduction of tax related to U.S. Base Erosion Anti Avoidance Tax (“BEAT”), a reduction of nondeductible compensation and a reduction of state income taxes. For the quarter ended March 31, 2020, the current income tax benefit was $4.9 million generated primarily from tax losses from our Canadian operations. Deferred tax benefit of $14.0 million was principally due to the creation of tax net operating losses in the U.S. and Canada and deferred taxes associated with the amortization of concession rights.

 

 

LIQUIDITY AND CAPITAL RESOURCES

Our primary funding sources historically have included cash from operations, and financial debt arrangements with Dufry AG and its subsidiaries ("Dufry Group"), our controlling shareholder. As of March 31, 2020, our cash and cash equivalents totaled $225.6 million and the balance outstanding on our long-term debt obligations with Dufry was $498.4 million.

As outlined in the COVID-19 Business Update above, we have significantly altered our operating plan and capital expenditures forecast to preserve liquidity during this period of uncertainty. We believe existing cash balances, operating cash flows and our long-term financing arrangements with Dufry will provide us with adequate funds to support our revised operating plan, make necessary capital expenditures and fulfill our debt service requirements for the foreseeable future.

If our cash flows and capital resources are insufficient to fund our working capital, we could face substantial liquidity problems and may be forced to reduce or delay investments and capital expenditures. We currently do not anticipate entering into additional third-party credit facilities for our working capital, and expect any future working capital requirements to be funded by Dufry. As a result, our financing arrangements and relationship with our controlling shareholder are critical to our business. Nonetheless, if approved by Dufry and subject to limitations imposed by Dufry's credit facilities, we may borrow cash from third-party sources, and may also raise funds by issuing debt or equity securities.

DUFRY GROUP CASH POOLING

For the efficient management of its short-term cash and overdraft positions, Hudson participates in Dufry’s notional cash pool arrangements. At March 31, 2020, we had a deposit of $125.4 million compared to $155.2 million at December 31, 2019 in our cash pool accounts. The cash pool arrangement is structured such that the assets and liabilities remain in the name of the corresponding participant, i.e. no physical cash concentration occurs for the day-to-day operations. We, along with other participants in the cash pool, have pledged the cash we have each placed in the cash pool to the bank managing the cash pool as collateral to support the aggregate obligations of cash pool participants.

Capital expenditures

Capital expenditures are our primary investing activity and we divide them into two main categories: tangible and intangible capital expenditures. Tangible capital expenditures consists of spending on the renovation and maintenance of existing stores and the fitting out of new stores. Intangible capital expenditures consists of investments in computer software.

When contemplating investments in new stores, we focus on profitable growth as the key investment criterion. In addition to fitting out new stores, we expect to invest in renovation and maintenance of our existing stores, including undertaking some major refurbishment projects each year. As a result of COVID-19, we have significantly reduced our planned capital expenditure projects for the remainder of the year.

 

Our capital expenditures (on the cash basis) are presented for each of the periods below:

 

		FOR THE QUARTER ENDED MARCH 31
IN MILLIONS OF USD		2020		2019
Tangible capital expenditures		18.4		19.2
Intangible capital expenditures		2.7		0.9
Total		21.1		20.1

 

CASH FLOWS

 

The following table summarizes the cash flows for each of the periods below:

 

		FOR THE QUARTER ENDED MARCH 31				CHANGE
IN MILLIONS OF USD		2020		2019 RESTATED
Net cash flows from operating activities		24.9		111.2		(86.3)
Net cash flows used in investing activities		(19.4)		(18.8)		(0.6)
Net cash flows from / (used in) financing activities		(94.9)		(85.2)		(9.7)
Currency translation on cash		(3.0)		0.5		(3.5)
Increase / (decrease) in cash and cash equivalents		(92.4)		7.7		(100.1)
Cash at the beginning of period		318.0		234.2		83.8
Cash at the end of period		225.6		241.9		(16.3)

Cash flows from operating activities

Net cash flows from operating activities were $24.9 million for the three months ended March 31, 2020, a decrease of $86.3 million compared to the prior year period. The decrease in net cash flows from operating activities is primarily due to the timing of increased cash payments for accounts payable and other liabilities and the decline in operating performance due to COVID-19.

