TIDMSSPG
RNS Number : 9300I
SSP Group PLC
17 December 2020
LEI:213800QGNIWTXFMENJ24
17 December 2020
SSP GROUP PLC
Results for year ended 30 September 2020
SSP Group, a leading operator of food and beverage outlets in
travel locations worldwide, announces its financial results for the
year ended 30 September 2020. SSP responded rapidly to Covid-19,
taking extensive action to protect its people, raise additional
liquidity and reduce its cost base, leaving it strongly placed to
capitalise on the recovery of the travel sector.
Commenting on the results, Simon Smith, CEO of SSP Group,
said:
"Covid-19 continues to have an unprecedented impact on the
travel industry and on SSP's businesses in all geographies. We have
taken rapid and decisive action to reduce costs, preserve cash and
to substantially strengthen the Group's financial position. I want
to thank our teams for their dedication and professionalism during
this time, especially when faced with extremely difficult
decisions.
Our priority continues to be the health, safety and welfare of
our people and our customers, and this has been front of mind as
we've re-opened our units. By renegotiating rents, rationalising
our menus and reducing our unit overheads, we've created a new,
more flexible operating model. This has allowed us to respond
rapidly to passenger demand, successfully re-opening more than a
third of our units by the end of September and delivering an
important service to the travelling public.
"Whilst we expect passenger numbers to remain subdued over the
winter, we are optimistic that, alongside good progress with the
vaccination programme, we will see a significant upturn in both
domestic and international travel from the Spring . We are ready to
respond quickly. The actions we are taking to rebuild the business
will put us in a strong position to capitalise on the recovery as
well as future new business opportunities, enabling us to deliver
long term sustainable growth for the benefit of all our
stakeholders."
Financial highlights:
-- Revenue of GBP1,433.1m: down 47.9% at constant currency(1) ; 48.7% at actual exchange rates.
-- Like-for-like sales(2) down 50.8%: heavily impacted by
Covid-19 and the closure of most of the global travel markets since
March.
-- Operating loss of GBP363.9m on a reported basis under IFRS
16, including non-underlying net operating costs of GBP48.5m. On a
pro forma IAS 17 basis, the underlying operating loss(3) was
GBP211.7m (2019: GBP221.1m profit).
-- Loss before tax of GBP425.8m on a reported basis under IFRS
16. On a pro forma IAS 17 basis, the underlying loss before tax(3)
was GBP239.6m (2019: GBP203.2m profit).
-- Basic loss per share of 76.1 pence on a reported basis under
IFRS 16. On a pro forma IAS 17 basis, underlying basic loss per
share(3) of 45.4 pence (2019: underlying basic earnings per share
of 29.1 pence).
-- Net debt of GBP692.0m on a pro forma IAS 17 basis, up from GBP483.4m at 30 September 2019.
-- Further covenant amendments recently agreed, including a
waiver of the leverage test until reinstated in March 2022.
-- Liquidity position remains strong, with cash and undrawn
available facilities of around GBP520m at the end of September.
Business Highlights:
-- Good first half performance prior to the outbreak of
Covid-19; strong net new space growth at 5.7% and further progress
on our strategic initiatives.
-- Rapid and effective response to Covid-19 to protect our
people and the business; significant liquidity created, business
"hibernated" and units closed.
-- Operating costs substantially reduced to reflect low levels
of passenger travel during the second half; central and operational
management skills retained to enable fast ramp up of the business
as demand recovers.
-- Agile response to increased demand over the summer; over one
third (c. 1,200) units open by the year end; more flexible
operating model deployed enabling sites to break even at lower
levels of sales.
-- Significant focus on cash; extensive action to reduce the
cost base and preserve cash resulted in materially lower cash usage
in the second half of the year than anticipated at the Interim
results.
-- Competitive advantages strengthened: client relationships
extended and more flexible rent models agreed; brand ranges and
menus optimised; customer proposition enhanced through digital
technology.
-- People and Corporate Responsibility strategies re-defined and being embedded.
-- Positive long term travel trends; SSP poised to re-launch the
business and take advantage of the future opportunities.
Recent Trading and Outlook:
From very low sales in the third quarter of the year (93% lower
year on year), passenger numbers increased gradually over the final
quarter of the year and by the end of September were 76% lower
year-on-year (averaging 80% lower year-on-year during the fourth
quarter). In response to the recovery of the travel sector over the
summer, we were able to open over one third of our units globally.
Since the end of the year, the re-emergence of the virus and
further lockdowns, notably in the UK and Continental Europe, have
resulted in further volatility in passenger numbers. As a result we
expect sales during the first quarter of the 2021 financial year to
remain broadly in line with the final quarter of the year,
approximately 80% lower year-on-year. This volatility is expected
to continue through the second quarter of the new financial
year.
We are optimistic that, alongside the roll out of the Covid-19
vaccination programmes, we will start to see a recovery in travel
in the second half of the new financial year. SSP has an important
role to play in providing food and beverage services to the
travelling public, and we will continue to re-open units rapidly in
response to demand, maximising the profitability of the reopening
programme and rigorously controlling costs and cash. Looking
further out, we firmly believe that demand for travel will return
and the actions we have taken since March, together with the
evolving market backdrop, will ensure SSP is well positioned to
capitalise on future market opportunities.
Financial highlights:
Underlying Underlying Underlying Year on
results results results year
IFRS 16 Pro forma IAS 17 IAS 17
IAS 17(4)
2020 2020 2019 Change
GBPm GBPm GBPm %
Revenue 1,433.1 1,433.1 2,794.6 (48.7)%
Like-for-like sales (fall)
/ rise(2) (50.8)% (50.8)% +1.9% n/a
Underlying operating (loss)
/ profit(3) (315.4) (211.7) 221.1 (195.7)%
Underlying (loss) / profit
before tax(3) (371.8) (239.6) 203.2 (217.9)%
Underlying (loss) / earnings
per share (p)(3) (68.0) (45.4) 29.1 (256.0)%
Net debt(5) (2,040.6) (692.0) (483.4) (43.2)%
Statutory reported results:
The table below summarises the Group's statutory reported
results (where the financial highlights above are adjusted).
As reported As reported
under IFRS under
16
2020 IAS 17
GBPm 2019
GBPm
Revenue 1,433.1 2,794.6
Operating (loss) /
profit (363.9) 219.2
(Loss) / profit before
tax (425.8) 197.2
(Loss) / earnings per
share (p) (76.1) 28.1
(1) Constant currency is based on average 2019 exchange rates
weighted over the financial year by 2019 results.
(2) Like-for-like sales represent revenues generated in an
equivalent period in each financial period in outlets which have
been open for a minimum of 12 months. Units temporarily closed as a
result of Covid-19 have not been excluded for the purposes of the
like-for-like calculation. Like-for-like sales are presented on a
constant currency basis.
(3) Stated on an underlying basis, which excludes non-underlying
items as further explained in the section on Alternative
Performance Measures (APMs) on pages 23-25.
(4) The Group has adopted IFRS 16 'Leases' with effect from 1
October 2019, using the modified retrospective approach to
transition. Accordingly prior year has not been restated and
therefore the results for the year ended 30 September 2020 are not
directly comparable with those reported in the prior year under the
previous applicable accounting standard, IAS 17 'Leases'. To
provide meaningful comparatives, the results for year ended 30
September 2020 have therefore also been presented under IAS 17 with
the growth rates shown on an IAS 17 basis. See notes 2 and 3 for a
reconciliation of the IAS 17 alternative performance measures to
the equivalent IFRS measures.
(5) Net debt reported under IFRS 16 includes leases liabilities
whereas under the pro forma IAS 17 basis lease liabilities are
excluded. Refer to 'Net debt' section of the 'Financial review' for
reconciliation of net debt.
CONTACTS:
Investor and analyst enquiries
Sarah John, Corporate Affairs Director, SSP Group plc
On 17 December 2020: +44 (0) 7736 089218
Thereafter: +44 (0) 203 714 5251
E-mail: sarah.john@ssp-intl.com
Media enquiries
Peter Ogden / Lisa Kavanagh
Powerscourt
+44 (0) 207 250 1446
E-mail: ssp@powerscourt-group.com
SSP Group plc's Full Year Results 2020 are available at
www.foodtravelexperts.com.
NOTES TO EDITORS
About SSP
SSP is a leading operator of food and beverage concessions in
travel locations, operating restaurants, bars, cafés, food courts,
lounges and convenience stores in airports, train stations,
motorway service stations and other leisure locations. Prior to the
onset of Covid-19, we served around one and a half million
customers every day at approximately 180 airports and 300 rail
stations in 35 countries around the world and operated more than
550 international, national and local brands across our c. 2,700
units.
www.foodtravelexperts.com
Business Review
Overview
Prior to the outbreak of Covid-19, the business was on track to
deliver another excellent set of financial results, growing
like-for-like sales and net gains and making good progress on our
efficiency programme during the first half of our financial year.
However, the spread of the virus had a significant impact on our
business, with the effective shut down of the global travel market.
We took rapid and decisive action to protect our people and to
preserve liquidity, effectively hibernating our business and
raising additional funding which put us in a strong position to
operate through this crisis. The gradual increase in travel, most
notably over the summer period, together with the significant cost
actions taken by the business enabled us to re-open over a third of
our units by the end of the year.
Financial results
Revenue decreased by 47.9% on a constant currency basis,
comprising a like-for-like sales reduction of 50.8% offset by net
contract gains of 2.9%. At actual exchange rates, total revenue
fell by 48.7%, to GBP1,433.1m. Although we had enjoyed a good start
to the new financial year, by February we began to see the impact
of Covid-19 on Group sales. Trading then deteriorated rapidly
across the entire group during March as the impact of the pandemic
spread across the world.
During the third quarter, with the global lockdowns continuing,
like-for-sales sales in April and May were approximately 95% below
last year, improving slightly to 90% lower in June. Helped by a
limited return of some short haul air travel over the summer
holiday period, the fourth quarter saw a further gradual
improvement in like-for-like sales, which were around 80% lower
than the prior year.
The underlying operating loss for the year was GBP315.4m. On a
reported basis, the operating loss was GBP363.9m, including
non-underlying items of GBP48.5m. Further details of the
non-underlying items have been set out in the section on Alternate
Performance Measures on pages 23-25. On a pro forma IAS 17 basis,
the Group reported an underlying operating loss of GBP211.7m,
compared to an equivalent profit of GBP221.1m in the prior
year.
The free cash outflow during the year on a pro forma IAS 17
basis was GBP394.9m, compared to a GBP50.5m free cash inflow last
year, reflecting the impact of Covid-19. This free cash outflow
included non-underlying costs of GBP22.7m, all incurred as a direct
consequence of the pandemic.
Capital expenditure was GBP134.5m, a reduction of GBP50.5m
compared to the prior year. Following the Covid-19 escalation, we
placed our capital programme on hold pending a recovery in the
travel sector, and we were able to reduce our second half
expenditure to GBP15.0m, in line with our indications at the
interim results in June. Further details of the Group's free
cashflow are provided in the table on page 18. The net decrease in
cash and cash equivalents was GBP43.1m, including the benefit from
the equity placings during the year of GBP219.4m (as described in
more detail on page 46). Overall net debt increased by GBP208.6m to
GBP692.0m on a pro forma IAS 17 basis.
At the end of the reporting period, the Group had approximately
GBP520m of available liquidity, including cash of GBP185m and
committed undrawn revolving credit facilities of GBP150m, as well
as a further GBP175m available to be drawn down under the Bank of
England's Covid Corporate Financing Facility (CCFF). Our current
monthly cash burn is approximately GBP25-30m.
Our response to Covid-19
Protecting our people and our business
As previously noted, prior to the impact of Covid-19, SSP had
made a good start to the year. However, the onset of the virus
resulted in wide-ranging measures being implemented across the
world in an attempt to contain its spread. This had a significant
effect on the Group, as the air and rail travel sectors which
comprise over 95% of the Group's revenue were largely closed.
As part of our initial response to the Covid-19 pandemic, we
rapidly implemented a number of proactive safety measures, in line
with local and national guidelines, designed to ensure the safety
and wellbeing of our colleagues. Offices were closed, colleagues
were supported to work from home and we temporarily closed around
90% of our global units.
The Group's management took extensive action to reorganise and
simplify the business in order to reduce the overall cost base,
including making salary reductions at Board level and across a wide
group of senior executives.
While the majority of our units have been closed, many of our
colleagues have been furloughed. There has been widespread
provision of government support through furlough schemes and fixed
costs support, in particular across Europe, with many of these
schemes already planned to run through much of 2021. However, with
the expectation of a prolonged recovery and units remaining closed,
regrettably, we had to take the difficult decision to make
significant redundancies, where government support has been reduced
or is no longer available.
We have successfully renegotiated rents in the majority of our
contracts, agreeing waivers of fixed minimum annual guarantees
(MAGs), therefore only paying concession fees (i.e. a percentage of
sales), or securing more flexible arrangements, such as MAGs
structured on a 'per passenger' basis.
In relation to the Group's financial position, the Group
implemented a set of measures to conserve cash and create
approximately GBP750m of liquidity by April 2020 through new equity
and debt. These measures included: (i) completing an equity placing
and subscription in March 2020, which raised GBP209m of net cash
proceeds, and a subsequent placing, retail offer and subscription
(GBP11m) which allowed investors to reinvest their 2019 final
dividend payment into new shares and retain cash in the business;
(ii) securing access to the Bank of England's CCFF programme which
allowed us to draw up to GBP300m from April 2020 (iii) securing
waivers and amendments of the Group's existing covenant tests until
March 2022; (iv) suspending the Group's share buyback programme to
conserve cash; and (v) foregoing the interim dividend.
We also supported those most in need during the pandemic by
donating to local charities and health services around the world.
For example, in the UK we distributed over 100,000 freshly baked
Millie's Cookies to NHS hospital staff and in India, our joint
venture (TFS) worked with local NGOs to cook meals for people who
have lost their livelihoods as a result of the lockdown, supplying
more than one million meals.
Positioning the business for the recovery in the travel
sector
Since Summer 2020, which saw the start of a period of increasing
passenger numbers as restrictions eased, our immediate focus has
been to take the actions needed to put the business in the
strongest position to benefit from an eventual recovery. The
strategic priorities during this stage have been to establish a
lean and flexible organisation, re-open units in a profitable way
and build agility and resilience to manage an uncertain recovery.
