Hudson : Q1 2020 Interim Report

HUDSON LTD.
INTERIM REPORT
MARCH 2020
CONTENT
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS	3
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, assump- tions, 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 state-ments 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 materi- ally 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 athttps://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 land- marks 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:

• - Temporarily closed more than 700 of our stores in airports, commuter hubs, landmarks, and tourist locations as of April 22, 2020. We have reopened over 100 stores as of June 15, 2020 as stay-at-home restrictions were lifted and passenger travel began to increase in certain areas.

• - Reduced a majority of our workforce through temporary furloughs and lay-offs of both field service and support team members.

• - Decreased staffing and store hours in certain locations that have remained open.

• - Reached agreements with many landlords to abate or defer rents and other payments; continue to work with the remaining landlords.

• - Implemented salary reductions for corporate team members and field leadership.

• - Reduced capital spend to minimal levels.

• - Managed inventory tightly to better align with lower sales levels and reduced working capital needs.

- Reduced all operating expenses to minimal levels.

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

2019
IN MILLIONS OF USD	2020	RESTATED 1	in %
Turnover	341.5	445.0	(23.3)
Cost of sales	(128.2)	(161.2)	(20.5)
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 income 2	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 TO 3
Non-controlling interests	(1.5)	5.8	(125.9)
Equity holders of the parent	(77.2)	(5.8)	1,231.0
5

• 1 The amounts presented for Q1 2019 and the related notes differ from the information reported in the interim consolidated financial statements for the period ended March 31, 2019 due to correction of an error identified in the accounting adopted on transition to IFRS 16 Leases. For details please refer to the Company's interim consolidated financial statements for the nine months ended September 30, 2019 (note 2.2)

• 2 In 2019, Other income amounts were presented in Other expenses.

• 3 Net profit attributable to equity holders includes charges related to business combinations, such as amortization or impairment of intangible assets, interest and deferred taxes not affecting the non-controlling interests. Additionally, the net profit attributable to non-controlling interests does not include the respective income tax charges.

Turnover

Due to the impacts of COVID-19 on the travel industry, key sales metrics were signifcantly 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.