 

Cash flows used in investing activities

Net cash used in investing activities increased to $19.4 million for the three months ended March 31, 2020, compared to $18.8 million for the prior year period.

 

Cash flows from / (used in) financing activities

Net cash used in financing activities increased by $9.7 million for the three months ended March 31, 2020, to $94.9 million compared to $85.2 million in the prior year period. The increase in net cash used in financing activities is primarily due to a one-time lease extension payment and increases in minimum annual guaranteed rent ("MAG") for certain leases. This was partially offset by $3.3 million in rent waivers, which reduced lease payments.

 

 

HUDSON LTD.

INTERIM CONDENSED

CONSOLIDATED FINANCIAL

STATEMENTS

MARCH 2020 (UNAUDITED)

 

 

 

HUDSON

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

for the three month periods ended March 31, 2020 and 2019

 

IN MILLIONS OF USD (EXCEPT PER SHARE AMOUNTS)		NOTE		UNAUDITED Q1 2020		UNAUDITED Q1 2019 RESTATED1
Turnover		4		341.5		445.0
Cost of sales				(128.2)		(161.2)
Gross profit				213.3		283.8
Lease (expenses) / income		7		(13.5)		(27.7)
Personnel expenses				(96.7)		(115.0)
Other expenses				(37.3)		(40.1)
Other income2		8		2.5		2.7
Depreciation, amortization and impairment		9		(144.6)		(88.6)
Operating profit / (loss)				(76.3)		15.1
Finance income		10		1.0		1.1
Finance expenses		10		(22.3)		(21.9)
Foreign exchange gain / (loss)				-		0.3
Profit / (loss) before tax				(97.6)		(5.4)
Income tax benefit		11		18.9		5.4
Net profit / (loss)				(78.7)		-
OTHER COMPREHENSIVE INCOME
Exchange differences on translating foreign operations				(23.2)		6.3
Total other comprehensive income / (loss) that may be reclassified to profit or loss in subsequent periods, net of tax				(23.2)		6.3
Total other comprehensive income / (loss), net of tax				(23.2)		6.3
Total comprehensive income / (loss), net of tax				(101.9)		6.3
NET PROFIT / (LOSS) ATTRIBUTABLE TO
Non-controlling interests				(1.5)		5.8
Equity holders of the parent				(77.2)		(5.8)
TOTAL COMPREHENSIVE INCOME / (LOSS) ATTRIBUTABLE TO
Non-controlling interests				(1.5)		5.8
Equity holders of the parent				(100.4)		0.5
EARNINGS PER SHARE ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
Basic earnings / (loss) per share in USD				(0.84)		(0.06)
Diluted earnings / (loss) per share in USD				(0.84)		(0.06)

 

 

 

HUDSON

 

INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

at March 31, 2020 and December 31, 2019

 

IN MILLIONS OF USD		NOTE		UNAUDITED 03.31.2020		12.31.2019
ASSETS
Property, plant and equipment				221.8		227.3
Right-of-use assets		12		1,251.4		1,330.2
Intangible assets		13		264.1		283.9
Goodwill		13		257.2		324.7
Investments in associates				6.4		6.5
Deferred tax assets				92.9		79.9
Other non-current assets				31.9		33.9
Non-current assets				2,125.7		2,286.4
Inventories		14		184.1		185.2
Trade receivables				0.8		0.5
Other accounts receivable				57.7		54.0
Income tax receivables				7.3		2.7
Cash and cash equivalents				225.6		318.0
Current assets				475.5		560.4
Total assets				2,601.2		2,846.8
LIABILITIES AND SHAREHOLDERS’ EQUITY
Equity attributable to equity holders of the parent				473.1		579.6
Non-controlling interests				67.4		79.2
Total equity				540.5		658.8
Borrowings		15		498.4		503.1
Lease obligations		15		1,028.3		1,098.1
Deferred tax liabilities				34.9		38.4
Post-employment benefit obligations				1.6		1.5
Other non-current liabilities				0.7		0.7
Non-current liabilities				1,563.9		1,641.8
Trade payables				106.8		124.6
Borrowings		15		42.6		45.9
Lease obligations		15		229.3		245.8
Income tax payables				0.5		1.4
Other liabilities				117.6		128.5
Current liabilities				496.8		546.2
Total liabilities				2,060.7		2,188.0
Total liabilities and shareholders’ equity				2,601.2		2,846.8

