TIDMSSPG
RNS Number : 0331Z
SSP Group PLC
15 May 2019
LEI:213800QGNIWTXFMENJ24
15 May 2019
SSP GROUP PLC
Results for six months period ended 31 March 2019
SSP Group, a leading operator of food and beverage outlets in
travel locations worldwide, announces its financial results for the
first half of its 2019 financial year, covering the six months
ended 31 March 2019.
Highlights:
-- Underlying operating profit(1) of GBP62.5m: up 14.6% at
constant currency(2) , and 13.2% at actual exchange rates
-- Revenue of GBP1,261.6m: up 6.8% at constant currency; 7.1% at actual exchange rates
-- Like-for-like sales(3) up 2.0%: driven by air passenger travel and retail initiatives
-- Net gains(4) of 4.1%: strong performances in Continental
Europe, North America and the Rest of the World
-- Underlying operating margin(1) up 30 basis points to 5.0% at
constant currency, strategic initiatives delivering well
-- Underlying profit before tax(1) of GBP54.2m: up 11.3%. Reported profit before tax of GBP51.4m
-- Underlying earnings per share(1) of 6.7 pence: up 19.6%.
Reported earnings per share of 6.1 pence
-- Capital investment of GBP108.2m, reflecting the significant
new contract opening programme, which has been first half weighted
in 2019
-- Encouraging pipeline of new contracts with wins in North
America, Brazil, India, Spain and France
-- Interim dividend of 5.8 pence per share, up 20.8 %. This
follows the completion of the c. GBP150m special dividend and share
consolidation in April 2019
Commenting on the results, Kate Swann, CEO of SSP Group
said:
"SSP has delivered another good performance in the first half of
2019, driven by strong sales growth, significant new contract
openings across the world and our programme of operational
improvements. We have continued to grow our global presence,
particularly in North America and Asia, and we have further
expanded our operations in Latin America. These are high growth
markets for SSP and present us with exciting opportunities. Given
this positive momentum, we are today raising our expectations for
net gains in the second half of the year.
"Looking forward, the second half has started well and whilst a
degree of uncertainty always exists around passenger numbers in the
short term, we continue to be well placed to benefit from the
structural growth opportunities in our markets and our programme of
operational improvements."
Financial highlights:
Year-on-year change
H1 2019 H1 2018 Actual FX Constant
GBPm GBPm rates currency(2)
Revenue 1,261.6 1,177.8 +7.1% +6.8%
Like-for-like sales growth(3) 2.0% 2.8% n/a n/a
Underlying operating profit(1) 62.5 55.2 +13.2% +14.6%
Underlying operating margin(1) 5.0% 4.7% +30 bps +30 bps
Underlying profit before tax(1) 54.2 48.7 +11.3% n/a
Underlying earnings per share (p)(1) 6.7 5.6 +19.6% n/a
Dividend per share (p) 5.8 4.8 +20.8% n/a
Underlying operating cash outflow(5) (69.8) - n/a n/a
Net debt (433.4) (290.1) +49.4% n/a
Statutory reported results:
The table below summarises the Group's statutory reported
results (where the financial highlights above are adjusted).
H1 2019 H1 2018 Year-on-year change
GBPm GBPm
Operating profit 61.6 54.2 +13.7%
Operating margin 4.9% 4.6% +30 bps
Profit before tax 51.4 48.4 +6.2%
Earnings per share (p) 6.1 5.6 +8.9%
(1) Stated on an underlying basis which excludes the revaluation
of the obligation to acquire an additional 16% ownership share of
TFS and the amortisation of intangible assets arising on the
acquisition of the SSP business in 2006. This is consistent with
the prior period.
(2) Constant currency is based on average 2018 exchange rates
weighted over the financial year by 2018 results.
(3) 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. Like-for-like sales are
presented on a constant currency basis.
(4) Net contract gains/(losses) represent the net year-on-year
revenue impact from new outlets opened and existing units closed in
the past 12 months. Net contract gains/(losses) are presented on a
constant currency basis.
(5) Stated on an underlying basis(1) after capital expenditure,
net cash flows to/from associates and non-controlling interests,
acquisitions and tax.
Please refer to page 15 for supporting reconciliations from the
Group's statutory reported results to these performance
measures.
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014.
CONTACTS:
Investor and analyst enquiries
Sarah John, Director of Investor Relations, SSP Group plc
On 15 May 2019: +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 Interim Results 2019 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. SSP has more
than 37,000 employees and serves approximately one and a half
million customers every day.
SSP operates an extensive portfolio of more than 500
international, national, local and own brands in more than 30
countries around the world. The group was owned by the private
equity business EQT until 2014 when it floated at the London Stock
Exchange at a share price of GBP2.10. Since then, the share price
has more than tripled.
www.foodtravelexperts.com
Business review
Overview
The Group delivered a good performance in the first half of the
year, driven by like-for-like sales growth, significant new
contract openings across the world and the ongoing implementation
of our programme of operational improvements. We are continuing to
invest in the growth and development of the business and to bring
new brands and concepts to our clients and customers. We have made
further good progress in the development of the business in
Continental Europe, North America and Asia Pacific. We are
recommending an interim ordinary dividend of 5.8 pence per share,
anticipating a full year pay-out ratio of 40%. This, together with
the payment of a c. GBP150m special dividend in April 2019,
reflects our confidence in the business and our commitment to
maintaining an efficient balance sheet.
Financial results
The financial performance of the Group is presented on an
underlying basis, for which the statutory reported results are
adjusted to take account of the amortisation of intangible assets
created on the acquisition of the SSP business in 2006 and the
revaluation of the obligation to acquire an additional share of
TFS. The statutory reported performance of the Group is explained
in the financial review, with a detailed reconciliation between
statutory and underlying performance provided on page 15.
The Group delivered a good financial performance in the first
half of 2019. Underlying operating profit increased to GBP62.5m, an
increase of 14.6% on a constant currency basis.
Total revenue increased by 6.8% on a constant currency basis,
including like-for-like sales growth of 2.0%, net contract gains of
4.1% and acquisitions of 0.7%. Like-for-like sales in the air
sector grew more strongly than in rail driven by the continued
growth in air passenger numbers. Like-for-like sales growth in the
second quarter was 1.5%, but was impacted by the timing of Easter,
which this year fell into the second half, and by the "Gilets
Jaunes" protests in France. Excluding these factors, like-for-like
sales growth in the second quarter would have been above 2%.
Like-for-like sales growth in the UK, North America and the Rest of
the World was in line with our expectations. In Continental Europe,
like-for-like sales were impacted by the protests in France and
disruption at some of our major airport sites as a consequence of
redevelopments, most notably Copenhagen and Malaga. With the
ongoing level of economic uncertainty and disruption, our
expectation for like-for-like sales growth in the full year is
around 2%.
We have seen significant expansion in the first half, delivering
net contract gains of 4.1% with strong contributions from
Continental Europe (+3.1%), North America (+8.7%) and the Rest of
the World (+4.2%). In Continental Europe, net gains were driven by
new unit openings at Montparnasse station in Paris, Charleroi and
Barcelona Airports, and a new contract for 29 Starbucks units in
railway stations in the Netherlands, and at the end of the first
half, the commencement of the mobilisation of the motorway service
areas across Germany. Net gains in North America included new
openings at LaGuardia, Los Angeles and Seattle Airports. In the
Rest of the World, net gains included new unit openings at airports
in Hong Kong, Phuket in Thailand and across a number of airports in
India including Delhi, Mumbai and Kolkata. In the first half, more
of our unit openings have been at brand new sites compared to the
first half last year and as a consequence we have incurred higher
preopening costs.