In light of this, we have undertaken a significant re-organisation
of Group and country structures to right-size the business. Coupled
with this, we have simplified internal processes and reporting
requirements to eliminate unnecessary complexity. However,
throughout this reorganisation we have been mindful of the need to
retain the capability and flexibility to upscale our operations and
swiftly reopen additional units when we see improved passenger
numbers.
As lockdown restrictions eased in the travel sector, we have
focused on opening our units as rapidly as possible, but only where
they will contribute to cash profitability. To do this we have
focused on creating as much flexibility as possible in our key
operating costs, such as labour and unit overheads, allowing us to
open and operate units at break-even levels of profitability, even
at very low levels of sales.
Our approach has been data-driven and systematic, looking to
open units selectively and in line with passenger numbers, thereby
concentrating the available sales into a smaller number of units
whilst demand remains low. SSP is well-positioned to do this as
most of its operations are in multi-unit sites, with on average
around five units per location. Importantly, we have been
successful in agreeing to progressive opening programmes with the
vast majority of our clients, as well as negotiating the removal of
MAGs and the introduction of more flexible rental structures.
By simplifying product ranges and menus, focusing on the most
popular items, we have been able to reduce complexity throughout
the production process and supply chain. This has enabled us to
minimise waste and to optimise gross margins. In addition, we have
accelerated the deployment of customer-facing technology and
automation as enablers of operational efficiency. Digital service
technology, such as order-at-table and self-order kiosks, has been
well received by customers, has driven up average transaction
values and reduced labour costs.
We have selectively added complementary revenue streams, for
example adding the sale of travel and heath essentials like masks
and sanitising gel, as well as providing food for Covid-19 testing
centres at airports and feeding airline staff.
At the end of the financial year, sales had slowly and steadily
recovered to 24% of pre-Covid levels, and we had c. 1,200 units
trading across the Group to serve those customers continuing to
travel, well ahead of what we expected at our interim results in
June 2020. However, given the re-emergence of the virus and
subsequent lockdowns in Europe and the UK, we've responded quickly
to close units as necessary. Our flexible model gives us the
confidence that we can quickly scale up again once demand
recovers.
Despite the impact of Covid-19 on the travel market, we've
continued to make good progress on business development. We have
secured contract extensions at a number of important sites,
including at Vienna Airport, Zurich Airport, Seattle Airport, and
at a number of airports in Thailand.
In addition, we continue to win new contracts and open new
units. For example, in Australia, we secured a four-year contract
to operate three new units at Hobart Airport, and we recently won a
full-service on-board catering contract for the Norwegian-Swedish
train line. New openings included: in China, two multi-brand food
courts in Shenzhen and Shanghai Hongqiao Airports, featuring a
compelling mix of local and regional Chinese brands and concepts;
in Australia, outlets at Perth and Melbourne airports, following
the acquisition of the Red Rock business earlier in the year; and
in America, at Seattle and Salt Lake City airports, following
contracts wins last year.
Strategy Review
Our ambition is to be the leading provider of food and beverage
in travel locations worldwide, meeting the needs of all of our key
stakeholders: our customers, clients, brand partners, investors
and, importantly, our colleagues. We continue to believe that the
markets in which we operate are fundamentally attractive. The air
and rail travel markets are expected to deliver long-term growth,
albeit from a lower base, as global GDP recovers, and an increasing
proportion of the world's population are willing and able to
travel.
Before the outbreak of Covid-19, the markets in which we operate
had benefitted from several structural long-term growth drivers,
the most significant being:
-- growth in global GDP and disposable income, which had led to
an increasing propensity to travel and had driven higher passenger
volumes and expenditure on food and beverage products;
-- a trend towards increased eating-out, including eating "on the move"; and
-- investment in travel infrastructure and capacity expansion,
supported by government policy and alongside infrastructure owners
increasingly focusing on retail revenue streams.
Though Covid-19 has impacted these trends in the short term, we
believe that these trends will return in the medium-term once the
effects of the pandemic diminish. While some uncertainty remains
about the longer term impact of working from home on business and
commuter travel, we anticipate a full recovery in leisure travel,
which drives the majority of our business.
Structural advantages
SSP has a number of structural advantages that we believe put us
in a strong position to capitalise on the recovery of the travel
sector when it comes.
1. Leading market positions: We have leading positions in some
of the most attractive sectors of the travel food and beverage
market, thanks to our extensive brand portfolio (comprising our own
brands and bespoke concepts as well as franchised local and global
brands) and established management and operational teams across the
35 countries in which we operate.
2. Local insight and international scale: We have a deep
knowledge of the individual markets in which we operate, alongside
significant international scale and expertise. A strong local
presence enables us to understand local customers' tastes and
needs, as well as allowing us to maintain close relationships with
clients and brand partners by creating a 'sense of place' in the
locations where we operate.
3. Food travel expertise: We provide a compelling proposition
for both clients and customers based on our food travel expertise.
This includes a deep understanding of what our customers are
looking for, an extensive offering of concepts to meet these needs
and a knowledge of how to operate in complex travel environments
which are logistically demanding. Our deep understanding of travel
F&B has enabled us to adapt our operating model so that we can
operate our units at lower passenger levels whilst still ensuring a
great customer experience.
4. Long-term client relationships: Our principal clients are the
owners and operators of airports and railway stations, but we also
have a small presence in motorway service areas, hospitals and
shopping centres. We have excellent, long-standing relationships
with many of our clients and have maintained high success rates in
retaining our contracts.
5. Experienced management team: We have highly experienced
colleagues with a broad range of experience across the food and
beverage, travel and retail industries. In all of our key markets,
we employ dedicated teams of senior managers focused on business
development, sales, marketing and operations, who work closely with
our clients to ensure their requirements are met. They are
supported by experienced, locally-based operational teams who have
a track record of delivering operational excellence and great
customer service.
In the medium-term the Group expects to see the gradual return
of passenger travel to more normalised levels. The actions the
Group is taking to rebuild the business will enable it to emerge
better positioned to flexibly reopen units in line with local
market demands.
Delivering long term sustainable growth
Our strategy for delivering long term sustainable growth for the
benefit of all our stakeholders focuses on five key priorities to
drive growth. These include:
1. Optimising our existing estate and like-for-like revenue
growth: as we re-open units we are seeking to optimise our existing
space through a range of opportunities from unit location to
customer proposition. The scale of the business gives us access to
a wealth of consumer insight, and we will seek to use this to
deliver the right proposition, investing in product innovation and
digital technology that makes sense, with the objective of giving
us the best platform from which to drive participation and
spend.
2. Business development: Prior to Covid-19, we had a strong
track record of winning new business and had delivered an average
of 4% net space growth per annum in the five years since IPO, with
strong growth in North America and ROW. Once the market recovers,
we expect these opportunities to re-emerge at existing and new
sites, as well as in new geographies where the returns are
attractive.
3. Efficient conversion: Running efficient operations is a core
competency for SSP and deeply embedded into our culture. Building
on the operational leverage inherent in the business, we continue
to relentlessly strip out unproductive costs, simplify and automate
processes to drive efficiencies and manage input cost
inflation.
4. Investment: Capital investment is an important part of our
model as it drives contract renewals as well as new contract
growth. We typically achieve discounted cash flow paybacks of three
to four years on the capex we invest in our concession contracts.
The challenges of Covid-19 may also present selective acquisition
opportunities, and we will be alert to these where they fit with
our strategy and deliver the required returns. We will also
continue to invest in automation and technology where that drives
increased revenue or cost efficiency and to strengthen our
competitive position, for example in product innovation.
5. Returns to shareholders: Creating shareholder value is
extremely important to SSP, and prior to Covid-19, we had a long
track record of delivering upper quartile total shareholder
returns. Once the travel market recovers, the profit and cash flow
growth we expect to generate will be used to de-lever the balance
sheet over time as well as generate value for our shareholders.
Underpinning these priorities are our People and Corporate
Responsibility strategies which we have redeveloped and reinforced
this year. Our colleagues are at the heart of our business success,
and we will be further investing in our teams by focusing on
retention, engagement and development, embedding the Group's values
within the organisation and incentivising our critical talent.
Additionally, we are committed to playing a key role in
contributing to areas where we can make the greatest positive
impact. We've developed a new framework for our Corporate
Responsibility strategy in line with our stakeholder's priorities
and will be increasing our focus on the wellbeing of our people and
supporting our local communities, ensuring the products we serve
are healthy and ethically sourced and minimising our impact on the
planet.
Financial review
Group performance
Pro forma
IAS 17
2020
GBPm IAS 17 change
IAS 17
IFRS
16 2020 2019
Constant
GBPm GBPm Reported currency LFL
--------- ---------- --------
Revenue 1,433.1 1,433.1 2,794.6 (48.7)% (47.9)% (50.8)%
--------- ---------- -------- --------- ---------- --------
Underlying operating
(loss)/profit (315.4) (211.7) 221.1 (195.7)% (195.7)%
--------- ---------- -------- --------- ---------- --------
Operating (loss)
/ profit (363.9) N/A 219.2 N/A
--------- ---------- -------- --------- ---------- --------
Revenue decreased by 47.9% on a constant currency basis,
comprising a like-for-like sales reduction of 50.8% offset by net
contract gains of 2.9%. At actual exchange rates, total revenue
fell by 48.7%, to GBP1,433.1m.
The Group's strong sales performance during the early part of
the year has been overshadowed by the very severe impact of
Covid-19. Prior to seeing the initial impact from the virus in
China towards the end of January, we had enjoyed a good start to
the financial year, with like-for-like sales growth of 1.2% during
the first quarter, in line with our expectations, despite a number
of external headwinds, including the impact of the Boeing Max 737
groundings, the slowdown in Chinese passenger numbers, the failure
of Jet Airways in India and the transport sector strikes in
France.
In the second quarter, like-for-like sales decreased by 18.5%,
with the Group's performance impacted significantly by the
development of Covid-19. We began to see a material impact on
trading in our Asia Pacific region (which accounted for around 8%
of group sales) from the escalation of the virus during late
January and throughout February. Trading then deteriorated rapidly
across the entire group during March as the impact of the pandemic
spread across the world. By the final few days of March, as
lockdowns and travel restrictions were implemented around the
world, like-for-like sales had decreased by over 90% across all
regions.
During the third quarter, with the global lockdowns continuing,
like-for-sales sales in April and May were approximately 95% below
last year, improving slightly to 90% lower in June. Helped by a
limited return of some short haul air travel over the summer
holiday period, the fourth quarter saw a further gradual
improvement in l ike-for-like sales, which were around 80% lower
than the prior year.
Prior to the onset of Covid-19, the Group had also made good
progress in delivering additional sales growth from net contract
gains, particularly in North America and in Continental Europe,
reporting net gains of 5.7% for the first half. Furthermore, new
openings during the first half of 2020 and those planned for the
second half were expected to drive significant further net gains in
the remainder of the year, which were expected to be over 6% for
the full year, prior to Covid-19. The new openings during the
second quarter included outlets in Australia and Germany following
the acquisitions of the Red Rock operations in Perth and Melbourne
Airports and the Station Food rail business in Germany. For the
year as a whole, despite the impact of Covid-19, net gains added
2.9% to prior year sales.
Trading results from outside the UK are converted into Sterling
at the average exchange rates for the period. The overall impact of
the movement of foreign currencies on revenue (principally the
Euro, US Dollar and pegged currencies, Norwegian Krone, Swedish
Krona and Indian Rupee) during 2020 compared to the 2019 average
was a reduction of 0.8%. However, this is solely a translation
impact.
Underlying operating loss
The underlying operating loss for the year was GBP315.4m. On a
pro forma IAS 17 basis, the Group reported an underlying operating
loss of GBP211.7m, compared to an equivalent profit of GBP221.1m in
the prior year.
For the first half year, we estimated that the loss of sales as
a result of the rapid spread of Covid-19 was approximately GBP147m
(compared to our pre-Covid forecasts), and that this impacted
operating profit by around GBP65m. The relatively high drop through
on the sales lost due to Covid-19 in this period reflected the
extreme speed with which travel restrictions impacted our markets
during March, limiting our ability to reduce operating costs,
particularly labour costs, at very short notice and prior to the
commencement of government furlough support schemes, while we also
suffered the impact of stock write offs as a result of the rapid
closure of most of our outlets late in the month.
For the second half year, the devastating and prolonged impact
of Covid-19 on our travel markets resulted in a much more
significant loss of sales, estimated at approximately GBP1,435m
(down 86% year-on-year) compared to our internal pre-Covid forecast
for the period. The equivalent impact on second half underlying
operating profit on a pro forma IAS 17 basis, was approximately
GBP377m, a profit conversion of around 26% on the reduction in
sales. This lower profit conversion on the lost sales compared to
March reflected the speed with which we were able to reduce our
operating costs during the "hibernation" period in April and May,
when around 90% of our units were closed, and the systematic
approach applied in re-opening our outlets during the summer, in
particular the selective opening of units in multi-unit locations,
ensuring that we were able to trade profitably even at lower levels
of footfall. Our focus throughout this challenging period has been
on maximising sales per passenger and ensuring that any units
re-opened were making a positive contribution to cash profit.
Looking forward, sales in the first quarter of the new financial
year are expected to remain at similar levels to that seen in the
final quarter of the year, approximately 80% lower year-on-year,
and we are planning on the basis that sales will remain at similar
levels during the second quarter. As a consequence, we expect the
profit conversion on the lost sales to remain in the region of 25%,
reflecting the actions taken to reduce our operating costs as well
as continued government furlough support, which has been extended
throughout the first half in many markets.
Operating loss
On a reported basis, the operating loss was GBP363.9m,
reflecting an adjustment for the non-underlying operating items of
GBP48.5m as described further below.
Non-underlying operating items
Items which are not considered reflective of the normal trading
performance of the business, and are exceptional because of their
size, nature or incidence, are treated as non-underlying operating
items and disclosed separately. In addition to a recurring
adjustment for the amortisation of acquisition-related intangible
assets of GBP1.9m (2019 GBP1.9m), the non-underlying operating loss
this year includes items specifically relating to the impact of
Covid-19 on the business amounting to GBP46.6m.