 

 

HUDSON

 

INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

for the three month periods ended March 31, 2020 and 2019

 

				ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
UNAUDITED 2020 IN MILLIONS OF USD		NOTE		Share capital		Treasury shares		Trans- lation reserves		Retained earnings		SHAREHOLDERS' EQUITY		NON-CON-TROLLING INTERESTS		TOTAL EQUITY
Balance at January 1				0.1		(1.1)		15.0		565.6		579.6		79.2		658.8
Net profit / (loss)				-		-		-		(77.2)		(77.2)		(1.5)		(78.7)
Other comprehensive income / (loss)				-		-		(23.2)		-		(23.2)		-		(23.2)
Total comprehensive income / (loss) for the period				-		-		(23.2)		(77.2)		(100.4)		(1.5)		(101.9)
TRANSACTIONS WITH OR DISTRIBUTIONS TO SHAREHOLDERS
Dividends to non-controlling interests				-		-		-		-		-		(11.4)		(11.4)
Purchase of treasury shares				-		(2.3)		-		-		(2.3)		-		(2.3)
Assignment of share-based payment plans				-		2.3		-		(2.3)		-		-		-
Share-based payments				-		-		-		(3.5)		(3.5)		-		(3.5)
Income tax on equity transactions				-		-		-		(0.3)		(0.3)		-		(0.3)
Total transactions with or distributions to owners				-		-		-		(6.1)		(6.1)		(11.4)		(17.5)
CHANGES IN OWNERSHIP INTERESTS IN SUBSIDIARIES
Changes in participation of non-controlling interests				-		-		-		-		-		1.1		1.1
Balance at March 31				0.1		(1.1)		(8.2)		482.3		473.1		67.4		540.5

 

UNAUDITED 2019 RESTATED IN MILLIONS OF USD		NOTE		Share capital		Treasury shares		Trans- lation reserves		Retained earnings		SHAREHOLDERS' EQUITY		NON-CON-TROLLING INTERESTS		TOTAL EQUITY
Balance at January 1				0.1		(2.0)		0.4		553.6		552.1		84.8		636.9
Net profit / (loss)				-		-		-		(5.8)		(5.8)		5.8		-
Other comprehensive income / (loss)				-		-		6.3		-		6.3		-		6.3
Total comprehensive income / (loss) for the period				-		-		6.3		(5.8)		0.5		5.8		6.3
TRANSACTIONS WITH OR DISTRIBUTIONS TO SHAREHOLDERS
Dividends to non-controlling interests				-		-		-		-		-		(10.0)		(10.0)
Purchase of treasury shares				-		(1.9)		-		-		(1.9)		-		(1.9)
Assignment of share-based payment plans				-		2.7		-		(2.7)		-		-		-
Share-based payments				-		-		-		(1.4)		(1.4)		-		(1.4)
Income tax on equity transactions				-		-		-		(0.5)		(0.5)		-		(0.5)
Total transactions with or distributions to owners				-		0.8		-		(4.6)		(3.8)		(10.0)		(13.8)
CHANGES IN OWNERSHIP INTERESTS IN SUBSIDIARIES
Changes in participation of non-controlling interests				-		-		-		-		-		2.3		2.3
Balance at March 311				0.1		(1.2)		6.7		543.2		548.8		82.9		631.7

 

 

 

HUDSON

 

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

for the three month periods ended March 31, 2020 and 2019

 