We continue to focus on retaining profitable contracts and our
contract renewal rate in the first half of 2019 was in line with
our historical trends.
We are encouraged by the pipeline of new contracts. In the first
half we won a number of significant new airport contracts including
in Continental Europe at Alicante, Helsinki and Athens Airports, in
North America at Oakland, Salt Lake City and Vancouver Airports,
and in India at Mumbai and Delhi Airports. Following our entry into
Latin America, winning contracts at Rio de Janeiro and San Paulo
Airports in Brazil, we have recently been awarded a further new
contract at Salvador Bahia Airport in Brazil. We expect to begin
operating these contracts progressively over the next two
years.
Following the strong start to the year and looking ahead at the
pipeline, our expectations for net gains for the full year have
increased from 3% to between 4% and 5%. Acquisitions are expected
to add c. 0.3% to revenue on a full year basis.
Underlying operating profit increased to GBP62.5m, a 14.6%
increase on a constant currency basis. The underlying operating
margin increased by 30 bps to 5.0% on a constant currency basis,
driven by solid like-for-like sales growth and the continued roll
out of our strategic initiatives and was delivered despite the
impact of higher preopening costs associated with the significant
new contract opening programme.
Looking forward to the second half and full year, and with the
expectation of lower pre-opening costs in the second half compared
to the first half, we now anticipate the overall operating margin
to increase by between 30 and 40 bps, up from our previous estimate
of 20 bps for the full year.
The underlying free cash outflow was GBP75.9m. Capital
expenditure was GBP108.2m. The increase compared to last year
reflects the phasing of the investment, with new unit development
being very first half weighted. In the full year we expect capital
spend in the region of GBP160m. The increase of approximately
GBP15m from the previous guidance reflects an increase in our
expectations for net gains from 3% to between 4% and 5% for the
full year.
The working capital usage of GBP36.3m was GBP35.8m higher than
last year, reflecting the later timing of Easter which fell in the
second half of this year. Last year we had an unusual result with
almost no cash usage in the first half, reflecting the fact that
Easter fell at the very end of the half. For the full year we
anticipate a normal cash inflow as a consequence of an increase in
the negative working capital in the business.
Net debt increased by GBP143.3m year on year to GBP433.4m,
reflecting our seasonal working capital cycle, our capital
investment programme and the payment of last year's GBP100.1m
special dividend. This represented leverage of 1.4 times EBITDA at
the end of the first half, compared with 1.1 times last year.
Strategy
Our strategy is focused on creating long-term sustainable value
for our shareholders, delivered through five key levers. We made
further progress on each of these levers in the period:
1. Optimising our offer from the positive trends in our markets
We are focused on the food and beverage markets in travel
locations, which benefit from long-term structural growth. We aim
to use our broad portfolio of brands and retailing skills to drive
profitable like-for-like sales, ensuring that we benefit from the
positive trends in these markets.
Like-for-like sales growth in the period was driven by the
ongoing roll out of our retailing programmes which are delivering
well. We continue to focus on optimising our product ranges and
have developed a wider range, including premium products to provide
customers with additional choice. We are making good use of new
technology, for example using self-order kiosks and ordering
applications and automatic coffee machines which help improve the
speed of service and increase customer transactions.
2. Growing profitable new space
The travel food and beverage market in airports and railway
stations is valued at approximately GBP17b and is characterised by
long-term structural growth. It offers excellent opportunities for
us to expand our business across the globe.
Net contract gains in the first half were 4.1%, driven by new
unit openings and high levels of contract retention. The high level
of net gains was driven by strong performances in North America and
in the Rest of the World. These large and growing markets (where we
still have a relatively small share), provide attractive expansion
opportunities and the pipeline of new contracts is encouraging. We
have strong disciplines around the contract tendering process which
enable us to deliver attractive returns from new business
investment.
Our new business growth is underpinned by our ability to deliver
attractive and effective food solutions at travel locations
internationally. An important element of this is the brand line up
we can offer. Our brands include both international brands which we
franchise, such as Burger King and Starbucks, and our own
proprietary brands such as Upper Crust and Ritazza, as well as
bespoke concepts and local heroes. This half we secured important
contract wins at airports with our own brands, including Ritazza,
Mi Casa and Millie's Cookies at Salvador, Brazil, and with Camden
Food Co at Charleroi, Belgium, and Ottowa, Canada. We also
introduced a number of new and exciting brand partners to our
portfolio, including our first ever BrewDog pub which we will be
opening at Alicante Airport in Spain, and we opened our first ever
airside M&S Food to Go at Birmingham Airport.
3. Optimising gross margins
Gross margin increased by 90 bps in the period at constant
currency. The higher growth in the air sector in the period, which
typically has higher gross margins but higher concession fees than
the rail sector, contributed approximately 10 bps of this
improvement.
This performance is encouraging given the ongoing pressure from
food cost inflation, and has been driven by the roll out of gross
margin initiatives across our regions which are progressing well.
Key areas of focus include procurement disciplines, range and
recipe rationalisation and the management of waste and losses. We
are making good progress in the introduction of equipment that
automates food preparation processes in our sites. This helps to
improve the product consistency and reduce waste. We also continue
to bring greater efficiency into the supply chain and have made
good progress in optimising delivery frequency to better align with
product demand. To support all these initiatives, we continue to
invest in both central and local resources.
4. Running an efficient and effective organisation
We have a multi-year programme of initiatives to improve
operating efficiency, which is important to the Group given the
backdrop of ongoing labour cost inflation, which continued in the
first half. In addition to this labour costs increased by 20 bps
reflecting the increase in preopening costs associated with the
significant new opening programme in the first half.
We continue to develop systems to better align labour to sales,
allowing us to optimise service levels and labour costs. The roll
out of our more standardised and systematised approach to labour
forecasting and scheduling is progressing well. Our increasing use
of automation and technology in food production and food service is
contributing both to improving the customer experience as well as
driving greater labour efficiency.
5. Optimising investment utilising best practice and shared resource
We have maintained our focus on optimising investment using best
practice and shared resource to help drive returns. We are
continuing to look at how shared back office services can reduce
cost and drive simpler, more efficient processes. We have expanded
our two outsourced shared service centres in Pune in India and Lodz
in Poland which are now used by 19 of SSP's countries for financial
transaction processing and basic administrative tasks. This year we
have also established an outsourced design centre in India to
support our unit development around the world. In addition to this,
we have made good progress in driving energy efficiencies and have
introduced a number of programmes which have helped to reduce
overall energy usage.
Summary and outlook
The Group delivered a good financial performance in the first
half of the year with solid like-for-like sales growth, strong net
gains and a further improvement in operating margin. The second
half has started well and the pipeline of new contracts is
encouraging. Looking forward to the full year, with the current
level of general economic and geopolitical uncertainty, we continue
to plan cautiously, anticipating like-for-like sales to be around
2%. However, the significant structural growth opportunities in the
travel sector and our programme to deliver operational improvements
leave us well placed to continue to deliver both for our customers
and our shareholders.