The non-underlying operating items that have arisen as a direct
consequence of Covid-19 are summarised below:
- Impairment of goodwill : as a result of past acquisitions, and
in particular the acquisition of the SSP business by EQT in 2006,
the Group holds a significant amount of goodwill on its
consolidated balance sheet. This is allocated on a country level
and tested annually for impairment by comparing the value held by
each country with the net present value of its expected future cash
flows. As a result of Covid-19, goodwill impairments totalling
GBP33.0m were identified, comprising write downs in Switzerland,
Germany and Singapore.
- Im pairment of property, plant and equipment and right of use
assets: the impact of Covid-19 on the Group's operations is
expected to continue during the current year and beyond. As a
result, the Group has carried out a review for potential impairment
across the entire unit portfolio. The impairment review compared
the value-in-use of individual cash-generating units, based on
management's assumptions regarding future trading performance
(taking into account the effect of Covid-19), to the carrying
values at 30 September 2020. Following this review, a charge of
GBP76.6m has been recognised, which includes an impairment of right
of use assets of GBP38.2m.
- Accelerated depreciation: As a result of a reassessment of the
lease term of certain units, accelerated depreciation of GBP6.2m
has been recorded on fixed assets to align their carrying value to
their expected useful economic life based on the revised lease
term.
- Restructuring costs: as a result of the impact of Covid-19,
the Group has recognised a charge of GBP22.7m relating to its
restructuring programmes carried out across the group during the
second half of the year. The charge primarily relates to redundancy
costs. It also includes some costs related to the exit from certain
contracts, most notably at Sheremetyevo Airport in Russia.
- IFRS 16 rent credit: as part of its response to Covid-19, the
Group negotiated rent waivers with clients totalling GBP91.9m. The
Group applied the practical expedient issued by the International
Accounting Standards Board as a part of the Amendment to IFRS 16 to
record this as a reduction in rent expense and an exceptional item
within the Consolidated Income Statement.
Regional performance
This section summarises the Group's performance across its four
operating segments. For full details of our key reporting segments,
please refer to note 3 on page 38.
UK (including Republic of Ireland)
Pro forma
IAS 17
2020
GBPm IAS 17 change
IAS 17
IFRS
16 2020 2019
Constant
GBPm GBPm Reported currency LFL
--------- ---------- --------
Revenue 410.1 410.1 840.5 (51.2)% (51.1)% (51.2)%
--------- ---------- ------- --------- ---------- --------
Underlying operating
(loss)/profit (28.7) (12.4) 101.8 (112.2)% (112.1)%
--------- ---------- ------- --------- ---------- --------
Note - Statutory reported operating loss was GBP39.0m (2019:
GBP100.3m profit) which includes an adjustment for the amortisation
of acquisition-related intangible assets of GBP1.5m (2019:
GBP1.5m). It also includes adjustments for items specifically
related to the impact of Covid-19 of GBP8.8m.
Revenue decreased by 51.1% on a constant currency basis,
comprising a like-for-like reduction of 51.2% and net contract
gains of 0.1%. At actual exchange rates, revenue declined by 51.2%
to GBP410.1m.
Prior to the impact of Covid-19 in March, like-for-like sales
growth had been robust, driven by increasing passenger numbers.
However, the significant reduction in passenger numbers during
March resulted in overall first half like-for-like sales declining
by 5.2%. Net contract gains of 2.1% during the first half included
contributions from the three Jamie Oliver outlets at Gatwick
airport that we began operating last summer.
During the third quarter, the impact on passenger travel arising
from Covid-19 resulted in the closure of almost all of our units in
the UK. In the fourth quarter there was a slight recovery in the
air sector over the summer holiday season, however the UK
Government's quarantine restrictions limited passenger numbers. The
rail sector remained weak throughout the second half, although we
had begun to see a slow recovery during the fourth quarter, driven
by a gradual return in commuter travel as people returned to the
office. This recovery, however, was curtailed by further government
restrictions announced towards the end of September. Overall UK
second half sales fell by 91.8%, comprising a like-for-like sales
decrease of 91.6% and net contract losses of 0.2%.
The underlying operating loss for the year for the UK was
GBP28.7m and reported operating loss was GBP39.0m. Non-underlying
operating items comprised an impairment charge of GBP21.1m,
accelerated depreciation of GBP6.2m, exceptional restructuring
costs of GBP5.9m and an adjustment for the amortisation of
acquisition-related intangible assets of GBP1.5m. These were offset
by IFRS 16 rent credits of GBP24.4m. On a pro forma IAS 17 basis,
the underlying operating loss was GBP12.4m, which compared to an
underlying operating profit of GBP101.8m last year
Continental Europe
Pro forma
IAS 17
2020
GBPm IAS 17 change
IAS 17
IFRS
16 2020 2019
Constant
GBPm GBPm Reported currency LFL
--------- ---------- --------
Revenue 558.2 558.2 1,036.9 (46.2)% (44.7)% (48.2)%
--------- ---------- -------- --------- ---------- --------
Underlying operating
(loss) / profit (148.1) (103.2) 79.3 (230.1)% (229.5)%
--------- ---------- -------- --------- ---------- --------
Note - Statutory reported operating loss was GBP193.5m (2019:
GBP78.9m profit) which includes an adjustment for the amortisation
of acquisition related intangible assets of GBP0.4m (2019:
GBP0.4m). It also includes adjustments for items specifically
related to the impact of Covid-19 of GBP45.0m.
Revenue decreased by 44.7% on a constant currency basis,
comprising a like-for-like reduction of 48.2% and net contract
gains of 3.5%. At actual exchange rates, revenue declined by 46.2%
to GBP558.2m.
During the first half, revenue decreased by 3.2% on a constant
currency basis, comprising a like-for-like reduction of 10.7% and
net contract gains of 7.5%. The impact of Covid-19 on first half
like-for-like sales was more significant in this region than in
either the UK or North America, with a number of countries in
Continental Europe announcing that they were closing borders and
restricting travel in early March following the outbreak in Italy
towards the end of February. Prior to the impact of Covid-19,
like-for-like sales had been in line with our expectations, albeit
with a continuation of some of the headwinds from the second half
of last year, including the national strikes in France during
December and January and the impact of major redevelopments in a
number of airports, including Copenhagen, Malaga and Las
Palmas.
Net contract gains during the first half remained very strong,
driven by new outlets opened last year at Montparnasse Railway
station and in the new motorway service areas in Germany, as well
as the Starbucks units in railway stations across the Netherlands.
They also included the impact of the acquisition of the Station
Food rail business in Germany at the end of February.
As was the case in the other regions, like-for-like sales
remained at very low levels during the third quarter, with the
majority of our units closed across this period. However the fourth
quarter saw a stronger recovery in Continental Europe compared to
the rest of the Group, with weekly sales approximately 66% lower
year-on-year, compared with the UK, North America and the Rest of
the World, where weekly sales remained around 80-85% lower
year-on-year. This was helped by the limited return of some short
haul air travel over the summer holiday period, by a stronger
recovery in rail passengers numbers in Germany and France compared
to the UK, with more people returning to their normal workplaces,
and by the motorway business in Germany and France which, in line
with government requirements, remained open throughout the crisis.
Overall Continental Europe second half sales fell by 77.1%,
comprising a like-for-like sales decrease of 77.6% and net contract
gains of 0.5%.
The underlying operating loss for Continental Europe was
GBP148.1m and reported operating loss was GBP193.5m. Non-underlying
operating items comprised an impairment charge of GBP62.2m,
exceptional restructuring costs of GBP8.3m and an adjustment for
the amortisation of acquisition-related intangible assets of
GBP0.4m. These were offset by an IFRS 16 concession credit of
GBP25.5m.
On a pro forma IAS 17 basis, the underlying operating loss was
GBP103.2m, which compared to an underlying operating profit of
GBP79.3m last year. The overall impact from Covid-19 in this region
during the first half was much more significant than in others,
partly due to the earlier imposition of travel restrictions
compared to the UK and North America, but also as a result of the
longer lead times required to reduce labour costs in response to a
rapid reduction in sales. Prior to the impact of Covid-19,
operating profit for the region had already been impacted by
transport strikes in France throughout December and January, the
ongoing impact of the airport redevelopments in Denmark and Spain,
and significant pre-opening and integration costs from new
contracts and the acquisition of the Station Food business in
Germany.
North America
Pro forma
IAS 17
2020
GBPm IAS 17 change
IFRS 16 IAS 17
2020 2019
Constant
GBPm GBPm Reported currency LFL
--------- ---------- --------
Revenue 274.9 274.9 533.4 (48.5)% (47.9)% (53.1)%
-------- ---------- ------- --------- ---------- --------
Underlying operating
(loss) / profit (55.4) (43.7) 41.9 (204.3)% (204.6)%
-------- ---------- ------- --------- ---------- --------
Note - Statutory reported operating loss was GBP63.3m (2019:
GBP41.9m profit) which includes adjustments for items specifically
related to the impact of Covid-19 of GBP7.9m.
Revenue decreased by 47.9% on a constant currency basis,
comprising a like-for-like decrease of 53.1% offset by net contract
gains of 5.2%. At actual exchange rates, revenue declined by 48.5%
to GBP274.9m.
Prior to the impact of Covid-19, like-for-like sales growth had
been robust, benefiting from positive trends in airport passenger
numbers in the North American market. However, the significant
reduction in passenger numbers during March resulted in overall
first half like-for-like sales declining by 6.5%. Net gains of
10.5% during the first half were driven by new openings in Ottawa,
Seattle, Oakland and LaGuardia Airports.
Following the lockdowns during the third quarter, domestic air
travel began to recover in many states over the summer, although
international travel remained largely closed. Overall, second half
sales fell by 90.2%, comprising a like-for-like sales decrease of
91.5% and net contract gains of 1.3%.
The underlying operating loss for North America was GBP55.4m and
reported operating loss was GBP63.3m. Non-underlying operating
items comprised an impairment charge of GBP19.1m and exceptional
restructuring costs of GBP2.1m, offset by IFRS 16 concession
credits of GBP13.4m. On a pro forma IAS 17 basis, the underlying
operating loss was GBP43.7m, which compared to an underlying
operating profit of GBP41.9m last year.
Rest of the World
Pro forma
IAS 17
2020
GBPm IAS 17 change
IFRS 16 IAS 17
2020 2019
Constant
GBPm GBPm Reported currency LFL
--------- ---------- --------
Revenue 189.9 189.9 383.8 (50.5)% (49.9)% (53.5)%
-------- ---------- ------- --------- ---------- --------
Underlying operating
(loss) / profit (55.6) (24.8) 35.9 (169.1)% (170.8)%
-------- ---------- ------- --------- ---------- --------
Note - Statutory reported operating loss was GBP37.3m (2019:
GBP35.9m profit) which includes adjustments for items specifically
related to the impact of Covid-19 of GBP18.3m.
Revenue decreased by 49.9% on a constant currency basis,
comprising a like-for-like fall of 53.5% offset by net contract
gains of 3.6%. At actual exchange rates, revenue declined by 50.5%
to GBP189.9m.
The impact of Covid-19 on first half like-for-like sales was
more significant in the Rest of the World region than in the
others, falling by 12.3%, reflecting the earlier escalation of the
virus in China and across the Asia Pacific region from late
January. Prior to the impact of Covid-19, like-for-like sales
growth in the Rest of the World had been steady, benefiting from an
improving trend in India but impacted by the ongoing political
disruption in Hong Kong.
First half net gains included sales from new outlets in Cebu
Airport in the Philippines and in Bangalore Airport in India, as
well from the acquisition of the Red Rock operations in Perth and
Melbourne Airports in Australia.
During the second half, whilst domestic air passenger levels had
recovered strongly in China by the fourth quarter and were
improving in Thailand and India, international traffic remained low
across the region. Overall, second half sales fell by 90.2%,
comprising a like-for-like sales decrease of 91.3% and net contract
gains of 1.1%.
The underlying operating loss for the Rest of the World was
GBP55.6m and reported operating loss was GBP37.3m. Non-underlying
operating items comprised an impairment charge of GBP7.2m and
exceptional restructuring costs of GBP3.2m, offset by an IFRS 16
concession credit of GBP28.6m. On a pro forma IAS 17 basis, the
underlying operating loss was GBP24.8m, which compared to an
underlying operating profit of GBP35.9m last year.
Share of loss of associates
The Group's share of losses from associates was GBP2.4m. On a
pro forma IAS 17 basis, the Group's share of losses from associates
was GBP1.7m (2019: GBP4.1m profit), the year-on-year reduction
reflecting the impact of Covid-19 on our associate investments
around the world.
Net finance costs
The underlying net finance expense was GBP54.0m including
interest on lease liabilities of GBP27.8m. Reported net finance
expense was GBP59.5m, including an adjustment of GBP5.4m relating
to non-cash interest charges arising from the adoption of the debt
modification rules under IFRS 9. On a pro forma IAS 17 basis,
underlying net finance costs increased year-on-year to GBP26.2m
(2019: GBP22.0m), primarily due to the higher net debt compared to
the prior year.
Taxation
The Group's underlying tax credit for the year was GBP23.7m
(2019: GBP45.1m charge), representing an effective tax rate of 6.4%
(2019: 22.2%) of underlying loss (2019: profit) before tax. On a
reported basis, the tax credit for the year was GBP28.1m (2019:
GBP43.7m charge).
On a pro forma IAS 17 basis, the Group's underlying tax credit
was GBP6.3m (2019: GBP45.1m charge), equivalent to an effective tax
rate of 2.6% (2019: 22.2%) of the underlying loss (2019: profit)
before tax.
The Group's tax rate is sensitive to the geographic mix of
profits and losses and reflects a combination of higher rates in
certain jurisdictions, as well as the impact of losses in some
countries for which no deferred tax asset is recognised. The change
in the tax rate for the current year compared to historical rates
of around 22% is due to the impact of Covid-19 which has led to a
significant change in the Group's geographic mix of profits and
losses compared to prior years.
Non-controlling interests
The loss attributable to non-controlling interests was GBP22.7m.
On a pro forma IAS 17 basis the loss attributable to
non-controlling interests was GBP9.6m (2019: GBP26.6m profit), with
the year on year change largely reflecting the impact of Covid-19
on our partly-owned operations in North America and in the Rest of
the World.
