TIDMSSPG
RNS Number : 9731T
SSP Group PLC
20 November 2019
LEI:213800QGNIWTXFMENJ24
20 November 2019
SSP GROUP PLC
Results for year ended 30 September 2019
"Strong full year results and another year of significant
expansion"
SSP Group, a leading operator of food and beverage outlets in
travel locations worldwide, announces its financial results for the
year ended 30 September 2019.
Highlights:
-- Underlying operating profit(1) of GBP221.1m: up 12.1% at
constant currency(2) , and 13.3% at actual exchange rates.
-- Revenue of GBP2,794.6m: up 7.8% at constant currency, and 9.0% at actual exchange rates.
-- Strong net gains(3) of 5.6%: driven by North America and Continental Europe.
-- Like-for-like sales(4) up 1.9%: driven by growth in passenger numbers, both in air and rail.
-- Underlying operating margin(1) up 30 basis points at constant
currency, driven by further progress on our strategic
initiatives.
-- Underlying profit before tax(5) of GBP203.2m: up 10.2%.
Reported profit before tax of GBP197.2m, up 7.8%.
-- Underlying basic earnings per share(5) of 29.1 pence: up
15.9%. Reported basic earnings per share of 28.1 pence, up
12.9%.
-- Final dividend of 6.0 pence per share, bringing the full year
ordinary dividend to 11.8 pence per share: up 15.7%, reflecting a
payout ratio of 40%.
-- Underlying operating cash inflow(6) of GBP67.9m, after
another year of record capital investment of GBP185.0m.
-- Encouraging pipeline, with significant new contracts
underpinning future growth, including in North America at
LaGuardia, San Jose and Ottawa Airports and in the Rest of the
World at Brisbane, Shenzhen, and Hongqiao Airports; and entry into
three new markets next year: Bahrain, Bermuda and Malaysia.
-- Share buyback of up to GBP100m, underpinning our confidence
in the business and our commitment to maintain an efficient balance
sheet.
Commenting on the results, Simon Smith, CEO of SSP Group,
said:
"SSP has delivered another strong performance in 2019. Operating
profit was up 12% at constant currency, driven by solid
like-for-like sales growth despite some external headwinds,
significant new contract openings and further operational
improvements. We continue to grow our business in North America,
and have made good progress expanding in Continental Europe. In the
Rest of the World, we have grown in India and the Philippines, and
have entered Brazil, a new market for us, with further market
entries planned in Bermuda, Bahrain and Malaysia. The new business
pipeline is strong across all our geographies both this year and
next, and we've announced a GBP100m share buyback which further
demonstrates our confidence in the future of the business.
"The new financial year has started in line with our
expectations 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 to create value for our shareholders."
Financial highlights:
Year-on-year change
2019 2018 Actual FX Constant
GBPm GBPm Rates currency(2)
Revenue 2,794.6 2,564.9 +9.0% +7.8%
Like-for-like sales growth(4) +1.9% +2.8% n/a n/a
Underlying operating profit(1) 221.1 195.2 +13.3% +12.1%
Underlying operating margin(1) 7.9% 7.6% +30 bps +30 bps
Underlying profit before
tax(5) 203.2 184.4 +10.2% n/a
Underlying basic earnings
per share (p)(5) 29.1 25.1 +15.9% n/a
Underlying diluted earnings
per share (p) (5) 28.7 24.8 +15.7% n/a
Dividend per share (p) 11.8 10.2 +15.7% n/a
Underlying operating cash
inflow(6) 67.9 90.2 -24.7% n/a
Net debt (483.4) (334.7) -44.4% n/a
Statutory reported results:
The table below summarises the Group's statutory reported
results (where the financial highlights above are adjusted).
2019 2018 Year-on-year
GBPm GBPm change
Operating profit 219.2 193.3 +13.4%
Operating margin 7.8% 7.5% +30 bps
Profit before tax 197.2 182.9 +7.8%
Basic - Earnings per share
(p) 28.1 24.9 +12.9%
Diluted - Earning per
share (p) 27.7 24.5 +13.1%
(1) Stated on an underlying basis, which excludes 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) 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) Like-for-like sales represent revenues generated in an
equivalent period in each financial year in outlets which have been
open for a minimum of 12 months. Like-for-like sales are presented
on a constant currency basis.
(5) Stated on an underlying basis, which excludes the
amortisation of intangible assets arising on the acquisition of the
SSP business in 2006, the revaluation of the obligation to acquire
an additional 16% shareholding in the TFS business in India, and
the additional non-cash interest as a result of debt modifications
arising on the adoption of IFRS 9.
(6) Stated on an underlying basis after capital expenditure, net
cash flows to/from associates and non-controlling interests,
acquisitions and tax.
Please refer to page 16 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 20 November 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 Full Year 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. With over 50
years of experience, today we have more than 39,000 employees,
serving approximately one and a half million customers every day.
We have business at approximately 180 airports and 300 rail
stations, and operate more than 2,800 units in 35 countries around
the world.
SSP operates an extensive portfolio of more than 550
international, national, and local brands. Among these are local
heroes such as Brioche Dorée in Paris, LEON in London, and Hung's
Delicacies in Hong Kong. Our range also includes proprietary brands
created for the travel sector including Upper Crust, Cabin Bar and
Ritazza, as well as international names such as M&S, Burger
King, Starbucks, Jamie's Deli and YO! Sushi. We also create
stunning bespoke concepts such as Five Borough Food Hall in JFK,
New York and Norgesglasset Bar in Oslo Airport.
www.foodtravelexperts.com
Business review
The Group achieved a strong performance in the year, driven by
solid like-for-like sales growth, despite some external headwinds,
significant new contract openings across the world and further
progress on the implementation of our programme of strategic
initiatives. We are continuing to invest in the growth and
development of the business, bringing new brands, concepts and
technology to meet the evolving needs of our customers, clients and
brand partners, and to drive operating performance.
Cash flow has been healthy, funding another year of record
investment in the business. The increase in the ordinary dividend,
which again represents a payout ratio of 40%, and the announcement
of a share buyback of up to GBP100m, reflect our confidence in the
business and our desire to maintain an efficient balance sheet.
