CFA Research Challenge - Autogrill SpA - UniPV Team

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AUTOGRILL S.p.A. CFA Institute Research Challenge Milan, 11 March 2013 Universita degli Studi di Pavia Liechtenstein Stock Exchange Alessandro Greppi ,Fitria, Kinga Karkus, Alberto Scarioni, Leyla Tanzi

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AUTOGRILL S.p.A.

CFA Institute Research Challenge Milan, 11 March 2013

Universita degli Studi di Pavia

Liechtenstein Stock ExchangeAlessandro Greppi ,Fitria, Kinga Karkus, Alberto Scarioni, Leyla Tanzi

INVESTMENT SUMMARYCOMPANY & INDUSTRY OVERVIEWVALUATIONFINANCIAL ANALYSISRISK ANALYSISHIGHLIGHTSRECOMMENDATION: BUYTARGET PRICE: EUR 11.4 (20.1% upside) WHY IS A BUY?Value through diversificationExpectations for the two division (CAGR):F&B: 1%; TR&DF: 7.2%YTD: 14.4% Last 3 years performance: 17.5%

MACROECONOMIC RISKS:Short-term: raw material costs Long-term: concession costs and airport rents VALUATION=> Target Price 11.4 50%: DCF valuation 40%: Peers comparison (industrial & financial)10%: Real option

WHY IS A BUY?MACROECONOMIC RISKS:VALUATION => Target Price EUR 11.4

INVESTMENT SUMMARY AGL IM Equity

Price range (last 52 weeks)EUR 6.5 9.5 Price (1/2/2013)EUR 9.45 Price targetEUR 11.4 (20.1% upside)P/E21.1x

INVESTMENT SUMMARYCOMPANY & INDUSTRY OVERVIEWVALUATIONFINANCIAL ANALYSISRISK ANALYSIS

RELEVANT EVENTS 2012:Spanish concession renewal (100% retention rate)New and renewed TR&DF in Jamaica, Germany, Mexico, Brazil, Amsterdam, AtlantaEntrance into Turkey and United Arab Emirates

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COMPANY OVERVIEWItalian multinational companyDeals with people on the moveTwo main business channels: Food & Beverage and Travel Retail & Duty FreeOperates mainly in airports and motorways (also present at railway stations, museums, shopping centers, high street, trade fairs)Present in 37 countries through more than 5,300 POS

INVESTMENT SUMMARYCOMPANY & INDUSTRY OVERVIEWVALUATIONFINANCIAL ANALYSISRISK ANALYSISStrong cash flow generationFlexible cost structreHigh retention ratesLong-lasting concessions

STRENGTHS

BUSINESS ANALYSIS & COMPETITIVE POSITIONINGA world leader in the concession industry that serves travellers around the world.DISTRIBUTION CHANNELSGEOGRAPHICAL PRESENCE

BRANDS & PRODUCTS

INVESTMENT SUMMARYCOMPANY & INDUSTRY OVERVIEWVALUATIONFINANCIAL ANALYSISRISK ANALYSIS

BUSINESS ANALYSIS & COMPETITIVE POSITIONING

FOOD & BEVERAGEEUR 15-20 blnAGL SALES (2011):44% US35% Italy21% Other EuropeanCompetitors:

TRAVEL RETAIL & DUTY FREEEUR 34-40 blnAGL SALES (2011):75% Europe25% USCompetitor:

INVESTMENT SUMMARYCOMPANY & INDUSTRY OVERVIEWVALUATIONFINANCIAL ANALYSISRISK ANALYSIS

INDUSTRIAL ANALYSIS

Role of GDP62 % of business is in Europe => GDP of Euro areaFlexible cost structure and financial solidityMain engine of growthSlowing economic recoveryHigh fuel pricesAirport Council International forecast (ACI) : 4.5% p.a international traffic growthHigh impact on F&Bs performanceRecession and high fuel priceItaly will decrease, but US contributes to growthAirport trafficMotorway trafficINVESTMENT SUMMARYCOMPANY & INDUSTRY OVERVIEWVALUATIONFINANCIAL ANALYSISRISK ANALYSIS

Italian Motorway traffic vs AGL SalesAGL vs NA Traffic GrowthAGL vs Euro GDP Growth

EXPLOITING NEW MARKETSWHY TURKEY?May 2013: Istanbul 3rd international hub (2017, 90mln passengers)Geographical & economical bridgeUp to 118 mln tourists in 2011Corporate taxation: 20%

FINANCIAL ANALYSIS

Growth and ProfitabilityAGL Sales and Ebitda Margin Evolution

FY2009: Hurricane years => Sales: -6%Flat sales in 2010-12: F&B down by 2.5%Tremendous growth of TR&D +5.4%Sales CAGR 2012-18E : 3.4%Historical outperformance of the groupEBITDA margin 2012E : 9.6%INVESTMENT SUMMARYCOMPANY & INDUSTRY OVERVIEWVALUATIONFINANCIAL ANALYSISRISK ANALYSIS

FINANCIAL ANALYSIS INVESTMENT SUMMARYCOMPANY & INDUSTRY OVERVIEWVALUATIONFINANCIAL ANALYSISRISK ANALYSIS

AGL TR&DF Sales and EBITDA margin evolution

AGL F&B Sales and EBITDA margin evolutionUpward trends from airport traffic:New emerging markets Presence at European hubsSales CAGR: 7.2 %Sales CAGR: 1 %Stable Ebitda margin and growth:Struggling European marketsGrowth after 2014 (post-crisis)

FINANCIAL ANALYSIS INVESTMENT SUMMARYCOMPANY & INDUSTRY OVERVIEWVALUATIONFINANCIAL ANALYSISRISK ANALYSIS

Debt Evolution and Maturity Profile

Covenants : ND/EBITDA < 3.5xEBITDA interest coverage ratio > 4.5x

FCFFAcc. operating profit 2012-18e : EUR 1.9 bioAcc. operating cash flow 2012-18e : EUR 3.9 bioCash Conversation rate : 50%