Earnings/(loss) per share
The Group's underlying loss per share was 68.0 pence per share,
and its reported loss per share was 76.1 pence per share. On a pro
forma IAS 17 basis the underlying loss per share was 45.4 pence per
share (2019: 29.1 pence earnings per share).
Dividends
There was no interim dividend declared during the financial year
2020 (2019: GBP25.8m). Additionally, the Directors will not be
recommending a financial year 2020 final dividend (2019: GBP26.8m)
which will result in no ordinary dividends for the year (2019:
GBP52.6m). Looking forward, the Group will continue to be
restricted from declaring or paying dividends until the expiry of
certain restrictions that apply under the amended debt arrangements
with the Group's lending group of banks and US private placement
note holders. When these restrictions are lifted and conditions
improve, the Board will consider the best way to restart returning
capital to shareholders.
Free Cash flow
The table below presents a summary of the Group's free cash flow
during the year:
2020 2019
GBPm GBPm
Underlying operating (loss) / profit(1) (211.7) 221.1
Depreciation and amortisation 113.5 105.3
Exceptional restructuring costs(3) (22.7) -
Working capital (67.6) 3.7
Net tax (11.0) (37.1)
Other 2.0 8.2
Net cash flow from operations (197.5) 301.2
Capital expenditure(2) (134.5) (185.0)
Acquisition of subsidiaries, adjusted for net debt acquired (26.5) ( 25.8 )
Net dividends to non-controlling interests and from associates (16.8) (22.5)
Net finance costs (19.6) (17.4)
-------- ---------
Free cash flow (394.9) 50.5
-------- ---------
(1) Presented on an underlying pro forma IAS 17 basis (refer to
pages 23 - 25 for details)
(2) Capital expenditure is net of capital contributions from
non-controlling interests of GBP3.1m (2019: GBP9.0m)
(3) Refer to the APMs section on pages 23-25 for further
details.
The Group's net cash outflow during the year from operations was
GBP197.5m, compared to a GBP301.2m net cash inflow last year. The
principal driver of this significant year on year change was the
underlying operating loss of GBP211.7m, compared with a profit of
GBP221.1m in the prior year, reflecting the impact of Covid-19 as
described earlier. Furthermore, the exceptional restructuring costs
of GBP22.7m were all incurred as a direct consequence of the
pandemic, primarily reflecting the costs of redundancy programmes
carried out across the Group during the second half of the
year.
The working capital outflow was GBP67.6m compared to a small
cash inflow of GBP3.7m in the prior year. This cash outflow was
primarily driven by the extreme reduction in average daily sales
following Covid-19. Nevertheless, this was a significantly better
working capital out-turn than anticipated at our interim results in
June, driven by very tight management of working capital which has
continued since the escalation of the virus in March. Throughout
this period, the Group has worked hard to manage its payments,
agreeing rent waivers and deferrals with many of our clients and
taking advantage of government-approved payment deferral schemes
around the world, particularly in relation to payroll taxes and
VAT.
Corporation tax payments were materially lower year-on-year at
GBP11.0m (2019: GBP37.1m), the reduction reflecting considerably
lower payments on account (of tax due for the current year)
compared to 2019. Indeed, during the second half we saw a net
recovery of corporation tax (an inflow of GBP9.1m) as we
successfully applied for and received corporation tax repayments
across a number of countries.
Capital expenditure was GBP134.5m, a reduction of GBP50.5m
compared to the prior year. Following the Covid-19 escalation, we
placed our capital programme on hold pending a recovery in the
travel sector and we were able to reduce our second half
expenditure to GBP15.0m, in line with our indications at the
interim results in June. For the year ahead, we anticipate a
further significant year on year reduction as we continue to work
with our clients to defer capital programmes until passenger
numbers and sales show material signs of recovery.
Acquisitions of GBP26.5m primarily reflected the purchases of
the Red Rock operations in Perth and Melbourne Airports in
Australia and of the Station Food rail business in Germany during
the first half. Net cash outflows to non-controlling interests and
from associates amounted to GBP16.8m, nearly all of which was
incurred during the first half year prior to the onset of
Covid-19.
Net finance costs paid of GBP19.6m were GBP2.2m higher than the
prior year, mainly reflecting increased average levels of net debt
and related financing costs.
Net debt
Overall net debt increased by GBP208.6m to GBP692.0m on a pro
forma IAS 17 basis, with the significant free cash outflow in the
year of GBP394.9m offset by the GBP208.6m equity issuance (net of
related fees) in late March. We were also able to retain some of
the cash related to the payment of GBP26.8m in respect of the final
2019 dividend (declared and approved at the AGM in February 2020)
through a further small equity placing, retail offer and
subscription raising net proceeds of GBP10.8m in June, as we gave
investors the opportunity to reinvest the proceeds of that dividend
payment into new SSP shares. To further preserve liquidity for the
Group as the impact of Covid-19 became apparent, we suspended our
previously announced share buyback programme having only incurred
GBP1.7m on the purchase of shares.
The table below highlights the movements in net debt in the year
on a pro forma IAS 17 basis. Note that the Group adopted IFRS 16
'Leases' with effect from 1 October 2019 using the modified
retrospective approach to transition which means that the prior
year balances including net debt have not been restated.
GBPm
Net debt excluding lease liabilities at 1 October
2019 (IAS 17 basis) (483.4)
Underlying free cash flow (394.9)
March 2020 equity issue (net of fees paid) 208.6
June 2020 equity issue (net of fees paid) 10.8
Dividend paid (26.8)
Share buyback (1.7)
Impact of foreign exchange rates (2.0)
Other (2.6)
----------
Net debt excluding lease liabilities at 30 September
2020 (IAS 17 basis) (692.0)
Lease liabilities (1,349.3)
Other 0.7
----------
Net debt including lease liabilities at 30 September
2020 (IFRS 16 basis) (2,040.6)
----------
As noted above, the Group adopted IFRS 16 on 1 October 2019 and
as a result now recognises lease liabilities, which are initially
based on the present value of the future payments required under
each lease discounted at the incremental borrowing rate. The
movement in the lease liabilities from the transition date of 1
October 2019 to 30 September 2020 was as follows:
Year ended
30 September
2020
GBPm
Beginning of the year -
Lease liabilities on transition (1,464.4)
Acquisitions (24.1)
Additions (266.4)
Interest charge in the year (27.8)
Payment of lease liabilities 200.4
Remeasurement adjustments 227.2
Currency translation 5.8
--------------
End of the year (1,349.3)
--------------
Actions taken to strengthen liquidity and to secure covenant
waivers
Since the onset of Covid-19, we have taken decisive action to
protect cash, minimise costs and raise additional liquidity to
allow us to operate throughout even our most pessimistic trading
scenario. This action to increase liquidity included a GBP209m (net
of related fees) equity placing and share subscription in late
March 2020, followed shortly afterwards by securing access to the
Bank of England's Covid Corporate Financing Facility (CCFF), under
which facility we were permitted to draw up to GBP300m. In
addition, the Group also secured access to a number of additional
smaller liquidity lines, including government-backed facilities in
France, Spain and Switzerland, providing a further GBP44m.
As well as raising this additional funding, we have taken a
number of further steps to protect liquidity. At the current very
low levels of sales, the current monthly cash burn of approximately
GBP25-30m reflects the many management actions taken to minimise
operating costs, as already described. Furthermore, we have also
taken action to defer all non-essential capital expenditure, to
agree rent waivers and deferrals with our clients, to suspend our
previously announced share buyback programme and to negotiate with
our lending banks a two year deferral of term loan amortisation
payments, amounting to approximately GBP63m, which were due to be
paid in July 2020 and July 2021. The Board has also announced that
the Company will not pay a dividend in respect of the current
financial year.
At the end of the year, the Group had approximately GBP520m of
available liquidity, including cash of GBP185m and committed
undrawn revolving credit facilities of GBP150m, as well as a
further GBP175m available to be drawn down under the CCFF. The
GBP150m revolving credit facility is committed until July 2022,
while the Bank of England has confirmed that the Group can draw
down the maximum GBP300m available to it under the CCFF for a
period extending through to February 2022.
Taking into account the current level of cash and available
facilities and the monthly cash burn as described above, we are
confident that we have sufficient liquidity to operate even through
a prolonged crisis and a slow recovery. Nevertheless,
notwithstanding the recent positive news on the development of
potential vaccines, we recognise that the pace of the anticipated
recovery in our markets remains uncertain, and as such there may be
a requirement to raise additional liquidity prior to the repayment
of the CCFF in early 2022.
In addition to the action taken in the Spring to strengthen
liquidity, the Group secured an agreement in May 2020 from SSP's
lending group of banks and its US private placement note holders to
waive existing financial covenants, testing both interest cover and
leverage, for the two testing periods covering the twelve months to
30 September 2020 and 31 March 2021. They agreed that these
existing covenants would be replaced between the date of the
agreement and 30 September 2021 by two new covenants, each tested
monthly, with the first of these based on the Group demonstrating a
minimum level of liquidity and the second based on the Group not
exceeding a maximum level of net debt. For the testing period
ending 30 September 2021 both the existing and new covenants would
be relevant, with the Group returning to the existing covenants
thereafter, once compliance with the existing covenants has been
confirmed.
In order to provide the maximum financial flexibility for the
Group through this exceptionally challenging period, we have now
agreed further covenant waivers and amendments covering the period
up to March 2022. As was the case with the covenant amendments
agreed in May, the existing financial covenant testing leverage has
been waived, until reinstated in March 2022, with the two
temporary, monthly-tested new covenants on minimum liquidity and
maximum net debt introduced for a further six months from October
2021. For the testing period ending 31 March 2022 both the existing
and new covenants would be relevant, with the Group returning to
the existing covenants thereafter, once compliance with the
existing covenants has been confirmed. In addition, we have agreed
to an additional new covenant, testing minimum EBITDA thresholds
for the six months ending 30 September 2021 and 31 December 2021.
Modified interest cover tests (calculated on a last six months
basis) will also be applied at these two testing dates. All of
these new covenant thresholds have been based on our most
pessimistic trading scenario, which is described in more detail
alongside the Board's considerations in adopting the going concern
basis of accounting in note 1.2 on pages 31-33.
Impact of IFRS 16 'Leases'
As stated above, the Group adopted IFRS 16 'Leases' with effect
from 1 October 2019 using the modified retrospective approach to
transition which means that the prior year balances have not been
restated. The new standard requires that the Group's leased assets
are recorded as right-of-use assets together with their
corresponding lease liabilities. Interest expense is recognised on
the lease liability and the right-of-use assets are required to be
depreciated on a straight-line basis over the lease term.
Income Statement impact
The impact of the implementation of IFRS 16 on the Income
Statement for the year ended 30 September 2020 is as follows:
Year ended IFRS 16 Year ended
30 September adjustment 30 September
2020 2020
IAS 17 IFRS 16
GBPm GBPm GBPm
Revenue 1,433.1 - 1,433.1
-------------- ------------- --------------
Underlying operating
loss (1) (211.7) (103.7) (315.4)
Share of loss from
associates (1.7) (0.7) (2.4)
Finance income 2.5 - 2.5
Finance expense (28.7) (27.8) (56.5)
-------------- ------------- --------------
Underlying loss before
tax (1) (239.6) (132.2) (371.8)
-------------- ------------- --------------
(1) Stated on an underlying basis, which excludes non-underlying
items as further explained in the section on Alternative
Performance Measures (APMs) on page 23-25.
Balance Sheet impact
The impact of the implementation of IFRS 16 on the Balance Sheet
as at 30 September 2020 is as follows:
As at 30 September IFRS 16 As at 30 September
2020 adjustment 2020
IAS 17 IFRS 16
GBPm GBPm GBPm
Non-current assets
Right-of-use assets - 1,271.2 1,271.2
Other non-current assets 1,294.9 9.3 1,304.2
------------------- ------------- -------------------
1,294.9 1,280.5 2,575.4
Current assets
Trade and other receivables 132.4 (7.1) 125.3
Other current assets 216.7 1.9 218.6
------------------- ------------- -------------------
349.1 (5.2) 343.9
Total assets 1,644.0 1,275.3 2,919.3
------------------- ------------- -------------------
Current liabilities
Lease liabilities - (289.1) (289.1)
Other current liabilities (596.3) 5.9 (590.4)
------------------- ------------- -------------------
(596.3) (283.2) (879.5)
Non-current liabilities
Lease liabilities - (1,060.2) (1,060.2)
Other non-current liabilities (779.1) 1.5 (777.6)
------------------- ------------- -------------------
(779.1) (1,058.7) (1,837.8)
Total liabilities (1,375.4) (1,341.9) (2,717.3)
------------------- ------------- -------------------
Net assets 268.6 (66.6) 202.0
------------------- ------------- -------------------
Total equity 268.6 (66.6) 202.0
------------------- ------------- -------------------
Cash flow impact
There is no net impact on cash flows. However, there has been a
change in classification of cash flows whereby an increase in net
cash inflows from operating activities has been offset by a
decrease in net cash flows from financing activities, as
highlighted below:
Year ended IFRS 16 Year ended
30 September Adjustment 30 September
2020 2020
IAS 17 IFRS 16
GBPm GBPm GBPm
Net cash flows from operating
activities (197.5) 199.9 2.4
Net cash flows from investing
activities (153.1) - (153.1)
Net cash flows from financing
activities 307.5 (199.9) 107.6
-------------- ------------- --------------
(43.1) - (43.1)
-------------- ------------- --------------
Further information on the impact of adoption of IFRS 16 can be
found in note 1.
Principal risks
Two new principal risks facing the Group have been added since
last year regarding liquidity and funding and the impact of
Covid-19. The impact of these risks has been discussed above.
The Company's principal risks, together with the Group's risk
management process, will be set out in the Annual Report and
Accounts 2020, and relate to the following areas: the two new risks
noted above, business environment and geopolitical uncertainty;
retention of existing contracts; impact of Brexit; senior
management capability and retention; regulatory compliance; food
safety and product compliance; labour laws and unionisation;
information security and stability; benefits realisation from
efficiency programmes; changing client behaviours; outsourcing
programmes; tax strategy; maintenance and development of brand
portfolio; and expansion into new markets.