Performance highlights
The financial performance of the Group is presented on an
underlying basis, for which the statutory reported results are
adjusted to exclude the impacts of the amortisation of intangible
assets created on the acquisition of the SSP business in 2006, the
additional interest expense as a result of debt modifications upon
the adoption of IFRS 9 and the revaluation of the obligation to
acquire the additional share of the TFS business in India. 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 16.
The Group delivered a strong financial performance in 2019, with
underlying operating profit increasing by 12.1% (on a constant
currency basis) to GBP221.1m. Total revenue increased by 7.8% (on a
constant currency basis), comprising like-for-like sales growth of
1.9%, net contract gains of 5.6% and revenue from acquisitions of
0.3%.
Like-for-like sales growth for the full year was 1.9%, driven by
increasing passenger numbers across the air and rail sectors.
Like-for-like sales in the air sector grew more strongly than in
the rail sector, although the latter benefited from a lower level
of disruption compared to the prior year. We faced an unusual
number of external headwinds during the year, including disruption
from the 'Gilets Jaunes' protests in France, slower passenger
growth and the impact of a number of airport redevelopments in the
Nordic countries and in Spain, the grounding of Boeing Max 737
aircraft in North America, and weaker Chinese passenger numbers and
the cessation of operations of Jet Airways in the Asia Pacific
region. Looking ahead to 2020, many of these challenges will
continue, particularly in the first half year, and with the
prospect of ongoing political uncertainty and the expectation of
airline capacity cuts, we continue to plan cautiously, anticipating
full year like-for-like sales growth at a similar level to 2019 of
just below 2%.
Net gains remained very strong at 5.6%, with good contributions
from North America and Continental Europe. North America had
another very strong year, with net gains of 13.0%, including new
openings at LaGuardia, Seattle, LAX and Oakland Airports. The net
gains in Continental Europe at 6.6% were unusually strong, driven
by new contracts at Charleroi Airport in Belgium, Montparnasse
Railway Station in Paris, 22 new Motorway Service Areas in Germany
and 29 new Starbucks outlets in railway stations in the
Netherlands. Net gains in the Rest of the World were driven by
India, including new openings at Delhi and Bangalore Airports, and
in the Philippines at Cebu Airport, and towards the end of the year
we commenced operations in Brazil, a new market for us, although
these gains were offset by our exit from some units in Hong Kong
and Shanghai Airports.
During the year, we won a number of important new contracts,
including in North America at LaGuardia, San Jose and Vancouver
Airports. In Continental Europe, we have won contracts at Bodo
Airport in Norway, Alicante Airport in Spain and Stuttgart Station
in Germany, and in the Rest of the World we have secured new
business at Bangalore Airport in India, Shenzhen Airport in China
and Changi Airport in Singapore. In the UK, we acquired all of the
Jamie Oliver units at Gatwick Airport, significantly expanding our
presence there. We have also won new contracts in Bermuda and
Malaysia and once we start operating in these new markets, as well
as in Bahrain, which is scheduled for next year, our global
footprint will increase to 38 countries. We are announcing today
our proposed acquisition of Red Rock's food and beverage operations
in Perth and Melbourne airports. These 14 units generated sales of
approximately GBP15m in FY 2019. In 2020, our expectation is for
net gains of between 4% and 5%, underpinned by the strong pipeline
of new contracts and the inclusion of our proposed acquisition of
Red Rock's food and beverage operations.
The underlying operating margin improvement of 30 bps was driven
by further encouraging progress on our strategic initiatives, in
particular in gross margin, which more than offset ongoing cost
inflation.
Looking forward to 2020, we expect to make further good progress
on our strategic initiatives and deliver another year of
significant expansion. The overall operating margin is expected to
remain at a similar level to this year, as we anticipate higher
pre-opening and start-up costs associated with another year of
strong net gains, our expansion into new territories and our
proposed acquisition of the Red Rock operations, as well as a
slight increase in the rate of depreciation, reflecting the timing
of our investment programme.
During the year we generated GBP50.5m of free cash flow, after
investing GBP185.0m in capital projects, GBP40.8m higher than the
previous year, as a result of our strong net contract gains, as
well as our investment in rebranding programmes in airports where
we had taken over business in previous years. We have also invested
a further GBP22.4m on the acquisition of the remaining 16% stake in
TFS in India. Net debt increased to GBP483.4m, the increase from
last year largely reflecting the payment of the GBP149.8m special
dividend in April 2019, leaving leverage at the year end at 1.5x
Net Debt: EBITDA.
Use of cash
Our priorities for the use of cash remain unchanged. Our primary
focus is organic growth, with selective bolt-on acquisitions where
they deliver returns in line with our investment criteria and align
with our strategy.
Having reviewed our medium-term capital requirements, we have
taken the decision to increase the ordinary dividend for the 2019
financial year to 11.8p, maintaining a payout ratio of 40% of net
income (the top of the range of 30% to 40% we gave at the IPO).
Furthermore, we have today announced our intention to return up to
GBP100m of cash to shareholders in the form of a share buyback
which we intend to complete over the next 12 months. This reflects
the confidence we have in the future of the business and our
commitment to maintaining balance sheet efficiency, with leverage
broadly within the 1.5x-2.0x Net Debt:EBITDA range over the medium
term.
Summary and outlook
Despite the external headwinds, the Group delivered a strong
performance in the year. Looking ahead to 2020, the new financial
year has started in line with our expectations and we remain
confident of delivering another year of strong growth.
Whilst a degree of uncertainty always exists around passenger
numbers in the short-term, we continue to be well placed to benefit
from the significant structural growth opportunities in our markets
and to create ongoing value for our shareholders.
Strategy
We aim to be the leading provider of food and beverage in travel
locations worldwide, delivering across all our stakeholder groups:
our customers, clients, brand partners, investors and importantly
our colleagues. To achieve this, we will continue to focus on our
successful five-lever strategy, underpinned by a strong focus on
corporate governance and on our environmental and social
responsibilities. Further information on the progress we have made
in this area can be found on our website (foodtravelexperts.com)
and we will also provide further details in our 2019 Annual Report
and Accounts.