VALUATION

I.III.II.50%: DCF valuation 40%: Peers comparison (Industrial & Financial)10%: Real optionINVESTMENT SUMMARYCOMPANY & INDUSTRY OVERVIEWVALUATIONFINANCIAL ANALYSISRISK ANALYSIS

VALUATIONINVESTMENT SUMMARYCOMPANY & INDUSTRY OVERVIEWVALUATIONFINANCIAL ANALYSISRISK ANALYSISDCF ANALYSISWACC AssumptionsRisk Free Rate3.4 %Implicit risk related to the geographical areas where AGL is present atMarket Risk Premium6.7 %Implicit risk related to the geographical areas where AGL is present atBeta0.83Regressed weekly returns of AGL stock against FTSE MIB INDEXCost Of Debt5.45 % (4.7 %)Cost of debt equals to 5.45%, later expected to reduce to 4.7%Debt/Equity220%Renewal of Spanish contracts wil increase it to 230%, from 2014:166%Tax Rate31.4 %Weighted average of enterprise tax rates according to sales relevance

TWO-STAGES DCF:Target price: EUR 11.3 (19.6% upside)Period: 2012-2018Long term growth rate: 1.5%Long run WACC: 8.2%

FCFF

CENTRAL SCENARIOBEAR CASEVALUATIONINVESTMENT SUMMARYCOMPANY & INDUSTRY OVERVIEWVALUATIONFINANCIAL ANALYSISRISK ANALYSIS

EUR 10.0Upside of 6.3%

BULL CASE

EUR 11.3Upside of 19.7%

EUR 12.6Upside of 33.1%

VALUATIONREAL OPTION: to capture information and opportunities and to strengthen DCF analysis.Estimate assets market values by:DCF at weighted cost of capitalUsing prices from the marketApplication to valuationDebt over Equity ratio69 %Enterprise ValueEUR 3,944 millionMaturity of the debt3.59Risk free rate3.4 %Long term growth rate1.5 %Long term Wacc8.1 %

TARGET PRICE:EUR 11.7

REAL OPTIONINVESTMENT SUMMARYCOMPANY & INDUSTRY OVERVIEWVALUATIONFINANCIAL ANALYSISRISK ANALYSIS

Very similar to AGL in terms of overall business

I. INDUSTRIAL PEERS

P/E multiplePEERS COMPARISONVALUATIONINVESTMENT SUMMARYCOMPANY & INDUSTRY OVERVIEWVALUATIONFINANCIAL ANALYSISRISK ANALYSIS

Different business modelBUT listed in the same financial segment: RestaurantShares investors preferences

II. FINANCIAL PEERS

EV/EBITDA multiplePEERS COMPARISONVALUATIONXYInterceptEbitda %Sales growthBetaEV/SALESAGL19.2%3.9%0.850.63MCD136.3%6.1%0.493.67SBUX120.7%11.2%0.802.61YUM120.5%11.1%0.692.20SW17.0%6.7%0.450.61THI124.1%7.2%0.242.36BKW160.5%0.6%1.007.60DRI113.0%7.1%0.801.00PNRA117.9%9.7%0.991.86DNKN152.5%7.1%1.007.67DUFN115.9%10.0%1.071.40ARCO18.4%9.3%1.340.78WTB125.0%10.1%0.782.44EAT113.9%2.6%0.941.03CPG18.9%5.1%0.720.85DPZ118.3%2.8%0.782.36

INVESTMENT SUMMARYCOMPANY & INDUSTRY OVERVIEWVALUATIONFINANCIAL ANALYSISRISK ANALYSIS

X1= Ebitda % X2=Sales Growth X3= Beta StatisticsF=142R2=0.97

INVESTMENT SUMMARYCOMPANY & INDUSTRY OVERVIEWVALUATIONFINANCIAL ANALYSISRISK ANALYSIS

Very similar to AGL in terms of overall business

I. INDUSTRIAL PEERSPEERS COMPARISONVALUATION

Different business modelBUT listed in the same financial segment: RestaurantShares investors preferences

II. FINANCIAL PEERSP/E multipleEV/EBITDA multiple

TARGET PRICE:EUR 11.2

RISK ANALYSISINVESTMENT SUMMARYCOMPANY & INDUSTRY OVERVIEWVALUATIONFINANCIAL ANALYSISRISK ANALYSISRISKSFinancialStrategicOperating

RISK ANALYSIS I.INVESTMENT SUMMARYCOMPANY & INDUSTRY OVERVIEWVALUATIONFINANCIAL ANALYSISRISK ANALYSISFINANCIAL RISKSINTEREST RATE RISKFOREIGN CURRENCYCREDIT RISKLIQUIDITY RISKEFFECTS40% fixed-rate debt60% floating-rate debtSales:32%: North-America 15% : UK95% of sales comes from concessionsAGLS POLICYDuration of concession portfolio = duration of the debtInterest rate swapsMatching assets & liabilities in currenciesForward FXEnd consumers transactions are made in cashInvoiced trade receivables => bank guaranteesLong contracts duration & high retention rates Strong CF generation & flexibility on costs and capital expenditure

RISK ANALYSIS II.