Post balance sheet events
In December 2020, SSP Financing Limited secured an agreement
from its lending group of banks and US private placement note
holders to waive the net debt cover financial covenant for the
testing period covering the twelve months to 30 September 2021.
Please refer to the Going Concern section on pages 31-33 for
further details.
Alternative Performance Measures
The Directors use alternative performance measures for analysis
as they believe these measures provide additional useful
information on the underlying trends, performance and position of
the Group. The alternative performance measures are not defined by
IFRS and therefore may not be directly comparable with other
companies' performance measures and are not intended to be a
substitute for IFRS measures.
Revenue growth
As the Group operates in over 30 countries, it is exposed to
translation risk on fluctuations in foreign exchange rates, and as
such the Group's reported revenue and operating profit will be
impacted by movements in actual exchange rates. The Group presents
its financial results on a constant currency basis in order to
eliminate the effect of foreign exchange rates and to evaluate the
underlying performance of the Group's businesses. The table below
reconciles reported revenue to constant currency sales growth,
like-for-like sales growth, net contract gains/(losses) and the
impact of acquisitions where appropriate.
(GBPm) UK Continental North America RoW Total
Europe
2020 Revenue at actual rates by segment 410.1 558.2 274.9 189.9 1,433.1
Impact of foreign exchange 0.6 15.5 3.2 2.5 21.8
-------- ------------ -------------- -------- --------
2020 Revenue at constant currency(1) 410.7 573.7 278.1 192.4 1,454.9
-------- ------------ -------------- -------- --------
2019 Revenue at actual rates 840.5 1,036.9 533.4 383.8 2,794.6
Constant currency sales (fall) / growth (51.1)% (44.7)% (47.9)% (49.9)% (47.9)%
Which is made up of:
Like-for-like sales growth(2) (51.2)% (48.2)% (53.1)% (53.5)% (50.8)%
Net contract gains(3) 0.1% 3.5% 5.2% 3.6% 2.9%
(51.1)% (44.7)% (47.9)% (49.9)% (47.9)%
-------- ------------ -------------- -------- --------
(1) Constant currency is based on average 2019 exchange rates
weighted over the financial year by 2019 results.
(2) Like-for-like sales represent revenues generated in an
equivalent period in each financial period in outlets which have
been open for a minimum of 12 months. Units temporarily closed as a
result of Covid-19 have not been excluded for the purposes of the
like-for-like calculation. Like-for-like sales are presented on a
constant currency basis.
(3) Net contract gains represent the net year-on-year revenue
impact from new outlets opened and existing units permanently
closed in the past 12 months. Net contract gains/(losses) are
presented on a constant currency basis.
Underlying profit measures
The Group presents underlying profit / (loss) measures,
including operating profit / (loss), profit / (loss) before tax,
and earnings / (loss) per share, which exclude a number of items
which are not considered reflective of the normal trading
performance of the business, and are considered exceptional because
of their size, nature or incidence. The table below provides a
breakdown of the non-underlying items in both the current year and
the prior year.
Non-underlying items
IFRS 16 IAS 17
2020 2019
GBPm GBPm
Operating costs
Impairment of goodwill (33.0) -
Impairment of property, plant and equipment (38.4) -
Impairment of right-of-use assets (38.2) -
Depreciation (6.2) -
IFRS 16 rent credit 91.9 -
Restructuring expenses (22.7) -
Amortisation of intangible assets arising
on acquisition (1.9) (1.9)
---------------------- -------------------
(48.5) (1.9)
---------------------- -------------------
Finance expenses
Effective interest rate charge and debt
modification loss (5.4) (2.2)
Unwind of discount on obligation to acquire
additional share of subsidiary undertaking - (0.3)
Foreign exchange (losses)/gains on revaluation
of obligation to acquire additional share
of subsidiary undertaking - (1.6)
Other (0.1) -
---------------------- -------------------
(5.5) (4.1)
---------------------- -------------------
Taxation
Tax credit on non-underlying items 4.4 1.4
---------------------- -------------------
Total non-underlying items (49.6) (4.6)
---------------------- -------------------
Further details of the non-underlying operating items have been
provided in the Financial Review section on page 13. Furthermore, a
reconciliation from the underlying to the statutory reported basis
is presented below:
2020 (IFRS 16) 2019 (IAS 17)
Non-underlying Non-underlying
Underlying items Total Underlying Items Total
Operating (loss)
/ profit (GBPm) (315.4) (48.5) (363.9) 221.1 (1.9) 219.2
Operating margin (22.0)% (3.4)% (25.4)% 7.9% (0.1)% 7.8%
(Loss) / profit
before tax (GBPm) (371.8) (54.0) (425.8) 203.2 (6.0) 197.2
(Loss) / earnings
per share (p) (68.0) (8.1) (76.1) 29.1 (1.0) 28.1
Furthermore, it should be noted that the Group adopted IFRS 16
'Leases' on 1 October 2019 using the modified retrospective
approach to transition. In accordance with the standard, the prior
year figures have not been restated and as a result comparison with
the prior year is distorted. However, in order to provide a
meaningful comparison with prior year, which was accounted for
under IAS 17 'Leases', commentary has been included in the Business
Review, Financial Review and other sections with reference to
underlying profit measures computed in accordance with IAS 17.
These are referred to as 'Pro forma IAS 17' measures. A
reconciliation of key underlying profit measures to 'Pro forma IAS
17' numbers is presented below:
Pro forma IAS Impact IFRS 16
17 of
2020 IFRS 16 2020
GBPm 2020 GBPm
GBPm
Underlying operating loss (211.7) (103.7) (315.4)
Underlying loss before tax (239.6) (132.2) (371.8)
Underlying loss per share
(p) (45.4) (22.6) (68.0)
Net debt (692.0) (1,348.6) (2,040.6)
IFRS 16 increases the underlying operating loss, whereby the
depreciation of the right-of-use assets of GBP305.3m is offset
primarily by the reduced lease expense of GBP201.6m, resulting in a
net charge to underlying operating loss of GBP103.7m. The interest
charge on the lease liabilities of GBP27.8m and the loss from
associates of GBP0.7m further increases the loss, giving the
underlying loss before tax impact of GBP132.2m. The impact of IFRS
16 on net debt is primarily the recognition of the lease liability
balance.
Consolidated income statement
for the year ended 30 September 2020
Year ended 30 September Year ended 30 September
2020 2019
Underlying(1, Non-underlying Underlying Non-underlying
Notes 2) items Total (1) items Total
GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 3 1,433.1 - 1,433.1 2,794.6 - 2,794.6
Operating costs 5 (1,748.5) (48.5) (1,797.0) (2,573.5) (1.9) (2,575.4)
Operating (loss)
/ profit (315.4) (48.5) (363.9) 221.1 (1.9) 219.2
Share of (loss)
/ profit of
associates (2.4) - (2.4) 4.1 - 4.1
Finance income 6 2.5 - 2.5 2.3 - 2.3
Finance expense 6 (56.5) (5.5) (62.0) (24.3) (4.1) (28.4)
(Loss) / profit
before tax (371.8) (54.0) (425.8) 203.2 (6.0) 197.2
Taxation 23.7 4.4 28.1 (45.1) 1.4 (43.7)
(Loss) / profit
for the year (348.1) (49.6) (397.7) 158.1 (4.6) 153.5
--------------------------- --------------- ---------- ----------- --------------- ----------
(Loss) / profit attributable to:
Equity holders
of the parent (334.7) (40.3) (375.0) 131.5 (4.6) 126.9
Non-controlling
interests (13.4) (9.3) (22.7) 26.6 - 26.6
(Loss) / profit
for the year (348.1) (49.6) (397.7) 158.1 (4.6) 153.5
--------------------------- --------------- ---------- ----------- --------------- ----------
(Loss) / earnings per share (p):
- Basic 4 (68.0) (76.1) 29.1 28.1
- Diluted 4 (68.0) (76.1) 28.7 27.7
(1) Stated on an underlying basis, which excludes non-underlying
items as further explained in the section on Alternative
Performance Measures (APMs) on pages 23 - 25.
(2) The Group adopted IFRS 16 'Leases' on 1 October 2019 using
the modified retrospective approach to transition and in accordance
with the standard the Group's financial results for the prior year
has not been restated. As a result, with the exception of revenue,
the statutory results shown above for the year ended 30 September
2020 are not directly comparable with the prior year. To provide a
meaningful comparison with the prior year an alternative
presentation of the Group's results prepared under IAS 17 'Leases',
the previous accounting standard for leases, is shown in note
2.
Consolidated statement of other comprehensive income
for the year ended 30 September 2020
2020 2019
GBPm GBPm
Other comprehensive (expense) / income
Items that will never be reclassified to the income statement
Remeasurements on defined benefit pension schemes 1.2 (6.2)
Tax (charge) / credit relating to items that will not be reclassified (2.5) 1.9
Items that are or may be reclassified subsequently to the income statement
Net gain / (loss) on hedge of net investment in foreign operations 4.2 (4.3)
Other foreign exchange translation differences (19.7) 16.0
Effective portion of changes in fair value of cash flow hedges (1.8) (5.9)
Cash flow hedges - reclassified to income statement 1.6 3.8
Tax credit relating to items that are or may be reclassified 0.5 0.2
Other comprehensive (expense) / income for the year (16.5) 5.5
(Loss) / profit for the year (397.7) 153.5
Total comprehensive (expense) / income for the year (414.2) 159.0
------------------------- ------
Total comprehensive (expense) / income attributable to:
Equity shareholders (386.1) 129.1
Non-controlling interests (28.1) 29.9
Total comprehensive (expense) / income for the year (414.2) 159.0
------------------------- ------
Consolidated balance sheet
as at 30 September 2020
Notes 2020 2019
GBPm GBPm
Non-current assets
Property, plant and equipment 437.2 466.5
Goodwill and intangible assets 731.2 747.1
Right-of-use assets 9 1,271.2 -
Investments in associates 12.2 17.3
Deferred tax assets 49.8 28.2
Other receivables 73.8 54.3
2,575.4 1,313.4
Current assets
Inventories 23.5 38.7
Tax receivable 10.1 0.8
Trade and other receivables 125.3 205.4
Cash and cash equivalents 12 185.0 233.3
343.9 478.2
Total assets 2,919.3 1,791.6
---------- ----------
Current liabilities
Short-term borrowings 12 (158.2) (128.8)
Trade and other payables (399.0) (551.9)
Tax payable (20.9) (30.9)
Lease liabilities 10 (289.1) -
Provisions (12.3) (4.6)
(879.5) (716.2)
Non-current liabilities
Long-term borrowings 12 (718.1) (587.9)
Post-employment benefit obligations (18.6) (19.6)
Lease liabilities 10 (1,060.2) -
Other payables (4.0) (4.1)
Provisions (21.4) (29.9)
Derivative financial liabilities 12 (5.1) (4.6)
Deferred tax liabilities (10.4) (13.7)
(1,837.8) (659.8)
Total liabilities (2,717.3) (1,376.0)
---------- ----------
Net assets 202.0 415.6
---------- ----------
Equity
Share capital 5.8 4.8
Share premium 472.7 461.2
Capital redemption reserve 1.2 1.2
Merger relief reserve 13 206.9 -
Other reserves 3.1 12.9
Retained losses (559.6) (152.1)
Total equity shareholders' funds 130.1 328.0
Non-controlling interests 71.9 87.6
Total equity 202.0 415.6
---------- ----------
Consolidated statement of changes in equity
for the year ended 30 September 2020
Share Share Capital Merger Other Retained Total NCI Total
capital premium redemption relief reserves losses parent equity
reserve reserve (1) equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 October
2018 4.8 461.2 1.2 - (13.0) (71.5) 382.7 81.8 464.5
Profit for
the year - - - - - 126.9 126.9 26.6 153.5
Other
comprehensive
(expense) /
income for
the year - - - - 6.5 (4.3) 2.2 3.3 5.5
Capital
contributions
from NCI - - - - - - - 9.0 9.0
Reclassification
of obligation
to purchase
subsidiary - - - - 10.4 (10.4) - - -
Dividends paid
to equity
shareholders - - - - - (200.8) (200.8) - (200.8)
Dividends paid
to NCI - - - - - - - (24.7) (24.7)
Purchase of
additional
stake in
subsidiary 8.3 - 8.3 (8.3) -
Transactions
with NCI - - - - 0.7 - 0.7 (0.1) 0.6
Share-based
payments - - - - - 8.2 8.2 - 8.2
Tax on
share-based
payments - - - - - (0.2) (0.2) - (0.2)
--------- --------- ------------ --------- ---------- ---------- -------- ------- --------
At 30 September
2019 4.8 461.2 1.2 - 12.9 (152.1) 328.0 87.6 415.6
--------- --------- ------------ --------- ---------- ---------- -------- ------- --------
At 1 October
2019 4.8 461.2 1.2 - 12.9 (152.1) 328.0 87.6 415.6
Loss for the
year - - - - - (375.0) (375.0) (22.7) (397.7)
Other
comprehensive
expense for
the year - - - - (9.8) (1.3) (11.1) (5.4) (16.5)
Capital
contributions
from NCI - - - - - - - 30.5 30.5
Acquisition
of shares in
partly owned
subsidiary
from NCI - - - - - (4.3) (4.3) (0.7) (5.0)
Equity issues(2) 1.0 11.5 - 206.9 - - 219.4 - 219.4
Share buyback - - - - - (1.7) (1.7) - (1.7)
Dividends payable
to equity
shareholders(3) - - - - - (26.8) (26.8) - (26.8)
Dividends paid
to NCI - - - - - - - (20.4) (20.4)
Share-based
payments - - - - - 2.0 2.0 - 2.0
Tax on share
based payments - - - - - 0.5 0.5 - 0.5
Other movements - - - - - (0.9) (0.9) 3.0 2.1
--------- --------- ------------ --------- ---------- ---------- -------- ------- --------
At 30 September
2020 5.8 472.7 1.2 206.9 3.1 (559.6) 130.1 71.9 202.0
--------- --------- ------------ --------- ---------- ---------- -------- ------- --------
(1) At 30 September 2019 and 30 September 2020, the other
reserves include the translation reserve and cash flow hedging
reserve.
(2) Refer to note 13 for details of the equity issue.