Below is an overview of the progress we have made on each of our
strategic levers in the period:
1. Optimising our offer to benefit from the positive trends in
our markets and drive profitable LFL sales
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 including
our focus on range, pricing, promotions, upselling and space
management, to drive profitable like-for-like sales, ensuring that
we benefit from the positive trends in the travel market.
As our customers' needs evolve we are increasingly providing
offers to meet these needs. We have made further good progress in
developing a number of premium products, both for our own brands
and in conjunction with our brand partners, and have also expanded
our range of locally sourced, meat free and healthier menu items,
which gives our customers more choice. Increasingly, we are using
technology to improve the service experience for our customers, as
well as to generate operational efficiencies, including further
rolling out self-order kiosks across our estate and successfully
trialling 'order at table' technology for our larger table service
bars and restaurants.
2. Growing profitable new space
The travel food and beverage market in airports and railway
stations is valued at approximately GBP22bn and is characterised by
long-term structural growth. It offers excellent opportunities for
us to expand our business across the globe.
We are continuing to expand our business through new unit
openings and high levels of contract retention. We have seen
significant growth in North America and in the Rest of the World
which together now account for one-third of our business. 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.
In addition to our recent entry into the large and growing
Indian market, we have now entered the Latin American market with
operations in three airports in Brazil (having won a third contract
at Salvador), and from next year, we will expand our global
footprint to 38 countries, once operations begin at airports in
Bahrain, Bermuda and Malaysia. We see further opportunities in all
of our new markets.
Our new business growth is underpinned by our ability to deliver
food and beverage choices that meet the needs of our customers. An
important element of this is the brand line up that we can offer,
which includes both national and international brands which we
franchise, such as Burger King and Starbucks, and our own
proprietary brands such as Upper Crust and Ritazza, which we
operate in several countries. This year, we secured several
important contract wins at airports with our own brands, including
with Ritazza in Abu Dhabi, and with Mi Casa and Nippon Ramen in
Brisbane.
We also create bespoke concepts and partner with 'local hero'
brands to create a sense of place to the travel locations we serve.
Some examples from the year include Dean & David in Germany,
Archipelago in Singapore, Bastard Burger in Sweden and Manufactory
in San Francisco, a bespoke food hall created in partnership with
four leading local chefs.
Finally, we will continue to look for opportunities for bolt-on
acquisitions which meet our returns criteria and align with our
strategy, such as our acquisitions of the Jamie Oliver units at
Gatwick Airport in June and Red Rock's units at Perth and Melbourne
Airports, announced today.
3. Optimising gross margins and leveraging scale benefits
Gross margin has been a significant driver of value for the
group. The roll out of gross margin initiatives is progressing well
across our regions. Key areas of focus include range and recipe
rationalisation, procurement disciplines and the management of
waste and losses. We continue to make good progress introducing
equipment that automates food preparation in our kitchens and helps
to improve the product consistency and reduce waste.
We have also identified further opportunities 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 of these initiatives, we continue to invest in both
central and local resources.
4. Running an efficient and effective business
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 and rising concession
fees.
Our increasing use of technology in food production and food
service is contributing both to improving the customer experience
as well as driving greater labour efficiency. This year we have
introduced a range of new equipment, including automatic sushi
machines, which cut preparation time by 60%, a pizza dough press,
which improves production speed with no wastage, and burger ovens,
which produce a superior product, using less energy. 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. For example, throughout the course of the
past year, we have implemented aerofoil technology in our grab 'n'
go refrigeration units, which helps retain cold air within the
chillers so that less is wasted.
5. Optimising investment using best practice and shared resources
We have maintained our focus on optimising investment using best
practice and shared resources 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 two
outsourced shared service centres in Pune in India and Lodz in
Poland which are used by 19 of SSP's countries for financial
transaction processing and administrative tasks.
This year, we also established an outsourced design centre in
India to support our unit development around the world, initially
for our lower complexity schemes in the UK, Spain, Asia Pacific and
Eastern Europe and Middle East. We will extend these trials to
other countries, whilst at the same time testing higher capex
projects in the UK.
Financial review
Group performance
Change
2019 2018 Constant
GBPm GBPm Reported currency LFL
--------- ---------- ------
Revenue 2,794.6 2,564.9 +9.0% +7.8% +1.9%
-------- -------- --------- ---------- ------
Underlying operating
profit 221.1 195.2 +13.3% +12.1%
-------- -------- --------- ---------- ------
Underlying operating
margin 7.9% 7.6% +30 bps +30 bps
-------- -------- --------- ---------- ------
Operating profit 219.2 193.3 +13.4%
-------- -------- --------- ---------- ------
Operating margin 7.8% 7.5% +30 bps
-------- -------- --------- ---------- ------
Revenue
Revenue increased by 7.8% on a constant currency basis,
comprising like-for-like sales growth of 1.9%, net contract gains
of 5.6%, and a further 0.3% from acquisitions. At actual exchange
rates, total revenue grew by 9.0%, to GBP2,794.6m.
Like-for-like sales growth of 1.9% was broadly consistent across
the first and second halves of the year. The growth in the air
channel has again been stronger than in rail, driven by increasing
passenger numbers in most of our major markets. The overall
like-for-like sales growth has been achieved in spite of a number
of external challenges faced during the year, particularly during
the second half, across a number of our regions, and these
headwinds are further explained within the regional performance
summaries below. Looking ahead to 2020, many of these challenges
will continue, particularly in the first half year, and with the
prospect of ongoing political uncertainty and the expectation of
airline capacity cuts, we continue to plan cautiously, anticipating
full year like-for-like sales at a similar level to 2019 of just
below 2%.