STRATEGIC RISKSTRAFFIC FLOWSMACROECONOMYEFFECTSHigh impact of traffic on sales Effects traffic and well-being of peopleAGLS POLICYChannel diversificationConstant innovation of products & customer servicesCost cutting to limit impacts on CF

INVESTMENT SUMMARYCOMPANY & INDUSTRY OVERVIEWVALUATIONFINANCIAL ANALYSISRISK ANALYSIS

RISK ANALYSIS III.INVESTMENT SUMMARYCOMPANY & INDUSTRY OVERVIEWVALUATIONFINANCIAL ANALYSISRISK ANALYSISOPERATING RISKSREPUTATIONCONSUMPTION HABITSCONCESSION FEESCUSTOMER SATISFACTIONSHOP EFFECTIVENESSRISKSNot being able to satisfy contractual commitments (effects on retention rate & new contracts)Effects of changesInfluence on profitabilityFalse predictions of performanceFail to keep service standards and products in line with customers expectationsChallenge to provide modern & appealing assortmentAGLS POLICYMonitoring procedures & processesTrainings to keep high standardsReview of methods & procedures Wide range of products & brandsHigh flexibility to respond to changesHigh importance on appraising & negotiating contractsConstant R&DQuality control (services & raw materials)Effective & efficient supply chain management

FINAL REMARKS

Recommendation: BUY (EUR 11.4)Upside of +20%Market leadershipStrong cash flow generationBusiness diversificationWide range of brand portfolioINVESTMENT SUMMARYCOMPANY & INDUSTRY OVERVIEWVALUATIONFINANCIAL ANALYSISRISK ANALYSIS

Q & A SESSION

APPENDIX

SWOT ANALYSISSTRENGTHSWEAKNESSEST&R presence is strategically positioned around the world in order to catch the most of air traffic AGL works with a lot of brands, specially in the USA T&R is performing well despite the world economic crisis High concessions retention rate (80-85%), the losses are covered by the new winnings Cash generated from AGL activities is instantly received and is used for investments AGL invest on products and machineries innovation, collaborating directly with the producers AGL is present in 37 countries and manages more than 5300 points of sale in over 1200 locations AGL invests only after winning a concession: the company can forecast in advance its returns AGL is a value company AGL T&R won new concessions in 2012, Spanish concessions 100% retention rate AGL margins depend on commoditires trendsAGL F&B sensitive to electricity pricePassengers flows, both in airports and motorways, are linked to oil price F&B is sensitive to electricity price commodities trend AGL businesses are very exposed to uncontrollable macro-shocks A consistent part of AGL businesses is in ITA and SPA that have a sluggish recover from crisis Bad performances on Italian motorways will last in the future Licensing strategy in the USA make the business subject to increasing price of raw materials AGL does not hedge from the risk connected to oil price and raw material increases OPPORTUNITIESTHREATSNew concession contracts or concessions expiring around the world Potential expansion on high speed railways network Fairs and events around the world will make a lot of people travel Emerging markets growth could create new travelers flows The spin-off between F&B and T&R division could unleash the T&R hidden value If economic cycle is negative, AGL cut dividends meanwhile the competitors do not Terrorism could negatively affect traffic, specially in airports Travelers trends became more volatile from 2008 onwards In 2016 we have the most, EUR 1,350 mln, of AGL debt reaching maturity Crisis could be longer and heavier than expected in Italy and Spain Emerging markets law suit are different from western countries and sometimes less transparent AGL is exposed to credit, market (cash flow future fluctuations) and liquidity risks AGL is exposed to the changes in consumer tastes and their consumption behavior AGL T&R division is exposed to changes in the cost of rents T&R in UK could suffer of exchange rate risk

AUTOGRILLFood & Beverage RetailSituationItalian-listed companyProduct mixFood & beverage, confectionary/food and other ancillary consumer goods (books, CD, lottery) sold in the little store beside the bars and restaurantsPerfumes, wines and spirits, tobacco, confectionary/foodsGeographical mix2011 Sales 44.2% were generated in US, 35% in Italy and the rest coming from other European counties2011 sales EUR1820m of which around 75% generated in Europe. T&R has been benefiting from the launch of Terminal 5 at Heathrow UK(47% of T&R sales)Well-positioned in western countries. Indirect exposure to emerging market through European hubs (London, Madrid and Barcelona)Channel mixPresent in airports (63%), motorways (30%), railways (2%), Others - high streets, trade fair, museums and shopping centers(5%)Capex3.4% - 4.8% of sales1.8% - 5.4% of salesGrowthCAGR 2012-18E 1%CAGR 2012-18E 7.4%Focus on organic growthContract average10-25 years5-10 yearsSales share69%31%Sales FY12eEUR 4088mioEUR 2000mioEBITDA FY12eEUR 334.6mioEUR 252.6mioEBITDA margin8.20%12.60%CompetitorsCompass, Sodexo, Restaurant Group, IMC, Cremonini, Farmi, Elior, SSPDufry

BENCHMARKING WITH COMPETITORSTR&DFFOOD SERVICEBenchmarking with DufryCompassSodexoListed public company located in Switzerland.British multinational contract food service and support servicesFrance company focus on quality of life servicesHigher exposure to luxury items (watches, jewellery,fashion and leather) perfumes & cosmetics. Low-margin products such as newspapers, books and confectionaryFood service, facility management, service vouchers. Brands : Bon appetit management, canteen vending, all leisure hospitality, rastaurantOn-site services 96% of group revenue: Flagship product in Meal & Food : Cheque restaurant (France, Belgium and Chile). Alimentacao Pass (Brazil), Passlunch (Italy), Meal Card (India), Restaurant Pass (Romania), Ramadan Gift Pass (Turkey)Strong presence in America (75% of its revenues). Strong leadership in Brazil. Direct exposure to emerging market in South, North and Central AmericaNA 43%, Continental Europe 24%, UK & Ireland 12%, RoW 21%. Core business : FoodPresent in North America 37%, Continental Europe 32%, RoW 19%, UK & Ireland 8%. Strategy: food services, non-food vouchers, support servicesLittle exposure to motorways. 90% of its revenues coming from airportsBusiness and industry (41%), Education (16%), Healtchcare & Seniors (19%), Sports and Leisure (11%), Defence (13%)Corporate (50%), Healthcare & seniors (27%), Education (23%)3-4% of sales1.5%-2% of sales2% of salesProactive approach in new concessions and acquisitions (Hudson Group, Brasif and InterBaires and Folli Follie)Focus on expanding presence in the fast growing & emerging economies (currently 20% of business) and cost efficiency. 2011: 9.2% revenue growth on a constant currency basisOrganic revenue driver : focus on large clients and integrated contracts. 2012e: revenue growth target 7% p.a (JPM estimates)Concession length 2009 : 3-5 years 41%, 6-9 years 24%, 10+ years 24%, 1-2 years 11%94% group retention rateClient retention : 94%8% share of the global travelLargest global food service operator (4% of its addressable market, of which only 42% has shifted to outsourcing)Second largest global food service operatorCHF 3182.8mioEUR 16095EUR 16729mioCHF482mioEUR 1452mioEUR 1210mioHigher EBITDA margin due to lower concession rents8-9%6-7%AutogrillSodexo, AGL and AramarkOSS : Compass group, AGL; MS :Edenred