(3) Refer to note 8 for details of dividends paid.
Consolidated cash flow statement
for the year ended 30 September 2020
Notes 2020 2019
GBPm GBPm
Cash flows from operating activities
Cash flow from operations 7 13.4 338.3
Tax paid (11.0) (37.1)
Net cash flows from operating
activities 2.4 301.2
Cash flows from investing activities
Dividends received from associates 3.6 5.2
Interest received 2.4 2.4
Purchase of property, plant
and equipment (120.3) (175.9)
Purchase of other intangible
assets (17.3) (18.1)
Acquisitions, net of cash and
cash equivalents acquired (21.5) (3.4)
Investment in associate - (3.0)
Net cash flows from investing
activities (153.1) (192.8)
Cash flows from financing activities
Equity funding from shareholders 219.4 -
net of expenses
Share buyback (1.7) -
Receipt of bank loans 32.1 -
Repayment of borrowings - (32.0)
Drawdown on revolving credit
facility - 27.5
Repayment of revolving credit (97.5) -
facility
Receipt of USPP debt 101.8 239.8
Drawdown on Covid Corporate
Financing Facility 125.0
Purchase of additional 16% stake
in TFS - (22.4)
Repayment of finance leases
and other loans - (3.2)
Payment of lease liabilities (172.6) -
- principal
Payment of lease liabilities (27.8) -
- interest
Financing fee paid - (1.3)
Acquisition of shares in partly (5.0) -
owned subsidiary from non-controlling
interest
Interest paid excluding interest
on lease liabilities (22.0) (18.5)
Dividends paid to equity shareholders (26.8) (200.8)
Dividends paid to non-controlling
interests (20.4) (24.7)
Capital contribution from non-controlling
interests 3.1 9.0
Net cash flows from financing
activities 107.6 (26.6)
Net (decrease) / increase in
cash and cash equivalents (43.1) 81.8
Cash and cash equivalents at
beginning of the year 233.3 147.8
Effect of exchange rate fluctuations
on cash and cash equivalents (5.2) 3.7
Cash and cash equivalents at
end of the year 185.0 233.3
---------- --------
Reconciliation of net cash flow
to movement in net debt
Net (decrease) / increase in
cash in the year (43.1) 81.8
Cash (inflow) from US Private
Placement debt (101.8) (239.8)
Cash (inflow) from Covid Corporate (125.0) -
Financing Facility
Cash outflow / (inflow) from
movements in Revolving Credit
Facility 97.5 (27.5)
Cash (inflow) / outflow from
other changes in debt (32.1) 35.2
Cash (inflow) from movement
in other financial assets - (5.1)
Change in net debt resulting
from cash flows, excluding lease
liabilities (204.5) (155.4)
Translation differences (2.0) (0.6)
Other non-cash changes (1.4) 7.3
Increase in net debt excluding
lease liabilities in the year (207.9) (148.7)
Net debt at beginning of the
year (483.4) (334.7)
---------- --------
Net debt excluding lease liabilities
at end of the year (691.3) (483.4)
Recognition of lease liabilities
upon transition to IFRS 16 10 (1,349.3) -
---------- --------
Net debt including lease liabilities
at end of the year (2,040.6) (483.4)
---------- --------
Notes
1 Basis of preparation and accounting policies
The Group adopted IFRS 16 'Leases' on 1 October 2019 which,
whilst having no overall net cash flow impact, significantly
distorts comparisons with previous years for certain line items,
particularly because the payment of lease liabilities is now
included as a deduction within financing activities whereas
previously under IAS 17 'Leases' operating lease charges were
included as a deduction within cash flow from operating
activities.
1.1 Basis of preparation
SSP Group plc (the Company) is a company incorporated in the
United Kingdom under the Companies Act 2006. The Group financial
statements consolidate those of the Company and its subsidiaries
(together referred to as the Group) and equity-account the Group's
interest in its associates. These financial statements have been
prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted by the EU and the Companies Act 2006
applicable to companies reporting under IFRS.
These financial statements are presented in Sterling and unless
stated otherwise, rounded to the nearest GBP0.1 million. The
financial statements are prepared on the historical cost basis
except for the derivative financial instruments which are stated at
their fair value.
1.2 Going concern
These financial statements are prepared on a going concern
basis.
The Board has reviewed the Group's trading forecasts,
incorporating the impact on SSP of Covid-19, as part of the Group's
adoption of the going concern basis, in which context the Directors
have reviewed cash flow forecasts prepared for a period of 16
months from the date of approval of these financial statements,
with a number of different scenarios considered. Having carefully
reviewed these forecasts, the Directors have concluded that it is
appropriate to adopt the going concern basis of accounting in
preparing these financial statements for the reasons set out
below.
Since the onset of Covid-19, management has taken decisive
action to protect cash, minimise costs and raise additional
liquidity to allow the Company to operate throughout even its most
pessimistic trading scenario. This action to increase liquidity
included a GBP209m (net of related fees) equity placing and share
subscription in late March 2020, followed shortly afterwards by
securing access to the Bank of England's Covid Corporate Financing
Facility (CCFF), under which facility the Group was permitted to
draw up to GBP300m. In addition, the Group also secured access to a
number of additional smaller liquidity lines, including
government-backed facilities in France, Spain and Switzerland,
providing a further GBP44m.
At the end of the year, the Group had approximately GBP520m of
available liquidity, including cash of GBP185m and committed
undrawn revolving credit facilities of GBP150m, as well as a
further GBP175m available to be drawn down under the CCFF. The
GBP150m revolving credit facility is committed until July 2022,
while the Bank of England has confirmed that the Group can draw
down the maximum GBP300m available to it under the CCFF for a
period extending through to February 2022.
In making the going concern assessment, the directors have
modelled a number of scenarios for the period to March 2022. The
base case scenario is consistent with the Board-approved 2021
Budget, adjusted for the lockdown across England announced by the
UK Government on 31 October, as well as significantly increased
government-imposed restrictions in many other parts of Continental
Europe which are likely to remain in place for the immediate
future. Our Budget reflects our expectations of ongoing challenging
trading conditions for the remainder of this financial year, with
sales recovering only gradually in calendar year 2021 and remaining
well below pre-pandemic levels for the duration of the going
concern period. While the recent positive news on the development
of potential vaccines is extremely encouraging, the Directors
recognise that the pace of the anticipated recovery in sales and
passenger numbers in our markets remains uncertain.
In light of the considerable uncertainty surrounding the ongoing
impact of Covid-19, a downside scenario has also been modelled,
applying severe but plausible assumptions to the base case. This
scenario assumes a further twelve week lockdown (in addition to the
November lockdown), lasting from December until February. The
downside scenario then assumes a gradual recovery, but at a much
slower pace than envisaged in our Budget throughout the second and
third quarters of the current financial year. Only by the fourth
quarter do our downside sales assumptions converge with those in
our Budget.
In both the base case and the downside case the Group would
continue to have sufficient liquidity headroom based on the cash
and available facilities as described above.
In addition to the action taken in the Spring to strengthen
liquidity, the Group secured an agreement in May 2020 from SSP's
lending group of banks and its US private placement note holders to
waive existing financial covenants ('existing covenants'), testing
both interest cover and leverage, for the two testing periods
covering the twelve months to 30 September 2020 and 31 March 2021.
They agreed that these existing covenants would be replaced between
the date of the agreement and 30 September 2021 by two new
covenants ('new covenants'), each tested monthly, with the first of
these based on the Group demonstrating a minimum level of liquidity
and the second based on the Group not exceeding a maximum level of
net debt. For the testing period ending 30 September 2021 both the
existing and new covenants would be relevant, with the Group
returning to the existing covenants thereafter once compliance with
the existing covenants had been confirmed.
In order to provide the maximum financial flexibility for the
Group through this exceptionally challenging period, we have now
agreed further covenant waivers and amendments covering the period
up to March 2022. As was the case with the covenant amendments
agreed in May, the existing financial covenant testing leverage has
been waived, until reinstated in March 2022, with the two
temporary, monthly-tested new covenants on minimum liquidity and
maximum net debt introduced for a further six months from October
2021. For the testing period ending 31 March 2022 both the existing
and new covenants would be relevant, with the Group returning to
the existing covenants thereafter, once compliance with the
existing covenants has been confirmed. In addition, we have agreed
to an additional new covenant, testing minimum EBITDA thresholds
for the six months ending 30 September 2021 and 31 December 2021.
Modified interest cover tests (calculated on a last six months
basis) will also be applied at these two testing dates. All of
these new covenant thresholds have been based on our most
pessimistic trading scenario.
Although the Directors are confident that the Group has
sufficient headroom to stay within the applicable new covenants for
at least the next twelve months, they also recognise that there is
likely to be continued disruption to travel markets during 2021,
notwithstanding the recent vaccine developments, and as a
consequence it is difficult to predict with confidence the overall
impact of Covid-19 on the Group's profitability in the twelve month
period ending March 2022 at this stage. Given this level of
uncertainty, there are scenarios in which the Group could breach
its existing interest cover and leverage covenants at the end of
March 2022 when these tests are reinstated, as well as the minimum
liquidity covenant when the CCFF is expected to be repaid in the
first quarter of 2022.
In adopting the going concern basis of preparation, the
Directors took account of the fact that they would be able to raise
additional liquidity prior to the repayment of the CCFF in early
2022 , and that management would remain in close dialogue with both
lenders and noteholders, and would seek further covenant waivers
should the need arise. Nevertheless, the possibility of a covenant
breach during the first quarter of calendar year 2022, together
with the possible requirement to raise additional liquidity prior
to the repayment of the CCFF at that time, cannot be discounted,
and as such represents a material uncertainty that may cast
significant doubt on the Group's and the Company's ability to
continue as a going concern, and that it therefore may be unable to
realise its assets and discharge its liabilities in the normal
course of business.
After reviewing the most recent projections and the sensitivity
analysis and having carefully considered the material uncertainty
and the mitigating actions available as set out in the previous
paragraph, the Directors believe that it is appropriate to prepare
the financial statements on the going concern basis. The financial
statements do not contain any adjustments that would be necessary
if that basis were inappropriate.
1.3 New accounting standards adopted by the Group
A. IFRS 16 'Leases'
The Group adopted IFRS 16 'Leases' with effect from 1 October
2019 using the modified retrospective approach to transition. The
new standard requires that the Group's leased assets are recorded
as right-of-use assets together with their corresponding lease
liabilities. Adoption of the new standard has had a material impact
on the Group's financial statements, with right-of-use assets of
GBP1,468.9m recognised on transition together with lease
liabilities of GBP1,464.4m. As at 30 September 2020 the
right-of-use assets were GBP1,271.2m and the lease liabilities were
GBP1,349.3m.
The Group's lease portfolio consists of approximately 1,500
leases which are within the scope of IFRS 16, principally for
concession contracts, offices, warehouses, vehicles and equipment
for which the Group has been collating data for a number of years
in preparation for the new standard. This data has been used in
conjunction with a lease accounting tool implemented for the Group
to provide the accounting entries required under IFRS 16.
On transition, the lease liabilities have been measured at the
present value of the remaining lease payments, discounted using the
incremental borrowing rate on the date of transition. The
right-of-use assets have been measured at the carrying amounts that
would have been in place had the standard been applied since the
commencement of each lease, discounted using the incremental
borrowing rate at the date of transition. The weighted average
incremental borrowing rate applied to the Group's lease portfolio
on 1 October 2019 was 1.62%.
On transition the Group elected not to reassess whether a
contract is, or contains, a lease, instead relying on the
assessment already made in applying IAS 17 'Leases' and IFRIC 4
'Determining whether an Arrangement contains a Lease'. In addition,
the Group applied the following available practical expedients
permitted by the standard:
-- the exclusion of leases relating to low-value assets (less than GBP5,000 when new);
-- the exclusion of short-term leases, being those with a lease term of 12 months or less;
-- the use of hindsight in determining the lease term where the
contract contains options to extend or terminate the lease; and
-- reliance on its assessment of whether leases are onerous
immediately prior to the date of transition.
The impact of the adoption of IFRS 16 on the opening balance
sheet as at 1 October 2019 is shown in the table below:
As at Impact Restated
30 September of IFRS as at
2019 16 1 October
GBPm GBPm 2019
GBPm
Right-of-use assets - 1,468.9 1,468.9
Other receivables 118.4 (10.9) 107.5
Other payables (201.3) 2.6 (198.7)
Provisions (34.5) 3.8 (30.7)
Lease liabilities - (1,464.4) (1,464.4)
Under IFRS 16, the operating lease expense previously recorded
in operating costs has been replaced by a depreciation charge,
which is higher in the current year than the operating lease
expense recognised under IAS 17, the previous accounting standard
for leases, and a separate interest expense, recorded in finance
expense. This significantly impacts certain line items in the
Group's consolidated income statement and distorts comparisons with
the prior year because in accordance with the standard, as a result
of the Group transitioning to IFRS 16 using the modified
retrospective approach, the prior year has not been restated.
However, in order to provide a meaningful comparison with prior
year, the Group's financial results for the year ended 30 September
2020 have also been presented in accordance with IAS 17. The
results for the year ended 30 September 2020 under IAS 17 are
referred to as 'Pro forma IAS 17'. Note 2 includes a Consolidated
income statement showing the results for year ended 30 September
2020 both as reported under IFRS 16 and on a pro forma IAS 17 basis
together with growth rates versus the prior year on a like-for-like
basis under IAS 17.
A summary of the impact of the adoption of IFRS 16 on the
Group's underlying results for the year ended 30 September 2020
compared to the pro forma IAS 17 results is shown in the table
below:
Pro forma IAS IFRS 16
17
2020 Impact of IFRS 2020
16
GBPm GBPm GBPm
Underlying(1) operating
loss (211.7) (103.7) (315.4)
Underlying(1) loss before
tax (239.6) (132.2) (371.8)
Underlying(1) loss per
share (pence) (45.4) (22.6) (68.0)
(1) Stated on an underlying basis, which excludes non-underlying
items as further explained in the section on Alternative
Performance Measures (APMs) on pages 23-25.