Net gains contributed 5.6% to full year revenue growth. We saw
strong performances from North America with net gains of 13.0%,
including new openings in Seattle, LAX, Oakland and LaGuardia
Airports, and Continental Europe where the unusually strong net
gains of 6.6% were driven by new contracts at Charleroi Airport in
Belgium, Montparnasse Railway Station in Paris, 22 new motorway
service areas in Germany and a new contract for 29 Starbucks units
in railway stations in the Netherlands. For 2020, the pipeline
looks strong, and our expectation is for net gains, including
acquisitions, of between 4% and 5%.
Trading results from outside the UK are converted into sterling
at the average exchange rates for the year. The overall translation
impact on revenue of the movement of foreign currencies
(principally the Euro, US Dollar, Indian Rupee, Swedish Krona and
Norwegian Krone) in 2019 compared to the 2018 average was 1.2%. If
the current spot rates were to continue through 2020, we would
expect a negative currency impact on revenue of around -2% compared
to the average rates used for 2019. This is only a translation
impact.
Underlying operating profit
Underlying operating profit increased by 12.1% on a constant
currency basis and by 13.3% at actual exchange rates to GBP221.1m.
The underlying operating margin improved by 30 bps, driven by
further progress on our strategic initiatives.
Gross margin increased by 80 bps year-on-year on a constant
currency basis. This improvement reflected the ongoing roll-out of
our strategic initiatives to optimise gross margin, including
ranging and mix management, food and drink procurement and waste
and loss reduction.
This was partially offset by an increase in the labour cost
ratio of 20 bps year-on-year reflecting the scale and complexity of
the new opening and rebranding programme, together with the
significant inflationary pressure on labour rates in the UK and
North America. Labour cost ratios were also impacted by several of
the sales headwinds faced during the year, particularly those
relating to political protests in France and Hong Kong that
resulted in sharp and unplanned falls in sales.
Concession fees rose by 60 bps during the year, very much in
line with recent trends, once again impacted by the stronger
like-for-like sales growth in the air sector, which typically has
higher concession fees but also higher gross margins compared to
rail. The improvement in overheads of 30 bps on a constant currency
basis was driven by ongoing strategic initiatives, including
improved energy efficiency. The rate of depreciation remained flat
at 3.8%, slightly below the historical average of around 4%.
Looking forward to 2020, we expect to make further good progress
on our strategic initiatives and deliver another year of
significant expansion. The overall operating margin is expected to
remain at a similar level to this year, as we anticipate higher
pre-opening and start-up costs associated with another year of
strong net gains, our expansion into new territories and our
proposed acquisition of the Red Rock operations, as well as a
slight increase in the rate of depreciation, reflecting the timing
of our investment programme.
Operating profit
Operating profit of GBP219.2m (2018: GBP193.3m) included an
adjustment for the amortisation of acquisition-related intangible
assets of GBP1.9m (2018: GBP1.9m).
Regional performance
UK (including Republic of Ireland)
Change
2019 2018 Constant
GBPm GBPm Reported currency LFL
--------- ---------- ------
Revenue 840.5 798.1 +5.3% +5.3% +2.4%
------ ------ --------- ---------- ------
Underlying operating
profit 101.8 89.5 +13.7% +13.7%
------ ------ --------- ---------- ------
Underlying operating
margin 12.1% 11.2% +90 bps +90 bps
------ ------ --------- ---------- ------
Note - Statutory reported operating profit was GBP100.3m (2018:
GBP88.0m) and operating margin was 11.9% (2018: 11.0%) reflecting
an adjustment for the amortisation of acquisition related
intangible assets of GBP1.5m (2018: GBP1.5m).
Revenue increased by 5.3% on a constant currency basis,
comprising like-for-like sales growth of 2.4% and net contract
gains of 2.9%. The like-for-like sales reflected solid growth in
the air sector and a slightly stronger performance from the rail
sector, which benefited from a lower level of disruption in the
rail network during the summer. Looking forward to 2020, with
ongoing political and economic uncertainty and the expectation of
airline capacity cuts, most notably from the failure of Thomas
Cook, we continue to plan cautiously, expecting like-for-like sales
in the UK to be around 1%.
The net contract gains included contributions from new M&S
Simply Food units in two major London stations, as well as the
three Jamie Oliver restaurants at Gatwick airport which we began
operating in early summer.
Underlying operating profit for the UK increased by 13.7% on a
constant currency basis, and underlying operating margin increased
by 90 bps to 12.1%, driven by the stronger like-for-like sales
growth and by the continued roll out of our operational efficiency
initiatives.
Continental Europe
Change
2019 2018 Constant
GBPm GBPm Reported currency LFL
--------- ---------- ------
Revenue 1,036.9 971.7 +6.7% +7.2% -0.2%
-------- ------ --------- ---------- ------
Underlying operating
profit 79.3 79.5 -0.3% +0.6%
-------- ------ --------- ---------- ------
Underlying operating
margin 7.6% 8.2% -60 bps -50 bps
-------- ------ --------- ---------- ------
Note - Statutory reported operating profit was GBP78.9m (2018:
79.1m) and operating margin was 7.6% (2018: 8.1%) reflecting an
adjustment for the amortisation of acquisition related intangible
assets of GBP0.4m (2018: GBP0.4m).
Revenue increased by 7.2% on a constant currency basis,
comprising a like-for-like sales decline of 0.2%, net contract
gains of 6.6% and the impact of the acquisition of the Stockheim
business in Germany of 0.8%. The lower like-for-like sales
reflected slower passenger growth across the Nordic countries and
Spain, and the impact of major redevelopments in a number of
airports, including Copenhagen, Malaga and Las Palmas.
Like-for-like sales were also impacted by the 'Gilets Jaunes'
protests in France during the first half of the year.
The net contract gains in Continental Europe were unusually
strong, driven by new contracts at Charleroi Airport in Belgium,
Montparnasse Railway Station in Paris, 22 new motorway service
areas in Germany and the new contract for 29 Starbucks units in
railway stations in the Netherlands.
Underlying operating profit increased by 0.6% on a constant
currency basis. The 50 bps reduction in operating margin on a
constant currency basis reflected the impact of the pre-opening
costs relating to the new contracts, together with the disruption
caused by the airport redevelopments in Denmark and Spain and the
protests in France.