P&L ACCOUNTP&L Account (Em)20112012E2013E2014E2015E2016E2017E2018ESales 5,844.6 6,088.4 6,287.5 6,545.8 6,835.3 7,125.6 7,405.7 7,676.7 %growth2.5%4.2%3.3%4.1%4.4%4.2%3.9%3.7%Other revenues154 152.00 163.00 180.00 190.00 206.00 225.00 249.00 %sales2.6%2.5%2.6%2.7%2.8%2.9%3.0%3.2%Value of Production 5,998.6 6,240.4 6,450.5 6,725.8 7,025.3 7,331.6 7,630.7 7,925.7 Cost of Production-2,139.6-2,190.6-2,254.1-2,334.8-2,438.0-2,541.6-2,641.5-2,738.1%revenue-35.7%-35.1%-34.9%-34.7%-34.7%-34.7%-34.6%-34.5%Gross Profit 3,859.0 4,049.8 4,196.4 4,391.0 4,587.3 4,790.0 4,989.2 5,187.5 % margin66.0%66.5%66.7%67.1%67.1%67.2%67.4%67.6%% growth2.8%4.9%3.6%4.6%4.5%4.4%4.2%4.0%Renting/royalties-1193.9-1293.0-1381.0-1477.0-1579.0-1653.1-1725.5-1796.3Personnel Expense-1472.6-1539.0-1576.0-1649.5-1699.9-1772.1-1836.6-1903.8Other Operating costs-575.5-631.6-663.5-654.6-661.3-680.5-705.0-725.1EBITDA 617.0 586.2 575.9 609.9 647.0 684.2 722.0 762.2 % margin10.6%9.6%9.2%9.3%9.5%9.6%9.7%9.9%% growth1.9%-5.0%-1.8%5.9%6.1%5.8%5.5%5.6%Depreciation & Amortization-298.8-330.0-336.0-354.0-373.0-391.0-411.0-433.0%sales5.1%5.4%5.3%5.4%5.5%5.5%5.5%5.6%EBIT 318.2 256.2 239.9 255.9 274.0 293.2 311.0 329.2 % margin5.4%4.2%3.8%3.9%4.0%4.1%4.2%4.3%% growth14.4%-19.5%-6.4%6.7%7.1%7.0%6.1%5.8%Net Financial expense-82.8-89.1-92.7-90.9-92.7-93.8-94.8-97.6Pre-tax profit 234.7 167.1 147.2 165.0 181.3 199.4 216.3 231.6 Taxes-80.3-52.5-46.2-51.8-56.9-62.6-67.9-72.7Tax rate34.2%31.4%31.4%31.4%31.4%31.4%31.4%31.4%Total profit 154.4 114.7 101.0 113.2 124.4 136.8 148.4 158.9 Minorities-12.8-18.3-18.9-19.6-20.5-21.4-22.2-23.0Net Profit 141.6 96.4 82.1 93.6 103.9 115.4 126.2 135.9 Net margin2.4%1.6%1.3%1.4%1.5%1.6%1.7%1.8%% growth85.5%-31.9%-14.8%13.9%11.0%11.1%9.3%7.7%

BALANCE SHEETBalance Sheet (Em)20112012E2013E2014E2015E2016E2017E2018EIntangible assets2154.52253.42339.52448.12583.82707.62829.02944.5Tangible assets923.4974.51018.81073.51134.71197.01259.01318.9Fin. Assets26.526.526.526.526.526.526.526.5Total Fixed Assets 3,104.4 3,254.4 3,384.8 3,548.1 3,744.9 3,931.1 4,114.5 4,289.9 Inventory266275.9288.6300.2313.2326.2338.9352.2Receivables53.560.969.278.588.999.8162.9184.0Other receivables227.9243.6257.8274.9293.9313.5333.3352.7Payable-632.4-657.0-685.5-711.2-740.4-764.3-792.5-821.7Other liabilities-406.2-418.3-433.0-445.6-460.4-474.6-488.4-502.7Total NWC-491.2-494.8-502.8-503.2-504.7-499.5-445.8-435.5Invested Capital2613.22759.62882.03045.03240.23431.63668.83854.4Risk fund provisions-66.5-91.4-94.3-98.2-102.5-106.9Severance fund and other-194.5-182.7-188.7-196.4-205.1-213.8-222.2-230.0Asset held for sales0000000NET CAPITAL EMPLOYED2352.12485.52599.02750.42932.63111.03335.53509.3Group Net equity779.8829.9844.7944.21051.21166.61327.41396.6Minorities19.621.321.724.227.029.934.035.8Total Net Equity799.4851.2866.3968.51,078.21,196.51,361.41,432.4Convertible bonds00000000L T Liabilities1568.61650.91750.31800.11873.31933.91994.22098.1L T LIABILITY1568.61639.41741.51796.41871.41933.91998.02106.3S T Liabilities214.2237.0247.8249.5257.8264.1268.5278.3Liquidity and loans-230-242.1-256.6-263.9-274.7-283.6-292.4-307.6S T LIABILITY-15.8-5.1-8.9-14.5-16.9-19.5-23.9-29.3NFP1,552.81,634.31,732.71,782.01,854.41,914.41,974.12,076.9TOTAL SOURCES2352.22485.52599.02750.42932.63111.03335.53509.3