There is no net cash flow impact arising from the adoption of
the new standard. As discussed in the going concern section above,
the Group's principal debt covenants, which are net debt to EBITDA
and interest cover, have been waived for 30 September 2020, 31
March 2021 and 30 September 2021 (in the case of net debt only) and
replaced by new covenants based on minimum liquidity and a maximum
consolidated net debt levels as well as (from 30 September 2021)
minimum EBITDA and modified interest cover. These new covenants are
measured on a historical accounting standards basis and are
therefore unaffected by the adoption of IFRS 16. The Group does not
intend to alter its approach going forward as to whether assets
should be leased or bought.
From 1 October 2019, the Group's lease accounting policy is as
follows:
The Group recognises a right-of-use asset and a lease liability
at the lease commencement date. The right-of-use asset is initially
measured at cost, comprising the initial amount of the lease
liability plus any initial direct costs incurred and any lease
payments made at or before the lease commencement date, less any
lease incentives received. The right-of-use asset is subsequently
depreciated using the straight-line method from the commencement
date to the earlier of the end of the useful life of the asset or
the end of the lease term. The lease liability is initially
measured at the present value of the lease payments that are not
paid at the commencement date, discounted using the incremental
borrowing rate being the rate that the lessee would have to pay to
borrow the funds necessary to obtain an asset in a similar economic
environment with similar terms and conditions. The lease liability
is subsequently measured at amortised cost using the effective
interest method. It is remeasured when there is a change in future
lease payments arising from a change in an index or a rate or a
change in the Group's assessment of whether it will exercise an
extension or termination option. When the lease liability is
remeasured, a corresponding adjustment is made to the right-of-use
asset.
Judgements are involved in determining the lease term,
particularly because termination options are included in a number
of property leases across the Group to facilitate operational
flexibility. In determining the lease term, management considers
all facts and circumstances that create an economic incentive to
exercise a termination option. Termination options are only
included in the lease term if it is reasonably certain that the
lease will not be terminated. The assessment of the lease term is
reviewed if a significant event or a significant change in
circumstances occurs that is within the control of the Group.
Payments associated with short-term leases and leases of
low-value assets are recognised on a straight-line basis as an
expense in the income statement. Short-term leases are leases with
a lease term of 12 months or less. Low-value assets are assets with
a value of less than GBP5,000 when new, typically small items of IT
equipment, office equipment and office furniture.
Covid-19-related rent concessions
The Group has applied Covid-19-Related Rent Concessions -
Amendment to IFRS 16 issued on 28 May 2020. The Group applies the
practical expedient allowing it not to assess whether eligible rent
concessions that are a direct consequence of the Covid-19 pandemic
are lease modifications. The Group applies the practical expedient
consistently to contracts with similar characteristics and in
similar circumstances. The amendment has been applied
retrospectively and has no impact on retained earnings at 1 October
2019. For rent concessions in leases to which the Group chooses not
to apply the practical expedient, or that do not qualify for the
practical expedient, the Group assesses whether there is a lease
modification.
B. Other standards
In addition to IFRS 16, the following accounting standards and
amendments have been adopted by the Group in the current year:
-- IFRIC 23 'Uncertainty over income tax treatments'
-- Amendments to IFRS 9 'Prepayment features with negative compensation'
-- Amendments to IAS 28 'Long term interests in associates and joint ventures'
-- Amendments to IAS 19 'Plan amendment, curtailment or settlement'
-- Annual improvements to IFRS standards 2015-2017 cycle
Adoptions of these new IFRS standards have had no material
impact on the consolidated financial statements.
1.4 New accounting standards not yet adopted by the Group
The following amended standards and interpretations are not
expected to have a significant impact on the Group's consolidated
financial statements
-- Amendments to references to the conceptual framework in IFRS standards
-- Amendments to IFRS 3 'Definition of a business'
-- Amendments to IAS 1 and IAS 8 'Definition of material'
-- Amendments to IFRS 9, IAS 39 and IFRS 7 'Interest rate benchmark reform'
-- Classification of liabilities as current or non-current (Amendments to IAS 1)
-- Sale of Contribution of Assets between an investor and its
Associate or Joint Venture (amendments to IFRS 10 and IAS 28)
-- IFRS 14 'Regulatory Deferral Accounts'
-- IFRS 17 'Insurance Contracts'
-- Onerous Contracts - Cost of fulfilling a Contract (Amendments to IAS 37)
2 Pro forma consolidated income statement
As referred to in note 1, the Group adopted IFRS 16 'Leases' on
1 October 2019 using the modified retrospective approach to
transition. In accordance with the standard, the prior year figures
have not been restated and as a result comparison with the prior
year is distorted. However, in order to provide a meaningful
comparison with the prior year, which was accounted for under IAS
17 'Leases', the table below shows the Group's underlying financial
results for the year ended 30 September 2020 presented in
accordance with IAS 17 under the heading 'Pro forma underlying IAS
17':
Pro forma Underlying
Underlying Underlying IAS 17
Underlying IAS 17 Year on
IFRS 16 IAS 17 year
Impact 2019
of IFRS
2020 16 2020 change
Notes GBPm GBPm GBPm GBPm %
Revenue 3 1,433.1 - 1,433.1 2,794.6 -48.7%
Operating
costs 5 (1,748.5) 103.7 (1,644.8) (2,573.5) +36.1%
Operating
(loss) / profit (315.4) 103.7 (211.7) 221.1 -195.7%
Share of (loss)
/ profit of
associates (2.4) 0.7 (1.7) 4.1 -141.5%
Finance income 6 2.5 - 2.5 2.3 +8.7%
Finance expense 6 (56.5) 27.8 (28.7) (24.3) -18.1%
(Loss) / profit
before tax (371.8) 132.2 (239.6) 203.2 -217.9%
Taxation 23.7 (17.4) 6.3 (45.1) +114.0%
(Loss) / profit
for the year (348.1) 114.8 (233.3) 158.1 -247.6%
------------------------ --------- ------------ ------------ ------------
Equity holders
of the parent (334.7) 111.0 (223.7) 131.5 -270.2%
Non-controlling
interests (13.4) 3.8 (9.6) 26.6 -136.1%
(Loss) / profit
for the year (348.1) 114.8 (233.3) 158.1 -247.6%
------------------------ --------- ------------ ------------ ------------
(Loss) / earnings
per share
(pence):
- Basic 4 (68.0) (45.4) 29.1 -256.0%
- Diluted 4 (68.0) (45.4) 28.7 -258.2%
3 Segmental reporting
SSP operates in the food and beverage travel sector, mainly at
airports and railway stations.
Management monitors the performance and strategic priorities of
the business from a geographic perspective, and in this regard has
identified the following four key "reportable segments": the UK,
Continental Europe, North America and Rest of the World (RoW). The
UK includes operations in the United Kingdom and the Republic of
Ireland; Continental Europe includes operations in the Nordic
countries and in Western and Southern Europe; North America
includes operations in the United States and Canada; and RoW
includes operations in Eastern Europe, the Middle East, Asia
Pacific, India and South America. These segments comprise countries
which are at similar stages of development and demonstrate similar
economic characteristics.
The Group's management assesses the performance of the operating
segments based on revenue and underlying operating profit. Interest
income and expenditure are not allocated to segments, as they are
managed by a central treasury function, which oversees the debt and
liquidity position of the Group. The non-attributable segment
comprises costs associated with the Group's head office function
and depreciation of central assets.
UK Continental North RoW Non-attributable Total
Europe America
GBPm GBPm GBPm GBPm GBPm GBPm
2020 (IFRS 16)
------- ------------ --------- ------- ----------------- --------
Revenue 410.1 558.2 274.9 189.9 - 1,433.1
------- ------------ --------- ------- ----------------- --------
Underlying operating
loss (28.7) (148.1) (55.4) (55.6) (27.6) (315.4)
------- ------------ --------- ------- ----------------- --------
Non-underlying operating
costs (10.3) (45.4) (7.9) 18.3 (3.2) (48.5)
------- ------------ --------- ------- ----------------- --------
Operating loss (39.0) (193.5) (63.3) (37.3) (30.8) (363.9)
------- ------------ --------- ------- ----------------- --------
2020 (Pro forma IAS
17)
------- ------------ --------- ------- ----------------- --------
Revenue 410.1 558.2 274.9 189.9 - 1,433.1
------- ------------ --------- ------- ----------------- --------
Underlying operating
loss (12.4) (103.2) (43.7) (24.8) (27.6) (211.7)
------- ------------ --------- ------- ----------------- --------
2019 (as reported under
IAS 17)
---------------- ------ --------------- --------
Revenue 840.5 1,036.9 533.4 383.8 - 2,794.6
------ -------- ------ ------ ------- --------
Underlying operating
profit / (loss) 101.8 79.3 41.9 35.9 (37.8) 221.1
------ -------- ------ ------ ------- --------
Adjustment (1.5) (0.4) - - - (1.9)
------ -------- ------ ------ ------- --------
Operating profit /
(loss) 100.3 78.9 41.9 35.9 (37.8) 219.2
------ -------- ------ ------ ------- --------
The following amounts are included in underlying operating
profit or loss:
UK Continental North RoW Non-attributable Total
Europe America
GBPm GBPm GBPm GBPm GBPm GBPm
2020 (IFRS 16)
------- ------------ --------- ------- ----------------- --------
Depreciation and amortisation(1) (78.3) (183.7) (72.7) (78.0) (6.1) (418.8)
------- ------------ --------- ------- ----------------- --------
2020 (Pro forma IAS
17)
------- ------------ --------- ------- ----------------- --------
Depreciation and amortisation(1) (15.4) (42.4) (33.4) (16.2) (6.1) (113.5)
------- ------------ --------- ------- ----------------- --------
2019 (as previously
reported under IAS
17)
------- ------------ --------- ------- ----------------- --------
Depreciation and amortisation(1) (15.2) (35.6) (31.3) (18.6) (4.6) (105.3)
------- ------------ --------- ------- ----------------- --------
(1) Excludes amortisation of acquisition related intangible
assets and accelerated depreciation as shown in the APMs
section.
A reconciliation of underlying operating profit or loss to
profit or loss before and after tax is provided as follows:
IFRS 16 IAS 17
2020 2019
GBPm GBPm
Underlying operating (loss) / profit (315.4) 221.1
Non-underlying operating costs (note 5) (48.5) (1.9)
Share of (loss) / profit from associates (2.4) 4.1
Finance income 2.5 2.3
Finance expense (56.5) (28.4)
Non-underlying finance expense (note 6) (5.5) (4.1)
-------- -------
(Loss) / profit before tax (425.8) 197.2
Taxation 28.1 (43.7)
-------- -------
(Loss) / profit after tax (397.7) 153.5
-------- -------
4 Earnings / (loss) per share
Basic earnings / (loss) per share is calculated by dividing the
result for the year attributable to ordinary shareholders by the
weighted average number of ordinary shares outstanding during the
year. Diluted earnings / (loss) per share is calculated by dividing
the result for the year attributable to ordinary shareholders by
the weighted average number of ordinary shares outstanding during
the year adjusted by potentially dilutive outstanding share
options.
Underlying earnings / (loss) per share is calculated the same
way except that the result for the year attributable to ordinary
shareholders is adjusted for specific items as detailed below:
IFRS 16 IAS 17
2020 2019
GBPm GBPm
(Loss) / Profit attributable to ordinary
shareholders (375.0) 126.9
Adjustments:
Non-underlying operating costs 48.5 1.9
Net revaluation and discount unwind of the
TFS financial liability (note 6) - 1.9
Non-underlying finance costs 5.5 2.2
Tax effect of adjustments (4.4) (1.4)
Less non-underlying costs attributable to (9.3) -
NCI
------------ ------------
Underlying (loss) / profit attributable to
ordinary shareholders (334.7) 131.5
------------ ------------
Basic weighted average number of shares 492,458,604 452,360,460
Dilutive potential ordinary shares - 5,953,867
------------ ------------
Diluted weighted average number of shares 492,458,604 458,314,327
------------ ------------
Earnings / (loss) per share (p):
- Basic (76.1) 28.1
- Diluted (76.1) 27.7
Underlying earnings / (loss) per share (p):
- Basic (68.0) 29.1
- Diluted (68.0) 28.7
The number of ordinary shares in issue as at 30 September 2020
was 537,596,432 which excludes treasury shares (30 September 2019:
444,852,520). The Company also holds 263,499 ordinary shares in
treasury.
Potential ordinary shares can only be treated as dilutive when
their conversion to ordinary shares would decrease earnings per
share or increase loss per share. As the Group has recognised a
loss for the year, none of the potential ordinary shares are
considered to be dilutive.
5 Operating costs
IFRS 16 IAS 17
2020 2019
GBPm GBPm
Cost of food and materials:
Cost of inventories consumed in the year (431.1) (806.7)
Labour cost:
Employee remuneration (518.6) (809.3)
Overheads:
Depreciation of property, plant and equipment (111.0) (98.3)
Depreciation of right-of-use assets (305.3) -
Amortisation of intangible assets (10.6) (8.9)
Impairment of property, plant and equipment (38.4) -
Impairment of right-of-use assets (38.2) -
Impairment of goodwill (33.0) -
Profit on lease disposal 0.3 -
Other exceptional costs (22.7) -
Rentals payable under leases (149.2) (551.8)
IFRS 16 rent credit 91.9 -
Other overheads (231.1) (300.4)
(1,797.0) (2,575.4)
---------- ----------
Non-underlying operating costs
The non-underlying operating costs in the year to 30 September
2020 are shown below.
IFRS 16 IAS 17
2020 2019
GBPm GBPm
Impairment of goodwill (33.0) -
Impairment of property, plant and equipment (38.4) -
Impairment of right-of-use assets (38.2) -
Depreciation (6.2) -
IFRS 16 rent credit 91.9 -
Restructuring expenses (22.7) -
Amortisation of intangible assets arising
on acquisition (1.9) (1.9)
Total non-underlying operating costs (48.5) (1.9)
-------- -------
6 Finance income and expense
IFRS 16 IAS 17
2020 2019
GBPm GBPm
Finance income
Interest income 2.5 2.3
Total finance income 2.5 2.3
-------- -------
Finance expense
Total interest expense on financial liabilities
measured at amortised cost (22.8) (18.1)
Lease interest expense (27.8) -
Debt modification loss (3.4) -
Effective interest rate (2.0) -
Net change in fair value of cash flow hedges
utilised in the year (1.6) (3.8)
Unwind of discount on provisions (0.4) (0.4)
Net interest expense on defined benefit pension (0.2) -
obligations
Foreign exchange losses on revaluation of
obligation to acquire additional share in
subsidiary undertaking - (1.6)
Unwind of discount on obligation to acquire
additional share in subsidiary undertaking - (0.3)
Other net foreign exchange losses (0.3) (0.7)
Other (3.5) (3.5)
-------- -------
Total finance expense (62.0) (28.4)
-------- -------
Non-underlying finance costs
The non-underlying finance costs in the year to 30 September
2020 includes expense arising as a result of amendments and
extensions of borrowings under IFRS 19.