IN MILLIONS OF USD		UNAUDITED Q1 2020		UNAUDITED Q1 2019 RESTATED1
CASH FLOWS FROM OPERATING ACTIVITIES
Profit / (loss) before tax		(97.6)		(5.4)
ADJUSTMENTS FOR
Depreciation, amortization and impairment		144.6		88.6
Loss / (gain) on sale of non-current assets		0.9		0.1
Increase / (decrease) in allowances and provisions		6.8		2.4
Loss / (gain) on foreign exchange differences		-		(0.3)
Rent waivers		(3.3)		-
Other non-cash items		(1.0)		1.8
Finance income		(1.0)		(1.1)
Finance expenses		22.3		21.9
Cash flows before working capital changes		71.7		108.0
Decrease / (increase) in trade and other accounts receivable		(7.7)		(3.5)
Decrease / (increase) in inventories		(9.7)		(3.9)
Increase / (decrease) in trade and other accounts payable		(28.5)		14.4
Cash generated from operations		25.8		115.0
Income tax paid		(0.9)		(3.8)
Net cash flows from operating activities		24.9		111.2
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchase of property, plant and equipment		(18.4)		(19.2)
Purchase of intangible assets		(2.7)		(0.9)
Contributions to associates		-		(0.8)
Proceeds from sale of property, plant and equipment		-		0.2
Interest received		0.4		1.0
Repayments of loans receivable from non-controlling interest holders		-		0.3
Sublease receivable payments		1.5		0.6
Business combinations, net of cash		(0.2)		-
Net cash flows used in investing activities		(19.4)		(18.8)
CASH FLOWS FROM / (USED IN) FINANCING ACTIVITIES
Lease payments 2		(82.8)		(74.6)
Dividends paid to non-controlling interests		(9.4)		(8.2)
Purchase of treasury shares		(2.3)		(1.9)
Interest paid		(0.4)		(0.5)
Net cash flows from / (used in) financing activities		(94.9)		(85.2)
Currency translation on cash		(3.0)		0.5
Increase / (decrease) in cash and cash equivalents		(92.4)		7.7
CASH AND CASH EQUIVALENTS AT THE
- beginning of the period		318.0		234.2
- end of the period		225.6		241.9

 

 

 

HUDSON

 

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

  

 

Hudson Ltd. and its subsidiaries (“Hudson” or “the Company”) is a travel experience leader with 1,007 stores in 87 locations in airports, commuter hubs and tourist destinations throughout the continental United States and Canada, under the travel convenience, specialty retail, duty free and food and beverage concepts.

 

Hudson Ltd., the parent company which is an exempt company limited by shares, was incorporated on May 30, 2017 in Hamilton, Bermuda with registered office at 2 Church Street, Hamilton HM11, Bermuda. Our Class A common shares began trading on the New York Stock Exchange on February 1, 2018, under the ticker symbol “HUD”. Hudson Ltd. is controlled by a subsidiary of Dufry AG ("Dufry"), the world’s leading travel retail company headquartered in Basel, Switzerland.

 

 

 

The interim condensed consolidated financial statements (unaudited) for the period ended March 31, 2020 have been prepared in accordance with IAS 34 Interim Financial Reporting.

 

The interim consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with Hudson’s annual consolidated financial statements as of December 31, 2019. As of March 31, 2020, the purchase price allocation for the Brookstone acquisition remains preliminary. Refer to note 6 of Hudson's annual consolidated financial statements for more information on the acquisition.

 

The interim consolidated financial statements include financial assets and liabilities presented at carrying value, which is generally consistent when compared to fair value.

 

The interim consolidated financial statements were authorized for issue on June 15, 2020 by the board of directors of Hudson Ltd.

 

 

The accounting policies adopted in the preparation of the interim consolidated financial statements are consistent with those followed in the preparation of Hudson’s annual consolidated financial statements for the year ended December 31, 2019, except for the following new or revised standards and interpretations adopted in these interim consolidated financial statements (effective January 1, 2020).