Financial review
Group performance
Change
H1 2019 H1 2018
GBPm GBPm Reported Constant currency LFL
--------- ------------------ ------
Revenue 1,261.6 1,177.8 +7.1% +6.8% +2.0%
-------- -------- --------- ------------------ ------
Underlying operating profit 62.5 55.2 +13.2% +14.6%
-------- -------- --------- ------------------ ------
Underlying operating margin 5.0% 4.7% +30 bps +30 bps
-------- -------- --------- ------------------ ------
Operating profit 61.6 54.2 13.7%
-------- -------- --------- ------------------ ------
Operating margin 4.9% 4.6% +30 bps
-------- -------- --------- ------------------ ------
Revenue
First half revenue increased by 6.8% on a constant currency
basis, comprising like-for-like sales growth of 2.0%, net contract
gains of 4.1% and the impact of acquisitions of 0.7%. At actual
exchange rates, total revenue grew by 7.1%, to GBP1,261.6m. Revenue
in the first half of the Group's financial year is typically lower
than in the second half, as a significant part of our business
serves the leisure sector of the travel industry, which is
particularly active during the summer in the northern
hemisphere.
Like-for-like sales in the air sector grew more strongly than in
rail driven by the continued growth in air passenger numbers.
Like-for-like sales growth in the second quarter were 1.5%, but was
impacted by the timing of Easter, which this year fell into the
second half, and by the "Gilets Jaunes" protests in France.
Excluding these factors, like-for-like sales growth in the second
quarter would have been above 2%. Like-for-like sales growth in the
UK, North America and the Rest of the World was in line with our
expectations. In Continental Europe like-for-like sales were
impacted by the protests in France and disruption at some of our
major airport sites as a consequence of redevelopments, most
notably Copenhagen and Malaga. With the ongoing level of economic
uncertainty and disruption, our expectation for like-for-like sales
growth in the full year is around 2%.
We have seen significant expansion in the first half, delivering
net contract gains of 4.1% with strong contributions from
Continental Europe (+3.1%), North America (+8.7%) and the Rest of
the World (+4.2%). In Continental Europe, net gains were driven by
new unit openings at Montparnasse station in Paris, Charleroi and
Barcelona Airports and a new contract for 29 Starbucks units in
railway stations in the Netherlands and at the end of the first
half, the commencement of the mobilisation of the motorway service
areas across Germany. Net gains in North America included new
openings at LaGuardia, Los Angeles and Seattle Airports. In the
Rest of the World, net gains included new unit openings at airports
in Hong Kong, Phuket in Thailand and across a number of airports in
India including Delhi, Mumbai and Kolkata. In the first half, more
of our unit openings have been at brand new sites compared to the
first half last year and as a consequence we have incurred higher
preopening costs. Following the strong start and looking ahead at
the pipeline, our expectations for net gains has increased from 3%
to between 4% and 5%.
The acquisition of Stockheim added 0.7% to first half revenues
and will add about 0.3% for the full year.
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 and Indian
Rupee) during the first half of 2019 compared to the 2018 average
was positive 0.3%. If the current spot rates were to continue
through to the end of 2019, we would expect a negative currency
impact on revenue in the full year of around 0.5% compared to the
average rates used for 2018. However this is a translation impact
only.
Underlying operating profit
Underlying operating profit increased to GBP62.5m, an increase
of 14.6% on a constant currency basis. The underlying operating
margin increased by 30 bps, on a constant currency basis, to 5.0%,
driven by solid like-for-like sales growth and the continued roll
out of our strategic initiatives, and was delivered despite the
impact of higher preopening costs arising from the significant new
contract opening programme.
Gross margin increased by 90 bps year-on-year, on a constant
currency basis. The sales mix in the first half, with stronger
growth in the air sector relative to the rail sector, contributed
approximately 10 bps of this improvement. The strong underlying
performance was driven by the continued roll out of our strategic
initiatives, including improved ranging and mix management, food
procurement, and waste and loss reduction.
The 20bps deterioration in the labour cost ratio largely
reflects the short term impact of preopening costs due to the first
half weighting of our significant new opening programme. We have
continued to see significant labour cost inflation, both in the UK
and North America, which has been broadly offset by the ongoing
efficiency programme.
Concession fees rose by 80bps, or c. 70bps after adjusting for
the stronger air sales. The higher year on year increase compared
to recent trends is mainly due to the scale of the first half
opening programme, with many contracts still in their mobilisation
phase. We would expect the underlying increase to revert to more
normal levels over the full year.
Looking forward to the second half and full year, and with the
expectation of lower pre-opening costs in the second half compared
to the first half, we now anticipate the overall operating margin
to increase by between 30 and 40 bps, up from our previous estimate
of 20 bps for the full year.
Operating profit
Operating profit was GBP61.6m, on a reported basis (H1 2018:
GBP54.2m), reflecting an adjustment for the amortisation of
acquisition-related intangible assets of GBP0.9m (H1 2018:
GBP1.0m).
Regional performance
The following shows the Group's segmental performance. For full
details of our key reporting segments, refer to note 2.
UK (including Republic of Ireland)
Change
H1 2019 H1 2018
GBPm GBPm Reported Constant currency LFL
--------- ------------------ ------
Revenue 385.2 369.5 +4.2% +4.3% +1.4%
-------- -------- --------- ------------------ ------
Underlying operating profit 39.1 33.4 +17.1% +17.4%
-------- -------- --------- ------------------ ------
Underlying operating margin 10.2% 9.1% +110 bps +110 bps
-------- -------- --------- ------------------ ------
Note - Statutory reported operating profit was GBP38.4m (H1
2018: GBP32.7m) and operating margin was 10.0% (H1 2018: 8.8%)
reflecting an adjustment for the amortisation of acquisition
related intangible assets of GBP0.7m (H1 2018: GBP0.7m).
Revenue increased by 4.3% on a constant currency basis,
comprising like-for-like growth of 1.4% and net contract gains of
2.9%. Like-for-like growth in the air sector was driven by
increasing passenger numbers, which was helped by the reversal of
the impact of the closure of Monarch Airlines last year, but held
back slightly by the timing of Easter, which this year fell into
the second half. In the rail sector, the underlying trends remained
broadly unchanged and we continued to see some impact from station
redevelopments in London, mainly at Liverpool Street, Victoria and
Waterloo. Net gains were stronger in the first half, driven mainly
by new M&S Simply Food unit openings in London stations and the
M&S Food to Go in Birmingham Airport.
Underlying operating profit for the UK increased by 17.4%, on a
constant currency basis, to GBP39.1m, with underlying operating
margin increasing by 110 bps, on a constant currency basis, to
10.2%. This represented a good performance, given the modest
like-for-like sales growth, with our operating efficiency
programmes continuing to deliver margin benefits.
Continental Europe
Change
H1 2019 H1 2018
GBPm GBPm Reported Constant currency LFL
--------- ------------------ ------
Revenue 452.7 440.5 +2.8% +4.1% -0.8%
-------- -------- --------- ------------------ ------
Underlying operating profit 17.7 21.8 -18.8% -15.3%
-------- -------- --------- ------------------ ------
Underlying operating margin 3.9% 4.9% -100 bps -90 bps
-------- -------- --------- ------------------ ------
Note - Statutory reported operating profit was GBP17.5m (H1
2018: GBP21.5m) and operating margin was 3.9% (H1 2018: 4.9%)
reflecting an adjustment for the amortisation of acquisition
related intangible assets of GBP0.2m (H1 2018: GBP0.3m).