North America
Change
2019 2018 Constant
GBPm GBPm Reported currency LFL
--------- ---------- ------
Revenue 533.4 436.3 +22.3% +16.5% +3.5%
------ ------ --------- ---------- ------
Underlying operating
profit 41.9 27.7 +51.3% +44.9%
------ ------ --------- ---------- ------
Underlying operating
margin 7.9% 6.3% +160 bps +150 bps
------ ------ --------- ---------- ------
Note - There are no adjustments between underlying operating
profit and statutory reported operating profit.
North America had a very good year, with revenue increasing by
16.5% on a constant currency basis, comprising like-for-like sales
growth of 3.5% and net contract gains of 13.0%. Like-for-like
growth was stronger during the first half year, benefiting from
positive trends in airport passenger numbers in the North American
market, with growth during the second half affected by the
grounding of Boeing Max 737 aircraft, and by the transfer of
passengers away from our terminals at some airports. Net gains
included new openings in Seattle, LAX, Oakland and LaGuardia
Airports.
Underlying operating profit increased by GBP14.2m to GBP41.9m,
an increase of 44.9% at constant currency. The underlying operating
margin increased by 150 bps on a constant currency basis, largely
reflecting this region's increasing scale and its greater focus on
operating efficiencies and a lower rate of depreciation. The strong
results were particularly pleasing given the lower level of
like-for-like sales growth in the second half, and the significant
new opening programme.
Rest of the World
Change
2019 2018 Constant
GBPm GBPm Reported currency LFL
--------- ---------- ------
Revenue 383.8 358.8 +7.0% +4.5% +4.5%
------ ------ --------- ---------- ------
Underlying operating
profit 35.9 35.7 +0.6% -2.3%
------ ------ --------- ---------- ------
Underlying operating
margin 9.4% 9.9% -50 bps -60 bps
------ ------ --------- ---------- ------
Note - There are no adjustments between underlying operating
profit and statutory reported operating profit.
Revenue increased by 4.5% on a constant currency basis, driven
entirely by like-for-like sales growth. As in North America, this
like-for-like growth was stronger during the first half year,
driven by ongoing passenger growth in India, China and Egypt. The
softer growth during the second half year reflected impacts from a
number of external headwinds, including the cessation of operations
at Jet Airways in India, weaker Chinese passenger numbers, which
impacted the wider Asia Pacific region, and more recently the
protests in Hong Kong. Contract gains came primarily from new units
at airports in India and in the Philippines, but were offset by the
closure of units in Hong Kong and Shanghai.
Underlying operating profit for the Rest of the World was
GBP35.9m, a fall of 2.3% on a constant currency basis. Underlying
operating margin fell by 60bps, with the second half performance
impacted by the lower LFL sales growth and the external headwinds
highlighted above, as well as the closure of units in Hong Kong and
Shanghai and the cost of entering new markets such as the
Philippines and Brazil.
Share of profit of associates
The Group's share of profit from associates was GBP4.1m (2018:
GBP4.8m), the year on year reduction reflecting one-off costs in
our joint venture operations in France. In 2020, we expect the
Group's share of profit from associates to increase to around
GBP7.0m.
Net finance costs
Underlying net finance costs increased by GBP6.4m year-on-year
to GBP22.0m, largely reflecting the higher average levels of net
debt compared to 2018 as a result of the payment of the GBP149.8m
special dividend in April 2019, together with the full year impact
of the GBP100.1m special dividend paid in April 2018. Reported net
finance costs were GBP26.1m (2018: GBP15.2m), reflecting
adjustments of GBP1.9m for the revaluation and discount unwind of
the financial liability to acquire the remaining 16% stake in TFS,
and a further GBP2.2m of non-cash interest charges arising from the
adoption of the new debt modification rules under IFRS 9.
Next year, we expect the underlying net finance costs to be
around GBP25m, reflecting a full year's impact of the April 2019
special dividend and the share buyback programme in 2020.
Taxation
The Group's underlying tax charge for the year was GBP45.1m
(2018: GBP40.5m), equivalent to an effective tax rate of 22.2%
(2018: 22.0%) of the underlying profit before tax. We expect the
underlying effective tax rate to remain at around 22% in 2020.
Non-controlling interests
The non-controlling interests increased year-on-year by GBP1.1m
to GBP26.6m. This increase was lower than in previous years,
largely as a result of a reduction in our joint venture partner's
share of profit in the TFS business in India, following our
acquisition of an additional 16% of the shares during the year. The
non-controlling interests' share of profit in our other joint
ventures in North America and the Rest of the World continued to
grow broadly in line with recent trends.
Looking forward to 2020, non-controlling interests are expected
to increase to around GBP30m at current exchange rates, reflecting
the expected growth in our joint ventures in these regions.
Earnings per share
Underlying basic earnings per share increased by 15.9% to 29.1
pence per share (2018: 25.1 pence per share). Reported basic
earnings per share was 28.1 pence per share (2018: 24.9 pence per
share).
Dividends
In line with the Group's stated priorities for the uses of cash
and after careful review of its medium term investment
requirements, the Board is proposing to maintain the dividend
payout ratio for this year at 40%, the top end of the range stated
in the IPO prospectus. This will equate to a final dividend of 6.0
pence per share (2018: 5.4 pence per share), which is subject to
shareholder approval at the Annual General Meeting. If approved,
this will result in a total ordinary dividend per share for the
year of 11.8 pence (2018: 10.2 pence), an increase of 15.7%.
The final dividend will be paid, subject to shareholder
approval, on 27 March 2020 to shareholders on the register on 6
March 2020. The ex-dividend date will be 5 March 2020.