CASH FLOWCash Flow (Em)20112012E2013E2014E2015E2016E2017E2018EGroup Net Sales 5,844.6 6,088.4 6,287.5 6,545.8 6,835.3 7,125.6 7,405.7 7,676.7 % change YoY2.5%4.2%3.3%4.1%4.4%4.2%3.9%Group EBITDA 617.0 586.2 575.9 609.9 647.0 684.2 722.0 762.2 % margin10.6%9.6%9.2%9.3%9.5%9.6%9.7%9.9%% change YoY1.9%-5.0%-1.8%5.9%6.1%5.8%5.5%D&A 298.8 330.0 336.0 354.0 373.0 391.0 411.0 433.0 % of sales5.1%5.4%5.3%5.4%5.5%5.5%5.5%5.6%Group EBIT 318.2 256.2 239.9 255.9 274.0 293.2 311.0 329.2 % margin5.4%4.2%3.8%3.9%4.0%4.1%4.2%4.3%% change YoY6.0%-19.5%-6.4%6.7%7.1%7.0%6.1%Taxes-80.3-80.4-75.3-80.4-86.0-92.1-97.7-103.4Theoretical tax rate34.2%31.4%31.4%31.4%31.4%31.4%31.4%31.4%NOPLAT 237.9 175.8 164.6 175.5 188.0 201.2 213.4 225.9 D&A and other provisions 298.8 330.0 336.0 354.0 373.0 391.0 411.0 433.0 Gross Operating Cash Flow 536.7 505.8 500.6 529.5 561.0 592.2 624.4 658.9 Capex-209.4-273-220-258-275-290-310-327% of sales-3.6%-4.5%-3.5%-3.9%-4.0%-4.1%-4.2%-4.3%Change in NWC-98.9-3.6-8.0-0.4-1.65.253.7Free Cash Flow to Firm 228.4 236.4 288.6 271.9 287.5 296.9 260.7 321.6

P&L FOOD & BEVERAGEP&L F&B (Em)201020112012E2013E2014E2015E2016E2017E2018ESales F&B division4027.84023.84088.04095.04140.54215.04277.44330.84381.5% growth6.4%-0.1%1.6%0.2%1.1%1.8%1.5%1.3%1.2%% of AGL group sales70.6%68.8%67.1%65.1%63.3%61.7%60.0%58.5%57.1%Other revenues96.9114103.690.1103.5113.8115.5112.6113.9% sales2.4%2.8%2.5%2.2%2.5%2.7%2.7%2.6%2.6%Cost of production-1356.1-1374.5-1443.0-1474.2-1455.8-1458.1-1467.1-1468.2-1474.4% sales-33.7%-34.2%-35.3%-36.0%-35.2%-34.6%-34.3%-33.9%-33.7%Rents and royalties-644.2-642-735.2-776.2-768.1-788.2-808.4-831.5-850.0% sales-16.0%-16.0%-18.0%-19.0%-18.6%-18.7%-18.9%-19.2%-19.4%Personnel expense-1240.4-1256.6-1194.9-1156.0-1230.9-1274.2-1293.0-1317.8-1337.6% sales-30.8%-31.2%-29.2%-28.2%-29.7%-30.2%-30.2%-30.4%-30.5%Other operating costs-445.2-450.9-458.1-455.4-459.3-472.2-481.4-476.6-477.4% sales-11.1%-11.2%-11.2%-11.1%-11.1%-11.2%-11.3%-11.0%-10.9%EBITDA438.8413.8360.3323.3329.9336.2342.9349.3356.0Corporate cost-27.2-25.3-25.7-25.7-26.0-26.5-26.9%sales-0.7%-0.6%-0.6%-0.6%-0.6%-0.6%-0.6%-0.6%-0.6%EBITDA after corporate cost411.6388.5334.6297.6303.9309.7316.0322.1328.4EBITDA Margin10.2%9.7%8.2%7.3%7.3%7.3%7.4%7.4%7.5%EBITDA growth-5.5%-5.6%-13.9%-11.1%2.1%1.9%2.0%1.9%

P&L TRAVEL RETAIL & DUTY FREEP&L TR&DF (Em)201020112012E2013E2014E2015E2016E2017E2018ESales TR&DF division1675.71820.82000.02192.52405.02630.02858.83086.13305.2% growth8.9%8.7%9.8%9.6%9.7%9.4%8.7%7.9%7.1%% of AGL group sales29.4%31.2%32.8%34.9%36.7%38.5%40.1%41.7%43.1%Other revenues31.424.128.031.836.140.845.750.959.2% sales1.9%1.3%1.4%1.5%1.5%1.6%1.6%1.7%1.8%Cost of production-733.8-765.1-844.0-926.3-1014.9-1109.9-1203.0-1296.2-1388.2% sales-43.8%-42.0%-42.2%-42.3%-42.2%-42.2%-42.1%-42.0%-42.0%Rents and royalties-505.7-551.2-608.9-667.0-732.9-802.2-872.0-941.6-1008.5% sales-30.2%-30.3%-30.4%-30.4%-30.5%-30.5%-30.5%-30.5%-30.5%Personnel expense-180.6-192.4-208.0-229.1-251.3-275.4-300.2-324.3-347.4% sales-10.8%-10.6%-10.4%-10.5%-10.5%-10.5%-10.5%-10.5%-10.5%Other operating costs-93.4-107.8-114.4-123.9-136.7-146.4-160.7-173.5-183.5% sales-5.6%-5.9%-5.7%-5.7%-5.7%-5.6%-5.6%-5.6%-5.6%EBITDA193.6228.4252.6277.9305.3337.0368.7401.4436.9EBITDA Margin11.6%12.5%12.6%12.7%12.7%12.8%12.9%13.0%13.2%EBITDA growth29.5%18.0%10.6%10.0%9.8%10.4%9.4%8.9%