Revenue increased by 4.1% on a constant currency basis,
comprising a like-for-like decline of 0.8%, net contract gains of
3.1%, and the acquisition of Stockheim adding a further 1.8%. The
lower like-for-like sales were driven by the impact of protests in
France largely in the second quarter. Like-for-like sales were also
impacted by slower growth in Nordics and Spain where some of our
airports were impacted by redevelopment works. Net gains in the
first half were stronger than normal, driven by a large opening
programme of new units at Montparnasse station in France, Charleroi
Airport in Belgium and the mobilisation of 29 Starbucks units in
Netherlands.
On a constant currency basis, underlying operating profit was
15.3% lower than last year, but excluding the impact of higher
depreciation costs arising from the new contact investments, EBITDA
was down 4%. Profit margins were, as expected, impacted by the
lower like for like sales arising from the protests in France and
airport redevelopment disruption as well as the significant
preopening costs associated with the large new opening
programme.
North America
Change
H1 2019 H1 2018
GBPm GBPm Reported Constant currency LFL
--------- ------------------ ------
Revenue 235.9 198.4 +18.9% +14.1% +5.4%
-------- -------- --------- ------------------ ------
Underlying operating profit 9.5 6.4 +48.4% +51.6%
-------- -------- --------- ------------------ ------
Underlying operating margin 4.0% 3.2% +80 bps +100 bps
-------- -------- --------- ------------------ ------
Note - There are no adjustments between underlying operating
profit and statutory reported operating profit.
Revenue increased by 14.1% on a constant currency basis,
comprising like-for-like growth of 5.4% and net contract gains of
8.7%. Like-for-like growth benefited from positive trends in
airport passenger numbers in the North American market. Net
contract gains of 8.7% included the benefit of the full year effect
of the major contracts that started in the second half of last
year, in particular at LaGuardia, Los Angeles and Seattle.
Underlying operating profit increased to GBP9.5m, an increase of
51.6% on a constant currency basis. This reflects the benefit of
the reversal of an impairment charge in the first half of 2018 in
relation to Houston airport. Excluding this, EBITDA increased by
around 9%, held back slightly by the impact of preopening costs
associated with new units at JFK T7, LaGuardia, Seattle and Phoenix
Airports.
Rest of the World
Change
H1 2019 H1 2018
GBPm GBPm Reported Constant currency LFL
--------- ------------------ ------
Revenue 187.8 169.4 +10.9% +10.6% +6.4%
-------- -------- --------- ------------------ ------
Underlying operating profit 15.9 13.6 +16.9% +16.3%
-------- -------- --------- ------------------ ------
Underlying operating margin 8.5% 8.0% +50 bps +40 bps
-------- -------- --------- ------------------ ------
Note - There are no adjustments between underlying operating
profit and statutory reported operating profit.
Revenue increased by 10.6% on a constant currency basis, with an
increase in like-for-like sales of 6.4% and net contract gains of
4.2%. Like-for-like sales were stronger than expected, driven by
ongoing passenger growth in India and Egypt, which continues its
recovery from the terrorist incidents a few years ago.
Like-for-like sales further benefitted from closure of competitor
units in Hong Kong, a trend that is expected to reverse in the
second half. Towards the end of the period we started to see some
impact from the suspension of operations of Jet Airways in India
and the grounding of Boeing 737 Max aircraft.
Net gains came mainly from new units at Phuket in Thailand and
at Delhi in India, as well as the new contract at Cebu Airport in
the Philippines which opened last year.
Underlying operating profit for the Rest of the World was
GBP15.9m, an increase of 16.3% on a constant currency basis, driven
by the strong like-for-like sales.
Share of profit of associates
The Group's share of profit from associates was GBP2.1m (H1
2018: GBP0.2m) reflecting good performances from associate
operations in Cyprus and profit improvement in our associate in
France which operate in Charles de Gaulle Airport.
Net finance costs
Underlying net finance costs increased over the prior period to
GBP10.4m (H1 2018: GBP6.7m), primarily due to the higher net debt
compared to last year. Reported net finance costs were GBP12.3m (H1
2018: GBP6.0m), the additional charge primarily relates to the
GBP1.6m revaluation of the financial liability to acquire the
remaining 16% interest in TFS. Underlying net finance costs are
expected to be at a similar level in the second half with full year
costs of around GBP20m.
Taxation
The Group's underlying tax charge for the period was GBP12.0m
(H1 2018: GBP10.7m), equivalent to an effective tax rate of 22.1%
(H1 2018: 22.0%) of underlying profit before tax. On a reported
basis the tax charge for the period was GBP12.1m (H1 2018:
GBP10.5m). Looking forward we expect the underlying tax rate to
remain around 22% for the full year.
Non-controlling interests
The profit attributable to non-controlling interests was
GBP11.0m (H1 2018: GBP11.1m), most of which relate to our joint
venture businesses in North America and the Rest of the World. For
the full year, we expect the profit attributable to our
non-controlling interests to be approximately GBP28m.
Earnings per share
Underlying earnings per share was 6.7 pence per share (H1 2018:
5.6 pence per share), an increase of 19.6% year-on-year. Reported
earnings per share was 6.1 pence per share (H1 2018: 5.6 pence per
share).
Dividends
The Board has declared an interim dividend of 5.8 pence per
share (H1 2018: 4.8 pence), with a view to maintaining the pay-out
ratio for the full year at 40%, consistent with the Group's stated
priorities for the uses of cash and after careful review of the
capital expenditure requirements for the coming years. The dividend
will be paid on 28 June 2019 to shareholders registered on 7 June
2019. The ex-dividend date will be 6 June 2019.
Post balance sheet events
On 11 April 2019, the Group signed an agreement to issue US
Private Placement notes (the 'Notes') of US$ 199.5m and EUR58.5m.
The notes represent SSP's second issue in the US Debt Private
Placement market, following its inaugural issue in 2018 and carry a
fixed rate of interest.
On 15 April 2019, the Company completed a share consolidation to
maintain the comparability of the Company's share price before and
after the special dividend.
In April 2019, the Group acquired a further 16% stake and
thereby completed the planned acquisition of its 49% stake in
Travel Food Services Private Limited ("TFS"), one of India's
largest travel food companies.
Cash flow
The table below presents a summary of the Group's cash flow for
the first half of 2019:
H1 2019 H1 2018
GBPm GBPm
Underlying operating profit(1) 62.5 55.2
Depreciation and amortisation 52.8 47.7
Working capital (36.3) (0.5)
Net tax (18.7) (17.6)
Other (3.0) 7.0
Underlying net cash flow from operating activities 57.3 91.8
Capital expenditure(2) (108.2) (61.5)
Acquisition of subsidiaries, adjusted for net debt acquired (3) (3.4) (18.8)
Net dividends to non-controlling interests and from associates (15.5) (11.5)
Underlying operating cash flow (69.8) (0.0)
Net finance costs (6.1) (6.1)
Other - (0.4)
-------- ---------
Underlying free cash flow (75.9) (6.5)
Dividend paid (25.2) (23.5)
-------- ---------
Underlying net cash flow (101.1) (30.0)
-------- ---------
(1) Presented on an underlying basis (refer to page 15 for
details)
(2) Capital expenditure is net of capital contributions from
non-controlling interests of GBP3.5m (H1 2018: GBP2.6m)
(3) Current period amount relates to the acquisition of SSP
D&B DFW LLC in the US. Prior period amount relates to Stockheim
and comprises consideration GBP19.3m less cash and cash equivalents
acquired GBP0.5m
The Group generated underlying net cash flow from operating
activities of GBP57.3m (H1 2018: GBP91.8m) and saw an underlying
free cash outflow of GBP75.9m, which was GBP69.4m higher than the
first half of 2018. This is driven by the seasonality of our
working capital cycle in the first half (mainly due to timing of
Easter) and higher capital expenditure in the first half of the
year compared to last year.