Cash flow
The table below presents a summary of the Group's cash flow for
2019:
2019 2018
GBPm GBPm
Underlying operating profit(1) 221.1 195.2
Underlying depreciation and amortisation 105.3 97.7
Working capital 3.7 12.8
Net tax (37.1) (37.2)
Other 8.2 11.7
Net cash flow from operating activities 301.2 280.2
Capital expenditure(2) (185.0) (144.2)
Acquisitions in the year (25.8) (19.0)
Net cash flows to/from non-controlling interests/associates (22.5) (22.5)
Other - (4.3)
Operating cash flow 67.9 90.2
Net finance costs (17.4) (13.6)
-------- --------
Free cash flow(2) 50.5 76.6
Dividends paid (200.8) (145.8)
Net cash flow(2) (150.3) (69.2)
-------- --------
(1) Presented on an underlying basis (refer to page 16 for
details).
(2) Capital expenditure is net of capital contributions from
non-controlling interests of GBP9.0m (2018: GBP12.4m).
The Group's cash flow remained healthy, generating net cash flow
from operating activities of GBP301.2m (2018: GBP280.2m), which was
an increase of GBP21.0m year-on-year, and free cash flow of
GBP50.5m (2018: GBP76.6m).
Capital expenditure increased by GBP40.8m to GBP185.0m, the
higher capex reflecting our net contract gains in the year, as well
as the investment in rebranding programmes at airports where we had
taken over the business in previous years, for example at Chicago
Midway and LaGuardia Airports. Capital expenditure in 2020 is
expected to be between GBP160m and GBP170m, excluding our proposed
acquisition of the Red Rock outlets.
Acquisitions in the year used GBP25.8m of cash flow, principally
reflecting the GBP22.4m paid for the additional 16% stake in the
TFS business in India. Net cash outflows to non-controlling
interests, net of cash inflows from associates, amounted to
GBP22.5m.
Net finance costs paid of GBP17.4m were higher than in 2018,
primarily due to the higher levels of net debt following the
payment of the GBP149.8m special dividend in April 2019 in addition
to the GBP100.1m paid in April 2018, together with slightly higher
interest costs arising from our US Private Placement programme.
The dividends paid of GBP200.8m reflected the cost of the 2018
final dividend of 5.4 pence per share, the 2019 interim dividend of
5.8 pence per share and the special dividend of GBP149.8m.
Overall, the Group used net cash of GBP150.3m during the
year.
Balance sheet and net debt
The Group's balance sheet remains in a strong position with the
net debt of GBP483.4m (2018: GBP334.7m) and net assets of GBP415.6m
(2018: GBP458.3m).
GBPm
Opening net debt (1 October 2018) (334.7)
Net cash flow (150.3)
Impact of foreign exchange rates (0.6)
Other 2.2
--------
Closing net debt (30 September 2019) (483.4)
--------
The increase in net debt of GBP148.7m was primarily a result of
the dividend payments of GBP200.8m, including the special dividend
of GBP149.8m paid in April 2019.
Leverage (Net Debt:EBITDA) at the year end was at 1.5x, compared
with 1.1x at the end of the prior year. Having reviewed our medium
term capital requirements, and with leverage remaining well below
our target range of 1.5x-2.0x Net Debt:EBITDA, we are planning to
return up to GBP100m of cash to shareholders in the form of a share
buyback. The buyback programme will begin immediately and will end
no later than 20 November 2020.
We will continue to keep the balance sheet under review, with
the intention of maintaining leverage broadly within the 1.5x-2.0x
Net Debt:EBITDA range over the medium term.
Future reporting
IFRS 16, the new financial reporting standard on accounting for
leases, is effective for all accounting periods beginning on or
after 1 January 2019. As such, SSP's first reported accounting
period under IFRS 16 will be the 2019/20 financial year, commencing
1 October 2019.The Group has elected to use the modified
retrospective transition approach, and therefore the cumulative
effect of the initial adoption will be recognised in the Group's
balance sheet at the same date, with no restatement of comparative
information.
The new standard has no economic impact on the Group, or its
cash flows, and does not affect how the business is run. It does,
however, have a significant impact on the presentation of the
Group's assets and liabilities, as well as its income statement. In
summary, IFRS 16 seeks to align the presentation of leased assets
more closely with owned assets. In doing so, a right of use asset
and a lease liability are brought on to the balance sheet, with the
lease liability recognised at the present value of the future fixed
rental payments.
Whilst the right of use asset is matched to the lease liability
at inception, it will differ in value over the life of the lease.
From an income statement perspective, the pre-IFRS 16 fixed rental
charge is replaced by depreciation and interest. IFRS 16 therefore
results in an increase in EBITDA and operating profit, which are
reported prior to interest being deducted. While depreciation
reduces on a straight line basis, interest is charged on
outstanding lease liabilities and is therefore highest in the early
years of a lease and decreases over time.
For SSP, which operates under concession contracts for nearly
all of its business (in which it pays rent as a percentage of
sales), this means that the fixed minimum guaranteed rent, which is
a constituent of most contracts, is capitalised and depreciated,
while the variable concession fee will continue to be expensed to
the income statement as a rental charge.
On transition, SSP expects to recognise a right of use asset and
a lease liability, each of approximately GBP1.6bn. From an income
statement perspective based on our existing portfolio of leases,
operating profit is expected to increase by approximately GBP10m,
with profit before tax expected to be around GBP25m lower than
under current IAS 17 accounting practice.
In the near term, the Group will continue to report its
financial results both pre and post the impact of IFRS 16. Further
details on the impact of IFRS 16 are provided on page 23.
Post balance sheet events
The Company has announced its intention to return up to GBP100m
to its shareholders through a share buyback programme underpinning
its confidence in the business and commitment to maintain an
efficient balance sheet. The buyback programme will begin
immediately and will end no later than 20 November 2020.
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.
UK Continental North RoW Total
Europe America
2019 Revenue at actual rates
by segment (GBPm) 840.5 1,036.9 533.4 383.8 2,794.6
Impact of foreign exchange
(GBPm) 0.2 4.9 (24.9) (8.7) (28.5)
------ ------------ --------- ------ --------
2019 Revenue at constant
currency(1) (GBPm) 840.7 1,041.8 508.5 375.1 2,766.1
2018 Revenue at actual rates
(GBPm) 798.1 971.7 436.3 358.8 2,564.9
Constant currency sales
growth 5.3% 7.2% 16.5% 4.5% 7.8%
Which is made up of:
Like-for-like sales growth
(2) 2.4% -0.2% 3.5% 4.5% 1.9%
Net contact gains / (losses)
(3) 2.9% 6.6% 13.0% - 5.6%
Acquisitions (4) - 0.8% - - 0.3%
------ ------------ --------- ------ --------
Total constant currency
sales growth 5.3% 7.2% 16.5% 4.5% 7.8%
====== ============ ========= ====== ========
(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 year in outlets which have been
open for a minimum of 12 months. Like-for-like sales are presented
on a constant currency basis.