 

New and amended standards adopted by the Company

A number of new or amended standards became applicable for the current reporting period:

 

 

 

COVID-19-Related Rent Concessions (Amendment to IFRS 16)

On May 28, 2020, the International Accounting Standards Board (IASB) issued COVID-19 Related Rent Concessions amendment to IFRS 16 Leases. The IASB amended the standard to provide relief to lessees from applying IFRS 16 guidance on lease modification accounting for rent concessions arising as a direct consequence of the COVID-19 pandemic. Hudson elected to apply this practical expedient to all locations that provide waivers of rent payments. Hudson presents rent waivers as negative lease expense in the period that the rent payment was originally due, which amounted to USD 3.3 million for the three months ended March 31, 2020.

Other amendments and interpretations

Any other amendments and interpretations that apply for the first time in 2020, do not have material impact on the interim consolidated financial statements of the Company.

 

COVID-19-related concerns, event cancellations, and business and government-imposed restrictions have led to a significant decrease in passenger travel, which has resulted in sharply reduced customer traffic and sales across Hudson’s retail stores in North America. Initially impacting only inbound passenger traffic from Asia during the first two months of the year, the global spread of the pandemic resulted in a material adverse impact on our results of operations and financial position by the end of the first quarter.

 

The effects of COVID-19 resulted in the following significant changes in the financial statements during the quarter ended March 31, 2020:

 

 

 

 

IN MILLIONS OF USD		UNAUDITED Q1 2020		UNAUDITED Q1 2019
Net sales		332.8		434.6
Advertising income		8.7		10.4
Turnover		341.5		445.0

 

NET SALES BREAKDOWN

Net sales by product category

 

IN MILLIONS OF USD		UNAUDITED Q1 2020		UNAUDITED Q1 2019
Confectionery, Food and Catering		138.3		170.0
Perfumes and Cosmetics		49.3		65.3
Fashion, Leather and Baggage		34.2		48.3
Literature and Publications		24.6		35.7
Electronics		20.4		23.0
Wine and Spirits		16.2		21.9
Watches, Jewelry and Accessories		15.9		25.4
Tobacco goods		10.7		14.2
Other product categories		23.2		30.8
Total		332.8		434.6

 

Net sales by market sector

 

IN MILLIONS OF USD		UNAUDITED Q1 2020		UNAUDITED Q1 2019
Duty paid		262.5		333.1
Duty free		70.3		101.5
Total		332.8		434.6

 

Net sales by channel

 

IN MILLIONS OF USD		UNAUDITED Q1 2020		UNAUDITED Q1 2019
Airports		317.4		412.9
Downtown and hotel shops		6.7		10.8
Railway stations and other		8.7		10.9
Total		332.8		434.6

  

 

Hudson consists of one operating segment “Travel Retail Operations” for which reports are submitted to the Group Executive Committee, being the Chief Operating Decision Maker (CODM). These reports form the basis for the evaluation of performance and allocation of resources.

 

Hudson generates turnover from selling a wide range of products in its duty paid and duty free stores that are mainly located at airports, commuter terminals, hotels, landmarks or tourist destinations. Refer to note 4 for a split of net sales by product category, market sector and sales channel.

 

Net sales by Country

 

IN MILLIONS OF USD		UNAUDITED Q1 2020		UNAUDITED Q1 2019
U.S.		276.0		352.6
Canada		56.8		82.0
Total		332.8		434.6

 

Non-Current Assets by Country

(excluding investments and deferred taxes)

 

IN MILLIONS OF USD		UNAUDITED 03.31.2020		12.31.2019
U.S.		1,402.9		1,476.7
Canada		623.5		723.3
Total		2,026.4		2,200.0

 

 

Hudson historically has its strongest months of net sales and operating profit between July and September corresponding to the summer season, whereas the first quarter is the weakest. These seasonality effects are more prominent on the operating profit level than on net sales. Due to COVID-19 related effects on world-wide travel, the seasonality of Hudson's business may be materially impacted in the year 2020 and beyond.