DEBT STRUCTUREDebtIssueAvailable AmountOriginal TenorMaturityRateDrawn(as of 30/09/12)CovenantsPrivate PlacementJan-03$266m10 yearsJan-13Fixed 6.01%$266mEbitda interest coverage > 4.5x; Net debt/Ebitda < 3.5May-07$150m10 yearsMay-17Fixed 5.73%$150mJan-03$60m8 yearsJan-11Fixed 5.66%$60mTerm LoanMar-08E2755 yearsMar-13FloatingE275Mar-08GBP3985 yearsMar-13FloatingGBP398Jun-05200m10 yearsJun-15Floating (Euribor) 3 months + 0.75% b.p200mEbitda interest coverage > 4.5xNet debt/Ebitda < 3.5Syndicated revolving credit facilitiesJun-12200m17 monthsNov-13Floating (Euribor)0Ebitda interest coverage > 4.5x; Net debt/Ebitda < 3.5Jun-05E3007 yearsJun-12Floating (Euribor) 3 months + 0.35% b.p0Autogrill SpaJul-11700m5 yearsJul-16Floating (Euribor)294m + GBP 31m + $250mMay-07E5007 yearsMay-14Floating$60m + E355mWDF Group SAJul-11650m5 yearsJul-16Floating (Euribor)Ebitda interest coverage > 4.5xNet debt/Ebitda < 3.5Mar-08E125m5 yearsMar-13FloatingGBP20m

DEBT COMPOSITION

DEBT IN CURRENCY

DEBT RATE

DEBT RATIODebt Key Ratios20112012E2013E2014E2015E2016E2017E2018ENet Debt/EBITDA (x)2.522.793.012.922.872.802.732.72Coverage Ratio (x)3.842.892.522.762.893.063.233.36Net Debt/Equity (x)1.941.922.001.841.721.601.451.45Debt/Equity (x)2.232.202.302.111.971.841.661.66(EUR)m20112012E2013E2014E2015E2016E2017E2018ETotal Debt1782.81876.41989.32045.92129.12198.02266.52384.6Total Net Debt1552.81634.31732.71782.01854.41914.41974.12076.9Cash230.0242.1256.6263.9274.7283.6292.4307.6Cost of debt5.3%5.5%5.4%5.1%5.0%4.9%4.8%4.7%

RAW MATERIALS COSTS

DCF - BULL CASEDCF Bull case (EUR mln)2012201320142015201620172018Sales Rev Turn6088.46340.06645.86959.37265.57563.47850.8Growth4.1%4.8%4.7%4.4%4.1%3.8%Ebitda586.80595.00639.00688.00737.45784.33831.40Growth1.4%7.4%7.7%7.2%6.4%6.0%Ebitda margin9.64%9.38%9.62%9.89%10.15%10.37%10.59%Amortization & other provisions329.7330.0347.0363.0379.3393.3406.7Amortization & Other/Capex5.4%5.2%5.2%5.2%5.2%5.2%5.2%Ebit257.06265.00292.00325.00358.19391.03424.73Growth3.1%10.2%11.3%10.2%9.2%8.6%Ebit margin 4.22%4.18%4.39%4.67%4.93%5.17%5.41%Capex273265285300315335360Capex /Sales4.5%4.2%4.3%4.3%4.3%4.4%4.6%Free Operating CF236.7254.8262.7287.6304.8272.8327.8FCFF ps0.931.001.031.131.201.071.29

Wacc calculationsYears2012201320142015201620172018Risk free rate3.4%3.5%3.6%3.7%3.8%3.9%4.0%Beta Equity0.820.840.860.880.90.920.93Mkt risk premium6.7%6.6%6.5%6.4%6.3%6.2%6.0%Cost of Equity8.9%9.0%9.2%9.4%9.5%9.5%9.7%Tax Rate31.4%31.4%31.4%31.4%31.4%31.4%31.4%Debt/ Equity220.0%230.0%205.0%192.0%181.0%166.0%150.0%Cost of debt5.45%5.25%5.10%4.95%4.80%4.71%4.60%WACC7.9%7.9%8.0%8.0%8.0%8.1%8.1%Discount Rate0.930.860.790.740.680.63

Valuation SummaryCur Mkt Cap2404Curr Entp Val3944Eqy Sh Out (mln)254Long Term Growth Rate2.0%Long Term WACC8.1%Net Financial pos. (mln)1540Cumulated FCF ps 20175.15Terminal Value21.5Discount Rate TV8.1%Discounted Terminal Value13.5Cumulated DCF18.6Equity Value ps12.6Price as date9.45Upside/(downside)33.20%

DCF - BEAR CASEDCF Bear case(EUR mln)2012201320142015201620172018Sales Rev Turn6088.362006340.86510.36666.56815.96954.9Growth1.8%2.3%2.7%2.4%2.2%2.0% Ebitda586.00555.00571.00591.00609.99627.75644.72Growth-5.3%2.9%3.5%3.2%2.9%2.7%Ebitda margin9.62%8.95%9.01%9.08%9.15%9.21%9.27%Amortization & other provisions325325329336343350355Amortization& Other/Capex5.3%5.2%5.2%5.2%5.2%5.1%5.1%Ebit260.88230.00242.00255.00266.66278.09289.33Growth-11.8%5.2%5.4%4.6%4.3%4.0%Ebit margin4.28%3.71%3.82%3.92%4.00%4.08%4.16%Capex272201190198209219231Capex /Sales4.5%3.2%3.0%3.0%3.1%3.2%3.3%Free Operating CF235.7289.8305.4314.5312.1267.7308.7FCFF ps0.931.141.201.241.231.051.22