(3) Revenue in outlets which have been open for less than 12
months and prior period revenues in respect of closed outlets are
excluded from like-for-like sales and classified as contract gains.
Net contract gains/(losses) are presented on a constant currency
basis.
(4) The acquisition impact of Stockheim has been presented
separately from net contract gains/(losses) from existing SSP
business.
Underlying profit measures
The Group presents underlying profit measures, including
operating profit, profit before tax and earnings per share, which
exclude 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 and
the additional non-cash interest as a result of debt modifications
arising from the adoption of IFRS 9. A reconciliation from the
underlying to the statutory reported basis is presented below.
2019 2018
Underlying Adjustments Total Underlying Adjustments Total
Operating profit
(GBPm) 221.1 (1.9) 219.2 195.2 (1.9) 193.3
Operating margin 7.9% (0.1)% 7.8% 7.6% (0.1)% 7.5%
Profit before
tax (GBPm) 203.2 (6.0) 197.2 184.4 (1.5) 182.9
Earnings per
share (p) 29.1 (1.0) 28.1 25.1 (0.2) 24.9
Consolidated income statement
for the year ended 30 September 2019
2019 2018
------------------------------------- -------------------------------------
Notes Underlying* Adjustment Total Underlying* Adjustment Total
GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 2 2,794.6 - 2,794.6 2,564.9 - 2,564.9
Operating
costs 4 (2,573.5) (1.9) (2,575.4) (2,369.7) (1.9) (2,371.6)
Operating
profit 221.1 (1.9) 219.2 195.2 (1.9) 193.3
Share of profit
of associates 4.1 - 4.1 4.8 - 4.8
Finance income 5 2.3 - 2.3 1.9 0.9 2.8
Finance expense 5 (24.3) (4.1) (28.4) (17.5) (0.5) (18.0)
Profit before
tax 203.2 (6.0) 197.2 184.4 (1.5) 182.9
Taxation (45.1) 1.4 (43.7) (40.5) 0.3 (40.2)
Profit for
the year 158.1 (4.6) 153.5 143.9 (1.2) 142.7
============ =========== ========== ============ =========== ==========
Profit attributable to:
Equity holders
of the parent 131.5 (4.6) 126.9 118.4 (1.2) 117.2
Non-controlling
interests 26.6 - 26.6 25.5 - 25.5
Profit for
the year 158.1 (4.6) 153.5 143.9 (1.2) 142.7
============ =========== ========== ============ =========== ==========
Earnings per share (p):
- Basic 3 29.1 28.1 25.1 24.9
- Diluted 3 28.7 27.7 24.8 24.5
*Presented on an underlying basis, refer to page 16 for
details
Consolidated statement of other comprehensive income
for the year ended 30 September 2019
2019 2018
GBPm GBPm
Other comprehensive income/(expense)
Items that will never be reclassified to the
income statement
Remeasurements on defined benefit pension
schemes (6.2) 0.1
Tax credit/(charge) relating to items that
will not be reclassified 1.9 (0.5)
Items that are or may be reclassified subsequently
to the income statement
Net loss on hedge of net investment in foreign
operations (4.3) (1.0)
Other foreign exchange translation differences 16.0 (6.8)
Effective portion of changes in fair value
of cash flow hedges (5.9) 1.3
Cash flow hedges - reclassified to the income
statement 3.8 4.5
Tax credit/(charge) relating to items that
are or may be reclassified 0.2 (0.2)
Other comprehensive income/(expense) for the
year 5.5 (2.6)
Profit for the year 153.5 142.7
Total comprehensive income for the year 159.0 140.1
====== ======
Total comprehensive income attributable to:
Equity shareholders 129.1 115.8
Non-controlling interests 29.9 24.3
Total comprehensive income for the year 159.0 140.1
====== ======
Consolidated balance sheet
as at 30 September 2019
Notes 2019 2018
GBPm GBPm
Non-current assets
Property, plant and equipment 466.5 371.4
Goodwill and intangible assets 747.1 731.2
Investments in associates 17.3 10.6
Deferred tax assets 28.2 23.7
Other receivables 54.3 49.2
Other financial assets 8 - 5.1
1,313.4 1,191.2
Current assets
Inventories 38.7 35.1
Tax receivable 0.8 2.0
Trade and other receivables 205.4 178.0
Cash and cash equivalents 8 233.3 147.8
478.2 362.9
Total assets 1,791.6 1,554.1
Current liabilities
Short-term borrowings 8 (128.8) (31.5)
Trade and other payables (551.9) (499.7)
Tax payable (30.9) (25.5)
Provisions (4.6) (3.4)
Obligation to acquire additional share of subsidiary undertaking - (20.5)
(716.2) (580.6)
Non-current liabilities
Long-term borrowings 8 (587.9) (456.1)
Post-employment benefit obligations (19.6) (13.0)
Other payables (4.1) (2.5)
Provisions (29.9) (28.0)
Derivative financial liabilities 8 (4.6) (3.2)
Deferred tax liabilities (13.7) (12.4)
(659.8) (515.2)
Total liabilities (1,376.0) (1,095.8)
Net assets 415.6 458.3
Equity
Share capital 4.8 4.8
Share premium 461.2 461.2
Capital redemption reserve 1.2 1.2
Other reserves 12.9 (13.0)
Retained losses (152.1) (77.7)
Total equity shareholders' funds 328.0 376.5
Non-controlling interests 87.6 81.8
Total equity 415.6 458.3
Consolidated statement of changes in equity
for the year ended 30 September 2019
Share Share Capital Other Retained Total NCI Total
capital premium redemption reserves earnings parent equity
reserve equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 October 2017 4.7 461.2 1.2 (11.5) (55.3) 400.3 64.7 465.0
Profit for the
year - - - - 117.2 117.2 25.5 142.7
Other
comprehensive
expense for the
year - - - (1.0) (0.4) (1.4) (1.2) (2.6)
Increase in NCI
equity - - - (0.5) - (0.5) 2.0 1.5
Issue of shares 0.1 - - - - 0.1 - 0.1
Capital
contributions
from NCI - - - - - - 12.4 12.4
Dividends paid to
equity
shareholders - - - - (145.8) (145.8) - (145.8)
Dividends paid to
NCI - - - - - - (21.6) (21.6)
Share-based
payments - - - - 4.6 4.6 - 4.6
Tax on
share-based
payments - - - - 2.0 2.0 - 2.0
----------- ----------- ----------- ----------- ----------- ----------- ------- -----------