 

IN MILLIONS OF USD		UNAUDITED Q1 2020		UNAUDITED Q1 2019 RESTATED
Lease expenses relating to variable lease payments		(15.9)		(30.0)
Lease expenses relating to rent waiver contracts (variable)		(1.7)		-
Lease expenses low value contracts		(0.2)		-
Derecognition of lease obligations as a result of rent waivers		3.3		-
Sublease income		1.0		2.3
Total		(13.5)		(27.7)

 

  

 

IN MILLIONS OF USD		UNAUDITED Q1 2020		UNAUDITED Q1 2019
Sales-related income		0.9		1.5
Franchise and management fee income		0.6		0.9
Other operational income		1.0		0.3
Total		2.5		2.7

 

 

IN MILLIONS OF USD		UNAUDITED Q1 2020		UNAUDITED Q1 2019 RESTATED
Depreciation RoU assets		(64.1)		(60.8)
Subtotal (Right-of-Use Assets, see note 12)		(64.1)		(60.8)
Depreciation Property, Plant and Equipment		(16.8)		(16.5)
Impairment Property, Plant and Equipment		-		(0.2)
Subtotal (Property, Plant and Equipment)		(16.8)		(16.7)
Amortization Intangible Assets		(11.4)		(11.1)
Subtotal (Intangible Assets, see note 13)		(11.4)		(11.1)
Impairment goodwill		(52.3)		-
Subtotal (Goodwill, see note 13)		(52.3)		-
Total		(144.6)		(88.6)

 

Hudson identified circumstances that indicated that the carrying amount of goodwill may not be fully recoverable. Due to COVID-19, Hudson suffered a material drop in sales affecting the projections for turnover. Although the company took several actions to mitigate the effects of this crisis, the cash flow projections used for the 2019 financial close have been materially adversely impacted. Upon performing a recoverability test, Hudson recognized a USD 52.3 million impairment of goodwill.

 

 

IN MILLIONS OF USD		UNAUDITED Q1 2020		UNAUDITED Q1 2019 RESTATED
FINANCE INCOME
Interest income on bank deposits		0.9		0.8
Interest on sublease receivables		0.1		0.1
Interest income on financial assets		1.0		0.9
Share of result of associates		-		0.2
Total finance income		1.0		1.1
FINANCE EXPENSES
Interest on loans		(7.3)		(7.2)
Interest on lease obligations		(14.3)		(13.9)
Other financial expenses		(0.6)		(0.8)
Interest expense on financial liabilities		(22.2)		(21.9)
Share of result of associates		(0.1)		-
Total finance expenses		(22.3)		(21.9)
Foreign exchange gain / (loss)		-		0.3
Financial result		(21.3)		(20.5)

 

 

 

IN MILLIONS OF USD		UNAUDITED Q1 2020		UNAUDITED Q1 2019 RESTATED
Current income tax benefit / (expense)		4.9		(2.5)
Deferred income tax benefit / (expense)		14.0		7.9
Total		18.9		5.4

  

 

UNAUDITED 2020 IN MILLIONS OF USD		STORES		OTHER BUILDINGS		VEHICLES		TOTAL
AT COST
Balance at January 1		1,511.8		67.6		0.1		1,579.5
Additions to right-of-use assets		25.9		0.3		0.4		26.6
Decrease in right-of-use assets		(34.2)		(0.3)		-		(34.5)
Currency translation adjustments		(29.9)		(0.2)		-		(30.1)
Balance at March 31		1,473.6		67.4		0.5		1,541.5
ACCUMULATED DEPRECIATION
Balance at January 1		(241.0)		(8.2)		(0.1)		(249.3)
Additions (note 9)		(62.0)		(2.0)		(0.1)		(64.1)
Disposals		19.3		0.2		-		19.5
Currency translation adjustments		3.8		-		-		3.8
Balance at March 31		(279.9)		(10.0)		(0.2)		(290.1)
CARRYING AMOUNT
At March 31, 2020		1,193.7		57.4		0.3		1,251.4