The working capital usage of GBP36.3m was GBP35.8m higher than
last year, reflecting the later timing of Easter and, in
particular, the unusual performance last year, where we saw almost
no cash usage. Last year Easter fell exactly at the end of the
first half and as a consequence working capital benefitted from the
seasonal sales uplift as well as a number of material rent payments
falling into the second half. For the full year we anticipate a
normal cash inflow as a consequence of an increase in the negative
working capital in the business.
Capital expenditure was GBP108.2m, up GBP46.7m vs last year. The
increase compared to last year reflects the phasing of the
investment, with new unit development being very first half
weighted. In the full year we expect capital spend in the region of
GBP160m. The increase of approximately GBP15m from the previous
guidance reflects an increase in our expectations for net gains
from c. 3% to between 4% and 5% for the full year.
Net finance costs paid of GBP6.1m were in line with the first
half of 2018. Overall, the Group had net cash outflow of GBP101.1m
during the period.
The dividend paid of GBP25.2m reflects the payment of the 2018
final dividend of 5.4 pence per share.
Balance sheet and net debt
Net assets increased slightly in the first half to GBP461.0m (30
September 2018: GBP458.3m), with net debt increasing to GBP433.4m
(30 September 2018: GBP334.7m) reflecting the normal seasonality of
the business ahead of the peak summer trading period.
GBPm
Opening net debt (1 October 2018) (334.7)
Net cash flow (excluding impact of foreign exchange) (101.1)
Impact of foreign exchange rates 8.2
Other (5.8)
--------
Closing net debt (31 March 2019) (433.4)
--------
The increase in net debt of GBP98.7m was driven by the net cash
outflow of GBP101.1m partially offset by a foreign exchange
translation impact of GBP8.2m arising from the strengthening of
Sterling during the period.
Leverage in the first half with net debt: EBITDA at 1.4 times,
compared with 1.1 times at 31 March 2018. By the year end we
anticipate leverage remaining at c. 1.4 times, reflecting strong
operating cash generation in the second half and after the payment
of the GBP150m special dividend in April 2019.
Going concern
After making due enquiries, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for at least 12 months from the date of
approval of this report and, therefore, continue to adopt the going
concern basis in preparing the accounts.
Principal risks
The principal risks facing the Group for the remainder of the
year are unchanged from those reported in the Annual Report and
Accounts 2018.
These risks, together with the Group's risk management process,
are detailed on pages 17 to 22 of the Annual Report and Accounts
2018, and relate to the following areas: business environment;
retention of existing client relationships; Brexit; labour laws and
unions; implementation of efficiency programmes; changing client
behaviours; regulatory compliance; execution and mobilisation of
new contracts; expansion into new markets; senior management
capability and retention; competitive intensity; outsourcing
programmes; cyber security; maintenance/development of brand
portfolio; business development capability and investment; and tax
compliance and management.
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 Europe North America RoW Total
H1 2019 Revenue at actual rates by segment 385.2 452.7 235.9 187.8 1,261.6
Impact of foreign exchange 0.1 4.4 (7.2) (0.9) (3.6)
------ ------------------- -------------- ------ --------
H1 2019 Revenue at constant currency(1) 385.3 457.1 228.7 186.9 1,258.0
------ ------------------- -------------- ------ --------
H1 2018 Revenue at constant currency 369.5 439.2 200.4 169.0 1,178.2
Constant currency sales growth 4.3% 4.1% 14.1% 10.6% 6.8%
Which is made up of:
Like-for-like sales growth(2) 1.4% (0.8)% 5.4% 6.4% 2.0%
Net contact gains/(losses)(3) 2.9% 3.1% 8.7% 4.2% 4.1%
Impact of acquisitions(4) - 1.8% - - 0.7%
------ ------------------- -------------- ------ --------
4.3% 4.1% 14.1% 10.6% 6.8%
------ ------------------- -------------- ------ --------
(1) Constant currency is based on average 2018 exchange rates
weighted over the financial year by 2018 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. Like-for-like sales are
presented on a constant currency basis.
(3) Net contract gains/(losses) represent the net year-on-year
revenue impact from new outlets opened and existing units closed in
the past 12 months. Net contract gains/(losses) are presented on a
constant currency basis.
(4) Acquisition impact represents the revenue impact from
acquired outlets owned for less than 12 months. Acquisition impact
is presented on a constant currency basis. Once the acquisition
annualises revenue is included in like-for-like sales or net
contract gains where appropriate.
Underlying profit measures
The Group presents underlying profit measures, including
operating profit, profit before tax and earnings per share, which
excludes the amortisation of intangible assets arising on the
acquisition of the SSP business in 2006 and the revaluation of the
obligation to acquire an additional 16% ownership share of TFS. A
reconciliation from the underlying to the statutory reported basis
is presented below.
H1 2019 H1 2018
Underlying Adjustments Total Underlying Adjustments Total
Operating profit (GBPm) 62.5 (0.9) 61.6 55.2 (1.0) 54.2
Operating margin 5.0% (0.1)% 4.9% 4.7% (0.1)% 4.6%
Profit before tax (GBPm) 54.2 (2.8) 51.4 48.7 (0.3) 48.4
Earnings per share (p) 6.7 (0.6) 6.1 5.6 (0.0) 5.6
Responsibility statement of the Directors in respect of the
half-yearly report
We confirm that to the best of our knowledge:
-- The condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting as adopted by
the EU;
-- The interim management report includes a fair review of the information required by:
- DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first
six months of the financial year and their impact on the condensed
set of financial statements; and a description of the principal
risks and uncertainties for the remaining six months of the year;
and
- DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
On behalf of the Board
Kate Swann Jonathan Davies
Chief Executive Officer Chief Financial Officer
14 May 2019 14 May 2019
Independent review report to SSP Group plc
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 31 March 2019 which comprises the condensed
consolidated income statement, the condensed consolidated statement
of other comprehensive income, the condensed consolidated balance
sheet, the condensed consolidated statement of changes in equity,
the condensed consolidated cash flow statement, and the related
explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 31
March 2019 is not prepared, in all material respects, in accordance
with IAS 34 Interim Financial Reporting as adopted by the EU and
the Disclosure Guidance and Transparency Rules ("the DTR") of the
UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
The impact of uncertainties due to the UK exiting the European
Union on our review
Uncertainties related to the effects of Brexit are relevant to
understanding our review of the condensed financial statements.
Brexit is one of the most significant economic events for the UK,
and at the date of this report its effects are subject to
unprecedented levels of uncertainty of outcomes, with the full
range of possible effects unknown. An interim review cannot be
expected to predict the unknowable factors or all possible future
implications for a company and this is particularly the case in
relation to Brexit.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
The annual financial statements of the group are prepared in
accordance with International Financial Reporting Standards as
adopted by the EU. The directors are responsible for preparing the
condensed set of financial statements included in the half-yearly
financial report in accordance with IAS 34 as adopted by the
EU.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company for our
review work, for this report, or for the conclusions we have
reached.