Wacc calculationsYears2012201320142015201620172018Risk free rate3.4%3.5%3.6%3.7%3.8%3.9%4.1%Beta Equity0.820.840.860.880.90.920.93Mkt risk premium6.7%6.6%6.5%6.4%6.3%6.2%6.0%Cost of Equity8.9%9.1%9.3%9.4%9.5%9.6%9.7%Tax Rate31.4%31.4%31.4%31.4%31.4%31.4%31.4%Debt/ Equity220.0%230.0%221.0%215.0%212.0%205.0%192.0%Cost of Debt5.5%5.4%5.4%5.3%5.3%5.2%5.1%WACC8.0%8.0%8.1%8.1%8.1%8.2%8.2%Discount Rate0.930.860.790.730.680.63

Valuation SummaryCur Mkt Cap2404Curr Entp Val3944Eqy Sh Out (mln)254Long Term Growth Rate1.0%Long Term WACC8.2%Net Financial pos. (mln)1540Cumulated FCF ps 20175.43Terminal Value17.1Discount Rate TV8.2%Discounted Terminal Value10.7Cumulated DCF16.1Equity Value ps10.04Price as date9.45Upside/(downside)6.27%

DCF CENTRAL SCENARIO (WACC CALCULATIONS)Valuation SummaryCur Mkt Cap2.404Curr Entp Val3.944Eqy Sh Out (mln)254.4Long Term Growth Rate1.5%Long Term WACC8.1%Net Financial pos. (mln)1.54Cumulated FCF ps 20175.21Terminal Value19.3Discount Rate TV8.2%Discounted TV12.1Cumulated DCF17.2Equity Value ps11.3Price as date9.45Upside/(downside)19.66%

Wacc calculationsYear2012201320142015201620172018Free Risk Rate3.4%3.5%3.6%3.7%3.8%3.9%4.0%Beta Equity0.820.840.860.880.90.920.93Mkt Risk Premium6.7%6.6%6.5%6.4%6.3%6.2%6.0%Cost of Equity8.9%9.0%9.2%9.4%9.5%9.6%9.8%Beta Leveraged2.062.172.072.972.041.971.99Cost of Equity17.2%17.8%17.4%17.0%16.6%16.0%16.2%Tax Rate31.4%31.4%31.4%31.4%31.4%31.4%31.4%Debt/ Equity220.0%230.0%211.0%197.0%184.0%166.0%166.0%Debt / D+E68.8%69.7%67.8%66.3%64.8%62.4%62.4%Cost of debt5.5%5.4%5.1%5.0%4.9%4.8%4.7%Wacc7.9%7.9%8.0%8.0%8.0%8.1%8.1%Compound Wacc7.9%16.5%25.9%36.0%47.0%58.8%Discount Rate0.930.860.790.740.680.63

AGL DCF (m )2012201320142015201620172018Sales Rev Turn6088.46287.56545.86835.37126.67406.77677.7Growth3.3%4.1%4.4%4.2%3.9%3.6%Ebitda586.80575.00609.00647.00684.73722.35762.59Growth-2.0%5.9%6.2%5.8%5.6%5.5%Ebitda margin9.64%9.15%9.30%9.47%9.60%9.75%9.92%Amortization&other provisions330336354373391411433Amortization & other / Capex5.4%5.3%5.4%5.5%5.5%5.6%5.6%Ebit257.98239.80255.12274.20292.28311.86328.53Growth-9.0%6.9%7.3%6.8%6.5%6.3%Ebit margin4.22%3.81%3.90%4.01%4.11%4.20%4.28%Capex273220258275290310327Capex /Sales4.5%3.5%3.9%4.0%4.1%4.2%4.3%Change in Net Working Capital(3.6)(8.0)(0.4)(1.6)5.253.710.2Change in NWCapital / Sales-0.06%-0.13%-0.01%-0.02%0.07%0.72%0.13%Free Operating Cash Flow 237288271288297261321FCFF ps0.931.131.071.131.171.021.26

DCF - FOOD & BEVERAGEDCF Bear case(EUR mln)2012201320142015201620172018Sales Rev Turn4088.04095.04140.54215.04277.44330.84381.5Growth0.2%1.1%1.8%1.5%1.3%1.2% Ebitda334.00297.50303.80310.00316.10322.22328.18Growth-10.9%2.1%2.0%2.0%1.9%1.8%Ebitda margin8.17%7.26%7.34%7.35%7.39%7.44%7.49%Amortization & other provisions197186189191193196199Amortization& Other/Capex4.8%4.5%4.6%4.5%4.5%4.5%4.5%Ebit137.48111.50114.90119.20123.19126.46129.25Growth-18.9%3.0%3.7%3.3%2.7%2.2%Ebit margin3.36%2.72%2.78%2.83%2.88%2.92%2.95%Capex237180188180172161152Capex /Sales5.8%4.4%4.5%4.3%4.0%3.7%3.5%Free Operating CF48.968.566.681.381.099.0123.9FCFF ps0.190.270.260.320.320.390.49

Wacc calculationsYears2012201320142015201620172018Risk free rate3.4%3.5%3.6%3.7%3.8%3.9%4.0%Beta Equity0.820.840.860.880.90.920.93Mkt risk premium6.7%6.6%6.5%6.4%6.3%6.2%6.0%Cost of Equity8.9%9.0%9.2%9.4%9.5%9.6%9.7%Tax Rate35.0%35.0%35.0%35.0%35.0%35.0%35.0%Debt/ Equity220.0%230.0%205.0%192.0%181.0%165.0%155.0%Cost of Debt5.5%5.4%5.1%5.0%4.9%4.8%4.7%WACC7.7%7.7%7.7%7.8%7.8%7.9%7.9%Discount Rate0.930.860.800.740.690.64