IFRS 16 IAS 17
2020 2019
GBPm GBPm
Effective interest rate charge and debt modification
loss (5.4) (2.2)
Unwind of discount on obligation to acquire
additional share of subsidiary undertaking - (0.3)
Foreign exchange loss on revaluation of obligation
to acquire additional share of subsidiary
undertaking - (1.6)
Other (0.1) -
Total non-underlying finance costs (5.5) (4.1)
-------- -------
7 Cash flow from operations
IFRS 16
2020 IAS 17
2019
GBPm GBPm
(Loss) / profit for the year (397.7) 153.5
Adjustments for:
Depreciation of property, plant and equipment 111.0 98.3
Depreciation of right-of-use assets 305.3
Amortisation of intangible assets 10.6 8.9
Profit on disposal of lease (0.3) -
Non-cash change in lease liabilities (91.9)
Impairments 109.6 -
Share-based payments 2.0 8.2
Finance income (2.5) (2.3)
Finance expense 62.0 28.4
Share of loss / (profit) of associates 2.4 (4.1)
Taxation (28.1) 43.7
---------- --------
82.4 334.6
Decrease / (increase) in trade and other
receivables 77.2 (30.4)
Decrease / (increase) in inventories 15.5 (3.6)
(Decrease) / increase in trade and other
payables including provisions (161.7) 37.7
Cash flow from operations 13.4 338.3
---------- --------
8 Dividends
2020 2019
GBPm GBPm
Interim dividend paid in the year of GBPnil
per share (2019: 5.8p) - (25.8)
Special dividend paid in the year of GBPnil
per share (2019: 32.1p) - (149.8)
Prior year final dividend of 6.0p per share
paid in the year (2019: 5.4p) (26.8) (25.2)
(26.8) (200.8)
------- --------
The prior year final dividend of 6.0p per share was approved at
the Group's Annual General Meeting in February 2020 and was paid in
June 2020 for a total payment of GBP26.8m. No dividend for
financial year 2020 is proposed.
9 Right-of-use assets
Land, buildings
Concessions and leasehold
contracts improvements Other equipment Total
GBPm GBPm GBPm GBPm
Beginning of the year - - - -
Right-of-use assets on
transition 1,441.4 26.5 1.0 1,468.9
Acquisitions 24.1 - - 24.1
Additions 247.9 17.7 0.8 266.4
Depreciation charge in
the year (298.8) (5.9) (0.6) (305.3)
Remeasurement adjustments (130.2) (6.7) - (136.9)
Impairments (38.2) - - (38.2)
Currency translation (7.0) (0.8) - (7.8)
------------ ---------------- ---------------- --------
End of the year 1,239.2 30.8 1.2 1,271.2
------------ ---------------- ---------------- --------
10 Lease liabilities
2020
GBPm
Beginning of the year -
Lease liabilities on transition (1,464.4)
Acquisitions (24.1)
Additions (266.4)
Interest charge in the year (27.8)
Payment of lease liabilities 200.4
Remeasurement adjustments 227.2
Currency translation 5.8
End of the year (1,349.3)
Of which are:
Current lease liabilities (289.1)
Non-current lease liabilities (1,060.2)
-----------------------
End of the year (1,349.3)
-----------------------
11 Business combinations and purchase of non-controlling interest
Business combinations
During the year ended 30 September 2020, the Group purchased
100% of the share capital of two companies and the trade and assets
comprising part of the business of two other companies for a total
consideration, net of cash and cash equivalents acquired, of
GBP21.5m. These four transactions were deemed to be business
combinations within the scope of IFRS 3 Business Combinations. A
summary of the details of these acquisitions is shown in the table
below:
Business / Company Acquisition Sector Country Acquisition date
method
Land's End Pasty Trade and Rail UK 1 October 2019
assets
-------------- ------- ---------- -----------------
Red Rock's F&B business Trade and Air Australia 23 December 2019
in Melbourne Airport assets
-------------- ------- ---------- -----------------
WA Airport Hospitality Share capital Air Australia 23 January 2020
Pty Ltd
-------------- ------- ---------- -----------------
Station Food GmbH Share capital Rail Germany 29 February 2020
-------------- ------- ---------- -----------------
The acquisitions are in line with the Group's strategy to grow
its geographic footprint and expand its operations in the UK,
Australia and Germany. These acquisitions are individually not
material but are material in aggregate.
A summary of the aggregate effect of acquisitions completed in
2020 are shown below:
GBPm
Property, plant and equipment 9.8
-------
Right-of-use assets 24.1
-------
Inventories 0.3
-------
Trade and other receivables 0.6
-------
Cash 1.0
-------
Trade and other payables (2.1)
-------
Lease liabilities (24.1)
-------
Fair value of the assets acquired 9.6
-------
Goodwill 12.9
-------
Cash consideration 22.5
-------
Reconciliation of consideration to the consolidated cash flow
statement:
Cash consideration 22.5
Less: cash and cash equivalents
acquired (1.0)
------
Cash consideration, net of cash
and cash equivalents acquired 21.5
------
The Board believes that the excess consideration paid over fair
value of the net identifiable assets is best considered as goodwill
on acquisition, representing the operating synergies, derived from
adding scale and other benefits to our local existing operations.
Goodwill recognised is not deductible for tax purposes.
For the year ended 30 September 2020, the acquisitions in
aggregate contributed GBP6.6m to revenue and GBP2.7m to operating
losses from the dates of acquisition. If the acquisitions had
occurred at the beginning of the year, their contribution to
revenue and operating loss would have been GBP16.0m and GBP3.3m
respectively.
Total transaction costs and expenses incurred of GBP0.6m have
been included in other overheads within the income statement and
primarily related to professional fees for reviews and due
diligence of these deals.
Purchase of non-controlling interest
Prior to 6 February 2020 the Group held a 50% interest in Rail
Gourmet Togservice Norge AS (RGT), a subsidiary of the Group. On 6
February 2020, the Group purchased the 50% interest in RGT it did
not own, taking its ownership to 100%. The consideration paid for
the additional 50% interest was NOK60m, equivalent to GBP5.0m.
12 Fair value measurement
Certain of the Group's financial instruments are held at fair
value.
The fair values of financial instruments held at fair value have
been determined based on available market information at the
balance sheet date, and the valuation methodologies detailed
below:
- the fair values of the Group's borrowings are calculated based
on the present value of future principal and interest cash flows,
discounted at the market rate of interest at the balance sheet
date; and
- the derivative financial liabilities relate to interest rate
swaps. The fair values of interest rate swaps have been determined
using relevant yield curves and exchange rates as at the balance
sheet date.
Carrying value and fair values of certain financial
instruments
The following table shows the carrying value of financial assets
and financial liabilities.
IFRS 16 IAS 17
2020 2019
GBPm GBPm
Financial assets measures at amortised
cost
Cash and cash equivalents 185.0 233.3
Trade and other receivables 155.1 184.5
----------------------------------------------- ---------- ----------
Total financial assets measured at amortised
cost 340.1 417.8
----------------------------------------------- ---------- ----------
Non-derivative financial liabilities measured
at amortised cost
Bank loans (411.3) (471.6)
Covid Corporate Financing Facility (CCFF) (123.9) -
US Private Placement notes (341.1) (243.9)
Lease liabilities (1,349.3) -
Finance lease liabilities - (1.2)
Trade and other payables (380.0) (532.8)
----------------------------------------------- ---------- ----------
Total financial liabilities measured at
amortised cost (2,605.6) (1,249.5)
----------------------------------------------- ---------- ----------
Derivative financial liabilities
Interest rate swaps (5.1) (4.6)
----------------------------------------------- ---------- ----------
Total derivative financial liabilities (5.1) (4.6)
----------------------------------------------- ---------- ----------
Financial assets and liabilities in the Group's consolidated
balance sheet are either held at fair value, or their carrying
value approximates to fair value, with the exception of loans,
which are held at amortised cost. The fair value of total
borrowings excluding lease liabilities estimated using market
prices at 30 September 2020 is GBP885.4m (30 September 2019:
GBP727.1m).
All of the financial assets and liabilities measured at fair
value are classified as level 2 using the fair value hierarchy
whereby inputs, which are used in the valuation of these financial
assets, and liabilities and have a significant effect on the fair
value, are observable either directly or indirectly. There were no
transfers during the year.
13 Equity issue
On 25 March 2020, the Company announced that it had raised new
equity by agreeing to allot and issue 86,195,459 new ordinary
shares (of nominal value 1 17/200 pence each) ("Ordinary Shares")
to investors at GBP2.50 per share, by way of a share placing. Due
to the size of the transaction, and the short time-frame required
as part of the Company's response to the Covid-19 pandemic, the
placing was effected by the Company's placing agent subscribing for
shares in a subsidiary of the Company for an amount broadly equal
to the proceeds of the placing, and then transferring those shares
to the Company in exchange for the allotment of the Company's new
shares to investors. The Company raised gross proceeds of GBP215.5m
and incurred issue costs and other related fees of GBP7.6m.
The excess of the gross proceeds raised over the nominal value
of the shares issued, and the issue costs and other related fees
incurred from the March placing, are both recorded in the merger
relief reserve, in accordance with Section 612 of the Companies Act
2006.
Concurrent to the March placing, certain directors of the
Company and members of the senior management team of the Group
subscribed in cash at GBP2.50 per share for an aggregate 304,000
new Ordinary Shares, raising additional proceeds of GBP0.8m and
incurring GBP0.1m of issue costs. The excess of the proceeds raised
over the nominal value of the shares issued and issue costs
incurred are recorded in share premium, in accordance with section
610 of the Companies Act 2006.
On 4 June 2020, the Company announced that it had raised further
new equity by agreeing to allot and issue 3,382,255 new ordinary
shares to investors at GBP3.15 per share, by way of a share
placing. The Company raised gross proceeds of GBP10.7m and incurred
issue costs and other related fees of GBP0.1m.
Concurrent to the June placing, (i) certain directors of the
Company and members of the senior management team of the Group
subscribed in cash at GBP3.15 per share for an aggregate 31,739 new
ordinary shares, raising additional proceeds of approximately
GBP0.1m and (ii) retail investors subscribed in an offer made by
the Company via the PrimaryBid platform for an aggregate of 61,394
new Ordinary Shares in the capital of the Company at GBP3.15 per
share, collectively raising additional proceeds of approximately
GBP0.1m.
The excess of the gross proceeds raised over the nominal value
of the shares issued, and the issue costs and other related fees
incurred from the June placing, subscription and retail offer, are
recorded in share premium, in accordance with section 610 of the
Companies Act 2006.
14 Post balance sheet events
In December 2020, SSP Financing Limited secured an agreement
from its lending group of banks and US private placement note
holders to waive the net debt cover financial covenant for the
testing period covering the twelve months to 30 September 2021.
Please refer to the Going Concern section on pages 31-33 for
further details.
15 Annual General Meeting
The Group's Annual General Meeting will be held on 26 February
2021. Details of the resolutions to be proposed at that meeting
will be included in the notice of Annual General Meeting that will
be sent to shareholders in January 2021.
16 Other information
The financial information set out above does not constitute the
company's statutory accounts for the years ended 30 September 2020
or 30 September 2019 but is derived from those accounts. Statutory
accounts for year ended 30 September 2019 have been delivered to
the registrar of companies, and those for year ended 30 September
2020 will be delivered in due course.
The auditor has reported on the accounts for the year ended 30
September 2020; their report was:
i. unqualified,
ii. included a reference to a material uncertainty that may cast
significant doubt on the Group's and the parent company's ability
to continue as a going concern as referred to in note 1.2; and
iii. did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
The Company's Annual Report and Accounts for the year ended 30
September 2020 will be posted and made available to shareholders on
the Company's website in January 2021.
17 Forward looking statement
This announcement contains forward-looking statements. These
forward-looking statements include all matters that are not
historical facts. Statements containing the words "believe",
"expect", "intend", "may", "estimate", "anticipate"; "will";
"plans", "aims", "projects"; "may"; "would"; "could"; "should" or,
in each case, their negative and words of similar meaning are
forward-looking. Forward-looking statements include statements
relating to the following: (i) future capital expenditures,
expenses, revenues, earnings, synergies, economic performance,
indebtedness, financial condition, dividend policy, losses and
future prospects; and (ii) business and management strategies and
the expansion and growth of the Company's operations. By their
nature, forward-looking statements involve risks and uncertainties
that could significantly affect expected results and are based on
certain key assumptions because they relate to events that may or
may not occur in the future. We caution you that forward-looking
statements are not guarantees of future performance and that the
Group's actual financial condition, performance, results of
operations and cash flows, and the development of the industry in
which we operate, may differ materially from those made in or
suggested by the forward-looking statements contained in this
document or other disclosures made by us or on the Group's behalf,
including as a result of the macroeconomic and other impacts of
Covid-19, economic and business cycles, the terms and conditions of
the Company's financing arrangements, foreign currency rate
fluctuations, competition in the Company's principal markets,
acquisitions or disposals of businesses or assets and trends in the
Company's principal industries.
In addition, even if the Group's financial condition, results of
operations and cash flows, and the development of the industry in
which we operate are consistent with the forward-looking statements
in this announcement, those results or developments may not be
indicative of results or developments in subsequent periods. The
forward-looking statements contained in this announcement speak
only as of the date of this announcement. Except where required to
do so under applicable law or regulatory obligations, the Company
and its Directors expressly disclaim any undertaking or obligation
to update or publicly revise any forward looking statements whether
as a result of new information, future events or otherwise.
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END
FR DBBDDLBBDGGL
(END) Dow Jones Newswires
December 17, 2020 02:00 ET (07:00 GMT)
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