Nicholas Frost
for and on behalf of KPMG LLP
Chartered Accountants
KPMG LLP
15 Canada Square
London
E14 5GL
14 May 2019
Condensed consolidated income statement
for the six months ended 31 March 2019
Six months ended 31 March 2019 Six months ended 31 March 2018
Notes Underlying* Adjustment Total Underlying* Adjustment Total
GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 2 1,261.6 - 1,261.6 1,177.8 - 1,177.8
Operating costs 4 (1,199.1) (0.9) (1,200.0) (1,122.6) (1.0) (1,123.6)
Operating profit 62.5 (0.9) 61.6 55.2 (1.0) 54.2
Share of profit of associates 2.1 - 2.1 0.2 - 0.2
Finance income 5 1.0 - 1.0 1.1 0.7 1.8
Finance expense 5 (11.4) (1.9) (13.3) (7.8) - (7.8)
Profit before tax 54.2 (2.8) 51.4 48.7 (0.3) 48.4
Taxation (12.0) (0.1) (12.1) (10.7) 0.2 (10.5)
Profit for the period 42.2 (2.9) 39.3 38.0 (0.1) 37.9
------------ ----------- ---------- ------------ ----------- ----------
Profit attributable to:
Equity holders of the parent 31.2 (2.9) 28.3 26.9 (0.1) 26.8
Non-controlling interests 11.0 - 11.0 11.1 - 11.1
Profit for the period 42.2 (2.9) 39.3 38.0 (0.1) 37.9
------------ ----------- ---------- ------------ ----------- ----------
Earnings per share (p):
- Basic 3 6.7 6.1 5.6 5.6
- Diluted 3 6.6 6.0 5.5 5.5
*Presented on an underlying basis, refer to page 15 for
details
Condensed consolidated statement of other comprehensive
income
for the six months ended 31 March 2019
Six months ended 31 March 2019 Six months ended 31 March 2018
GBPm GBPm
Other comprehensive income/(expense)
Items that will never be reclassified to the income
statement
Remeasurements on defined benefit pension schemes (2.3) (0.6)
Income tax credit relating to items that will not
be reclassified 0.2 1.7
Items that are or may be reclassified subsequently
to the income statement
Net gain on hedge of net investment in foreign
operations 8.5 5.2
Other foreign exchange translation differences (14.2) (22.1)
Effective portion of changes in fair value of cash
flow hedges (3.3) 2.0
Cash flow hedges - reclassified to the income
statement 2.2 2.3
Income tax credit relating to items that are or may
be reclassified 2.8 0.3
Other comprehensive expense for the period (6.1) (11.2)
Profit for the period 39.3 37.9
Total comprehensive income for the period 33.2 26.7
------------------------------- -------------------------------
Total comprehensive income attributable to:
Equity shareholders 20.2 18.2
Non-controlling interests 13.0 8.5
Total comprehensive income for the period 33.2 26.7
------------------------------- -------------------------------
Condensed consolidated balance sheet
as at 31 March 2019
Notes 31 March 2019 30 September 2018
GBPm GBPm
Non-current assets
Property, plant and equipment 420.5 371.4
Goodwill and intangible assets 724.8 731.2
Investments in associates 13.8 10.6
Deferred tax assets 25.7 23.7
Other receivables 54.9 49.2
Other financial assets 8 - 5.1
1,239.7 1,191.2
Current assets
Inventories 35.9 35.1
Tax receivable 8.2 2.0
Trade and other receivables 178.1 178.0
Cash and cash equivalents 8 166.1 147.8
388.3 362.9
Total assets 1,628.0 1,554.1
-------------- ------------------
Current liabilities
Short term borrowings 8 (90.5) (31.5)
Trade and other payables (461.9) (499.7)
Tax payable (21.9) (25.5)
Provisions (3.5) (3.4)
Obligation to acquire additional share of subsidiary undertaking (22.4) (20.5)
(600.2) (580.6)
Non-current liabilities
Long term borrowings 8 (509.0) (456.1)
Post-employment benefit obligations (16.0) (13.0)
Other payables (2.7) (2.5)
Provisions (22.4) (28.0)
Derivative financial liabilities 8 (4.2) (3.2)
Deferred tax liabilities (12.5) (12.4)
(566.8) (515.2)
Total liabilities (1,167.0) (1,095.8)
-------------- ------------------
Net assets 461.0 458.3
-------------- ------------------
Equity
Share capital 4.8 4.8
Share premium 461.2 461.2
Capital redemption reserve 1.2 1.2
Other reserves (19.0) (13.0)
Retained losses (71.9) (77.7)
Total equity shareholders' funds 376.3 376.5
Non-controlling interests 84.7 81.8
Total equity 461.0 458.3
-------------- ------------------
Condensed consolidated statement of changes in equity
for the six months ended 31 March 2019
Share capital Share premium Other Retained Total parent NCI Total equity
reserves (1) losses equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 October
2017 4.7 461.2 (10.3) (55.3) 400.3 64.7 465.0
Profit for the
period - - - 26.8 26.8 11.1 37.9
Other
comprehensive
expense for
the period - - (8.0) (0.6) (8.6) (2.6) (11.2)
Issue of
ordinary
shares under
share option
schemes 0.1 - - - 0.1 - 0.1
Capital
contributions
from NCI - - - - - 2.6 2.6
Dividends paid
to equity
shareholders - - - (23.5) (23.5) - (23.5)
Dividends paid
to NCI - - - - - (11.5) (11.5)
Share-based
payments - - - 4.4 4.4 - 4.4
Current and
deferred tax
on share
schemes - - - 1.0 1.0 - 1.0
At 31 March
2018 4.8 461.2 (18.3) (47.2) 400.5 64.3 464.8
-------------- -------------- -------------- -------------- ------------- ------- -------------
At 1 October
2018 4.8 461.2 (11.8) (77.7) 376.5 81.8 458.3
Profit for the
period - - - 28.3 28.3 11.0 39.3
Other
comprehensive
(expense) /
income for
the period - - (6.0) (2.1) (8.1) 2.0 (6.1)
Issue of - - - - - - -
ordinary
shares under
share option
schemes
Capital
contributions
from NCI - - - - - 3.5 3.5
NCI arising on
acquisition - - - - - 0.7 0.7
Dividends paid
to equity
shareholders - - - (25.2) (25.2) - (25.2)
Dividends paid
to NCI - - - - - (14.3) (14.3)
Share-based
payments - - - 4.7 4.7 - 4.7
Current and
deferred tax
on share
schemes - - - 0.1 0.1 - 0.1
-------------- -------------- -------------- -------------- ------------- ------- -------------
At 31 March
2019 4.8 461.2 (17.8) (71.9) 376.3 84.7 461.0
-------------- -------------- -------------- -------------- ------------- ------- -------------
(1) The other reserves includes the capital redemption reserve,
translation reserve, cash flow hedging reserve and the obligation
to acquire an additional share of a joint venture accounted for as
a subsidiary.