Valuation SummaryCur Mkt Cap1603Curr Entp Val2604Eqy Sh Out (mln)1.0Long Term Growth Rate7.9Long Term WACC1000Net Financial pos. (mln)1.55Cumulated FCF ps 20177.19Terminal Value7.9Discount Rate TV4.53Discounted TV6.11Cumulated DCF2.17Equity Value ps1603Price as date2604Upside/(downside)1.0

DCF - TRAVEL RETAIL & DUTY FREEDCF Bear case(EUR mln)2012201320142015201620172018Sales Rev Turn2000.02192.52405.02630.02858.83086.13305.2Growth9.6%9.7%9.4%8.7%8.0%7.1% Ebitda252.40278.00305.80337.00368.50400.88434.63Growth10.1%10.0%10.2%9.3%8.8%8.4%Ebitda margin12.62%12.68%12.72%12.81%12.89%12.99%13.15%Amortization & other provisions133150165182198215234Amortization& Other/Capex6.7%6.8%6.9%6.9%6.9%7.0%7.1%Ebit119.00128.50141.00155.40170.39185.47200.29Growth8.0%9.7%10.2%9.6%8.9%8.0%Ebit margin5.95%5.86%5.86%5.91%5.96%6.01%6.06%Capex36407095128149170Capex /Sales1.8%1.8%2.9%3.6%4.5%4.8%5.1%Free Operating CF183.1182.0174.3173.5167.8174.9183.6FCFF ps0.720.720.690.680.660.690.72

Wacc calculationsYears2012201320142015201620172018Risk free rate3.4%3.5%3.6%3.7%3.8%3.9%4.0%Beta Equity0.820.840.860.880.90.920.93Mkt risk premium6.7%6.6%6.5%6.4%6.3%6.2%6.0%Cost of Equity8.9%9.0%9.2%9.4%9.5%9.6%9.7%Tax Rate28.0%28.0%28.0%28.0%28.0%28.0%28.0%Debt/ Equity220.0%230.0%215.0%210.0%200.0%191.0%188.0%Cost of Debt5.45%5.35%5.10%5.00%4.90%4.80%4.75%WACC8.2%8.2%8.2%8.2%8.2%8.3%8.3%Discount Rate0.920.850.790.730.670.62

Valuation SummaryCur Mkt Cap801Curr Entp Val1341Eqy Sh Out (mln)2.7%Long Term Growth Rate8.3%Long Term WACC540Net Financial pos. (mln)3.17Cumulated FCF ps 201712.7Terminal Value8.3%Discount Rate TV8.07Discounted TV11.2Cumulated DCF9.12Equity Value ps801Price as date1341Upside/(downside)2.7%

REAL OPTIONDCF real option2012201320142015201620172018 FCF ps 0.931.131.071.131.171.021.26Wacc 7.9%7.9%7.9%8.0%8.0%8.1%8.1%Compound Cost of Equity7.9%16.5%25.9%36.0%47.0%58.5%Discount Rate0.930.860.790.740.680.63DCF EVALUATIONDiscounted Cash Flow1.050.920.900.860.700.79Cumulated1.051.962.863.724.425.21

VALUATIONCumulated FCF ps 20185.21Discounted Terminal Value12.1Cumulated DCF17.36Price (S)17.36Strike (K)6.3Expiration Date09.17.2016Volatility11.8%LN (S/K)1.022d15,150d24,926N(d1)1,000N(d2)1,000Call Price11.75

PORTFOLIO STRUCTURE

COMPANY NAMEMKT CAP (MLN )WEIGHTAUTOGRILL24047.45%DUFRY30729.52%SODEXO1047332.45%COMPASS16322 50.58%TOTAL32271100.00%

BETA STATISTICSBETA ALPHA1.210.00STD ERROR0.130.00R^2 - STD ERROR ESTIMATION Y0.320.04STATISTIC F DEGREE OF FREEDOM94.16202.00SS REGRESSION SS RESIDUALS0.120.27

MULTIPLES

MULTIPLES

BOARD OF DIRECTORS & SHAREHOLDERS STRUCTUREExecutiveNon ExecutiveIndependent for CodeIndependent for T.U.F.Board of directorsInternal control & Corp. Gov. CommiteeHuman resources CommitteeStrategy &Investments CommitteeRelated-party Transaction CommiteeXBenetton Gilberto ChairmanXTondato Da Ruos Gianmario Chief Executive OfficerXBenetton Alessandro DirectorXXXBarracco Alessandro DirectorXXXXCamuffo Arnaldo DirectorXXXXGiavazzi Francesco DirectorX XXXJesi Marco DirectorXXXXMalguzzi Alfredo DirectorX XXXXXMangiagalli Marco Lead DirectorXXXMion Gianni DirectorX XXXOrlando Stefano DirectorXXXRoverato Paolo DirectorXX

INVESTMENT SUMMARYCOMPANY & INDUSTRY OVERVIEWVALUATIONFINANCIAL ANALYSISRISK ANALYSISGEOGRAPHICAL PRESENCE

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DISTRIBUTION CHANNELSINVESTMENT SUMMARYCOMPANY & INDUSTRY OVERVIEWVALUATIONFINANCIAL ANALYSISRISK ANALYSIS

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BRAND AND PRODUCT PORTFOLIOFOOD & BEVERAGETRAVEL RETAIL & DUTY FREEPropertyLicenced

INVESTMENT SUMMARYCOMPANY & INDUSTRY OVERVIEWVALUATIONFINANCIAL ANALYSISRISK ANALYSISBRANDSPRODUCTSFirst and second dishesSaladsDessertsCoffeeSpirits Cigars and cigarettesFashion brand glasses, jewelrysPerfums and cosmeticsChocolate and foodTravel essentials

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