Condensed consolidated cash flow statement
for the six months ended 31 March 2019
Notes Six months ended 31 March 2019 Six months ended 31 March 2018
GBPm GBPm
Cash flows from operating activities
Cash flow from operations 6 76.0 103.9
Tax paid (18.7) (17.6)
Net cash flows from operating activities 57.3 86.3
Cash flows from investing activities
Investment in associate (1.3) (1.0)
Dividends received from associates 0.1 1.1
Interest received 0.6 0.8
Purchase of property, plant and equipment (101.5) (55.0)
Purchase of other intangible assets (10.2) (3.6)
Acquisition of subsidiary, net of cash and
cash equivalents acquired (3.4) (18.8)
Net cash flows from investing activities (115.7) (76.5)
Cash flows from financing activities
Receipt of US Private Placement debt 133.3 -
Repayment of finance lease and other loans (12.7) (1.8)
Financing fee paid (1.0) (2.0)
Investment in other financial assets - 3.4
Interest paid (6.7) (6.9)
Dividends paid to equity shareholders (25.2) (23.5)
Dividends paid to non-controlling interests (14.3) (11.6)
Capital contribution from non-controlling
interests 3.5 2.6
Net cash flows from financing activities 76.9 (39.8)
Net increase / (decrease) in cash and cash
equivalents 18.5 (30.0)
Cash and cash equivalents at beginning of
the period 147.8 178.1
Effect of exchange rate fluctuations on
cash and cash equivalents (0.2) (2.6)
Cash and cash equivalents at end of the
period 166.1 145.5
------------------------------- -------------------------------
Reconciliation of net cash flow to movement
in net debt
Net increase / (decrease) in cash in the
period 18.5 (30.0)
Cash inflow US Private Placement debt (133.3) -
Cash outflow from change in debt and
finance leases 12.7 1.8
Financing fee paid 1.0 2.0
Cash inflow from investment in other
financial assets - (3.4)
Change in net debt resulting from cash
flows (101.1) (29.6)
Translation differences 8.2 2.3
Other non-cash changes (5.8) (0.6)
Increase in net debt in the period (98.7) (27.9)
Net debt at beginning of the period (334.7) (262.2)
Net debt at end of the period (433.4) (290.1)
------------------------------- -------------------------------
Notes
1 Preparation
Basis of preparation and statement of compliance
The condensed consolidated half-yearly financial statements of
SSP Group plc (the Group) have been prepared in accordance with
International Accounting Standard (IAS) 34, Interim Financial
Reporting as adopted by the EU. The annual consolidated financial
statements of the Group are prepared in accordance with
International Financial Reporting Standards as adopted by the EU
(IFRS) and the Companies Act 2006 applicable to companies reporting
under IFRS. These condensed consolidated half-yearly financial
statements do not comprise statutory accounts within the meaning of
Section 435 of the Companies Act 2006, and should be read in
conjunction with the Annual Report and Accounts 2018. The
comparative figures for the six months ended 31 March 2018 are not
the Group's statutory accounts for that financial year. Those
accounts were reported upon by the Group's auditors and delivered
to the registrar of companies. The report of the auditors was
unqualified, did not include a reference to any matters to which
the auditors drew attention by way of emphasis without qualifying
their report and did not contain statements under Section 498 (2)
or (3) of the Companies Act 2006.
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.
Except as described below, the accounting policies adopted in
the preparation of these condensed consolidated half-yearly
financial statements to 31 March 2019 are consistent with the
accounting policies applied by the Group in its consolidated
financial statements as at, and for the year ended, 30 September
2018 as required by the Disclosure and Transparency Rules of the
UK's Financial Conduct Authority.
Changes in accounting policy and disclosures
IFRS 9 'Financial Instruments' and IFRS 15 'Revenue from
contracts with customers' were adopted this financial year. IFRS 9
replaced IAS 39 'Financial Instruments: Recognition and
measurement' whereas IFRS 15 replaced IAS 11 'Construction
contracts' and IAS 18 'Revenue'.
The remaining accounting policies adopted are consistent with
those of the previous year.
The following standards, issued by the IASB and endorsed by the
EU, have not yet been adopted:
IFRS 16 'Leases' (effective for the year ending 30 September
2020) requires lessees to recognise operating leases on the Group's
balance sheet. However, where leases have a lease term of 12 months
or less or the underlying asset has a low value, an election can be
made not to recognise such assets. The standard, which replaces IAS
17 'Leases', will give rise to the recognition of an asset
representing the right-of-use of the leased item and a related
liability being the future lease payment obligations. Therefore,
costs currently classified as operating lease costs will be
reclassified and split between the depreciation of the asset, on a
straight-line basis, and interest on the lease liability. This
reclassification will increase EBITDA with corresponding increases
in the depreciation charge and interest expense. The Group will
adopt a modified retrospective approach to transition and is
currently working on an implementation plan. IFRS 16 will have a
material impact on the Group's consolidated results and an
associated impact on both assets and liabilities.
2 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 and India. 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
Six months ended 31 March 2019
------ ------------ --------- ------ ----------------- --------
Revenue 385.2 452.7 235.9 187.8 - 1,261.6
------ ------------ --------- ------ ----------------- --------
Underlying operating profit/(loss) 39.1 17.7 9.5 15.9 (19.7) 62.5
------ ------------ --------- ------ ----------------- --------
Six months ended 31 March 2018
------ ------------ --------- ------ ----------------- --------
Revenue 369.5 440.5 198.4 169.4 - 1,177.8
------ ------------ --------- ------ ----------------- --------
Underlying operating profit/(loss) 33.4 21.8 6.4 13.6 (20.0) 55.2
------ ------------ --------- ------ ----------------- --------
The following amounts are included in underlying operating
profit:
UK Continental North RoW Non-attributable Total
Europe America
GBPm GBPm GBPm GBPm GBPm GBPm
Six months ended 31 March 2019
------ ------------ --------- ------ ----------------- -------
Depreciation and amortisation* (7.4) (17.9) (15.3) (9.0) (3.2) (52.8)
------ ------------ --------- ------ ----------------- -------
Six months ended 31 March 2018
------ ------------ --------- ------ ----------------- -------
Depreciation and amortisation* (5.7) (16.2) (15.6) (8.3) (1.9) (47.7)
------ ------------ --------- ------ ----------------- -------
* Excludes amortisation of acquisition related intangible
assets.
A reconciliation of underlying operating profit to profit before
and after tax is provided as follows:
Six months ended 31 March 2019 Six months ended 31 March 2018
GBPm GBPm
Underlying operating profit 62.5 55.2
Adjustments to operating costs (note 4) (0.9) (1.0)
Share of profit from associates 2.1 0.2
Finance income 1.0 1.1
Finance expense (11.4) (7.8)
Adjustments to finance expense (note 5) (1.9) 0.7
------------------------------- -------------------------------
Profit before tax 51.4 48.4
Taxation (12.1) (10.5)
------------------------------- -------------------------------
Profit after tax 39.3 37.9
------------------------------- -------------------------------
3 Earnings per share
Basic earnings per share is calculated by dividing the result
for the period attributable to ordinary shareholders by the
weighted average number of ordinary shares outstanding during the
period. Diluted earnings per share is calculated by dividing the
result for the period attributable to ordinary shareholders by the
weighted average number of ordinary shares outstanding during the
period adjusted by potentially dilutive outstanding share
options.
Underlying earnings per share is calculated the same way except
that the result for the period attributable to ordinary
shareholders is adjusted for specific items as detailed below:
Six months ended 31 March 2019 Six months ended 31 March 2018
GBPm GBPm
Profit attributable to ordinary shareholders 28.3 26.8
Adjustments:
Amortisation of acquisition-related intangibles 0.9 1.0
Net revaluation and discount unwind of the TFS
financial liability (note 5) 1.9 (0.7)
Tax effect of adjustments 0.1 (0.2)
------------------------------- -------------------------------
Underlying profit attributable to ordinary
shareholders 31.2 26.9
------------------------------- -------------------------------
Basic weighted average number of shares 466,385,491 476,769,504
Dilutive potential ordinary shares 4,356,506 8,667,255
------------------------------- -------------------------------
Diluted weighted average number of shares 470,741,997 485,436,759
------------------------------- -------------------------------
Earnings per share (p):
- Basic 6.1 5.6
- Diluted 6.0 5.5
Underlying earnings per share (p):
- Basic 6.7 5.6
- Diluted 6.6 5.5
The number of ordinary shares in issue as at 31 March 2019 was
467,021,646 (31 March 2018: 479,392,339).
4 Operating costs
Six months ended 31 March 2019 Six months ended 31 March 2018
GBPm GBPm
Cost of food and materials:
Cost of inventories consumed in the period (369.4) (356.3)
Labour cost:
Employee remuneration (385.1) (356.7)
Overheads:
Depreciation of property, plant and equipment (48.7) (44.2)
Amortisation of intangible assets - software (4.1) (3.5)
Amortisation of acquisition-related intangible
assets (0.9) (1.0)
Rentals payable under operating leases (248.6) (222.3)
Other overheads (143.2) (139.6)
(1,200.0) (1,123.6)
------------------------------- -------------------------------
Adjustments to operating costs
Amortisation of intangible assets arising on
acquisition (0.9) (1.0)
------------------------------- -------------------------------
(0.9) (1.0)
------------------------------- -------------------------------
5 Finance income and expense
Six months ended 31 March 2019 Six months ended 31 March 2018
GBPm GBPm
Finance income
Interest income 1.0 1.0
Net foreign exchange gains - 0.1
Net revaluation and discount unwind of TFS
financial liability - 0.7
------------------------------- -------------------------------
Total finance income 1.0 1.8
------------------------------- -------------------------------
Finance expense
Total interest expense on financial liabilities
measured at amortised cost (7.2) (4.4)
Net change in fair value of cash flow hedges
utilised in the period (2.2) (2.3)
Unwind of discount on provisions (0.3) (0.2)
Net interest expense on defined benefit pension
obligations - (0.1)
Net foreign exchange losses (0.7) -
Net revaluation and discount unwind of TFS (1.9) -
financial liability
Other (1.0) (0.8)
------------------------------- -------------------------------
Total finance expense (13.3) (7.8)
------------------------------- -------------------------------
Adjustments to finance expense
The adjustments to finance expense in the period to 31 March
2019 include the revaluation and discount unwind of the obligation
to acquire an additional 16% share of TFS in April 2019.
Six months ended 31 March 2019 Six months ended 31 March 2018
Unwind of discount on obligation to acquire
additional share of subsidiary undertaking (0.3) (0.2)
Foreign exchange (loss) / gain on revaluation of
obligation to acquire additional share of
subsidiary undertaking (1.6) 0.9
Net revaluation and discount unwind of TFS
financial liability (1.9) 0.7
------------------------------- -------------------------------
6 Cash flow from operations
Six months ended 31 March 2019 Six months ended 31 March 2018
GBPm GBPm
Profit for the period 39.3 37.9
Adjustments for:
Depreciation 48.7 44.3
Amortisation 5.0 4.4
Share-based payments 4.7 7.1
Finance income (1.0) (1.8)
Finance expense 13.3 7.8
Share of profit of associates (2.1) (0.2)
Taxation 12.1 10.5
------------------------------- -------------------------------
120.0 110.0
Increase in trade and other receivables (5.8) (16.1)
Increase in inventories (0.8) (1.4)
Increase/(decrease) in trade and other payables
including provisions (37.4) 11.4
Cash flow from operations 76.0 103.9
------------------------------- -------------------------------
7 Dividends
Six months ended 31 March 2019 Six months ended 31 March 2018
GBPm GBPm
Prior year final dividend of 5.4p per share paid in
the period (2018: 4.9p) (25.2) (23.5)
(25.2) (23.5)
------------------------------- -------------------------------
The proposed interim dividend of 5.8 pence per share (H1 2018:
4.8 pence per share), totalling GBP25.8m (H1 2018: GBP22.2m), will
be paid on 28 June 2019 to shareholders on the register on 7 June
2019.
8 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. It does not include information for
financial assets and financial liabilities not measured at fair
value if the carrying value is a reasonable approximation of fair
value.
Carrying value
31 March 30 September
2019 2018
GBPm GBPm
Financial instruments measured at fair value:
Non-current
Derivative financial liabilities (4.2) (3.2)
Financial instruments not measured at fair value:
Non-current
Other financial assets - 5.1
Long term borrowings (509.0) (456.1)
Current
Cash and cash equivalents 166.1 147.8
Short term borrowings (90.5) (31.5)
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 estimated using market prices at 31 March 2019 is
GBP604.3m (30 September 2018: GBP492.1m).
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 period.
9 Post balance sheet events
On 11 April 2019, the Group signed an agreement to issue US
Private Placement notes (the 'Notes') of US$199.5m and EUR58.5m.
The notes represent SSP's second issue in the US Debt Private
Placement market, following its inaugural issue in 2018 and carry a
fixed rate of interest. The notes will be issued in July 2019 and
December 2019 in four series: US$66.5m at 4.06% to be issued in
July 2019 and maturing in July 2026; US$66.5m at 4.25% to be issued
in December 2019 and maturing in December 2027; US$66.5m at 4.35%
to be issued in December 2019 and maturing in December 2029; and
EUR58.5m at 2.11% to be issued in July 2019 and maturing in July
2031.
On 15 April 2019, the Company completed a share consolidation to
maintain the comparability of the Company's share price before and
after the special dividend. Each shareholder received 20 new
ordinary shares in substitution for every 21 existing ordinary
shares held at the record date. Following this, on 26 April 2019,
the special dividend of 32.1 pence per share was paid to
shareholders equating to c. GBP150m.
In April 2019, the Group completed the planned acquisition of
its 49% stake in Travel Food Services Private Limited ("TFS"), one
of India's largest travel food companies. In line with the terms of
the acquisition originally announced in October 2016, SSP agreed to
create the joint venture with K Hospitality Corp, a leading player
in the F&B industry in India, and acquire a 49% stake in two
stages. The acquisition of the initial 33% stake completed in March
2017, and the second stage of the agreement to acquire a further
16% stake was completed in April 2019 for GBP22.4m.
10 Related parties
Related party relationships exist with the Group's subsidiaries,
associates, key management personnel, pension schemes and employee
benefit trusts. A full explanation of the Group's related party
relationships is provided on pages 98 and 99 of the Annual Report
and Accounts 2018.
There are no material transactions with related parties or
changes in the related party transactions described in the last
annual report that have had, or are expected to have, a material
effect on the financial performance or position of the Group in the
six months to 31 March 2019.
11 Forward looking statement
This document 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" or, in each
case, their negative and words of similar meaning are
forward-looking. By their nature, forward-looking statements
involve risks and uncertainties 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, 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 made by us or on the Group's behalf. 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
document, those results or developments may not be indicative of
results or developments in subsequent periods. Except where
required to do so under applicable law or
regulatory obligations, we undertake no obligation to update any
forward looking statements whether as a result of new information,
future events or otherwise.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR EAXSLFSFNEFF
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May 15, 2019 02:01 ET (06:01 GMT)
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