At 30 September
2018 4.8 461.2 1.2 (13.0) (77.7) 376.5 81.8 458.3
IFRS 9 Opening
balance sheet
adjustment (see
note 1) - - - - 7.7 7.7 - 7.7
Tax on IFRS 9
Opening balance
sheet adjustment
(see note 1) - - - - (1.5) (1.5) - (1.5)
----------- ----------- ----------- ----------- ----------- ----------- ------- -----------
Revised balance
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
income/(expense)
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
additional stake
in 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
=========== =========== =========== =========== =========== =========== ======= ===========
Consolidated cash flow statement
for the year ended 30 September 2019
Notes 2019 2018
GBPm GBPm
Cash flows from operating activities
Cash flow from operations 6 338.3 310.1
Tax paid (37.1) (37.2)
Net cash flows from operating activities 301.2 272.9
Cash flows from investing activities
Dividends received from associates 5.2 3.9
Interest received 2.4 1.9
Purchase of property, plant and equipment (175.9) (146.6)
Purchase of other intangible assets (18.1) (10.0)
Acquisitions in the year, net of cash and cash equivalents acquired (3.4) (19.0)
Investment in associate (3.0) (2.6)
Net cash flows from investing activities (192.8) (172.4)
Cash flows from financing activities
Repayment of borrowings (32.0) (31.5)
Drawdown on revolving credit facility 27.5 70.0
Purchase of additional 16% stake in TFS (22.4) -
Drawdown on USPP debt 239.8 -
Repayment of finance leases and other loans (3.2) (1.7)
Realisation of other financial assets - 5.2
Refinancing fee paid (1.3) (2.0)
Interest paid (18.5) (13.5)
Dividends paid to equity shareholders (200.8) (145.8)
Dividends paid to non-controlling interests, net of equity issued to them (24.7) (19.6)
Loan to associate - (4.2)
Capital contribution from non-controlling interests 9.0 12.4
Net cash flows from financing activities (26.6) (130.7)
Net increase/(decrease) in cash and cash equivalents 81.8 (30.2)
Cash and cash equivalents at beginning of the year 147.8 178.1
Effect of exchange rate fluctuations on cash and cash equivalents 3.7 (0.1)
Cash and cash equivalents at end of the year 233.3 147.8
======== ========
Reconciliation of net cash flow to movement in net debt
Net increase/(decrease) in cash in the year 81.8 (30.2)
Cash inflow from movement in debt and finance leases (232.1) (36.8)
Cash inflow from movement in other financial assets (5.1) (5.2)
Change in net debt resulting from cash flows (155.4) (72.2)
Translation differences (0.6) (1.0)
Other non-cash changes 7.3 0.7
Increase in net debt in the year (148.7) (72.5)
Net debt at beginning of the year (334.7) (262.2)
Net debt at end of the year (483.4) (334.7)
======== ========
Notes
1 Preparation
Basis of preparation and statement of compliance
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.
The financial statements are presented in Sterling, which is the
Company's functional currency. All information is given to the
nearest GBP0.1m.
The financial statements are prepared on the historical cost
basis, except in respect of the derivative financial instruments
that are stated at their fair value.
New accounting standards adopted by the Group
There have been significant changes to accounting under IFRS
which have affected the Group's financial statements. New standards
and interpretations effective for periods commencing on or after 1
January 2018 and therefore applicable to the Group's financial
statements for the financial year ended 30 September 2019 are
listed below:
IFRS 9 Financial Instruments
IFRS 9 Financial Instruments replaced IAS 39 'Financial
Instruments: Recognition and Measurement'. The standard introduces
changes to four key areas:
- New requirements for the classification and measurement of financial instruments;
- A new impairment model based on expected credit losses for recognising provisions;
- Debt revaluations for all debt modifications, rather than only
significant modifications; and
- Simplified hedge accounting through closer alignment with an
entity's risk management methodology.
IFRS 9 was adopted using the modified transition approach
without restating comparative information. Hedge accounting
relationships within the scope of IFRS 9 have transitioned
prospectively. The adoption of the standard has not had a material
impact either the consolidated income statement or the consolidated
balance sheet. Adjustments as a result of the adoption of the
standard are reflected in the opening balance sheet as of 1 October
2018. These relate to the new debt modification rules and are not
reflected in the comparative balance sheet. As shown in the
consolidated statement of changes in equity, the total impact on
the Group's retained earnings was an increase of GBP6.2m,
reflecting a GBP7.7m impact of IFRS 9 itself less a related tax
charge of GBP1.5m. The change also reduced opening borrowings by
GBP7.7m, increased current tax liabilities by GBP1.5m and increased
interest expense for the 12 months ended 30 September 2019 by
GBP2.2 million.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 Revenue from Contracts with Customers provides a
five-step revenue recognition model, applicable to all sales
contracts, which is based on the principle that revenue is
recognised when control of goods or services is transferred to the
customer. The standard provides a single, principles-based
five-step model to be applied to all contracts with customers to
determine whether, how much and when revenue is recognised. IFRS 15
replaces the separate models for goods, services and construction
contracts under IAS 11 'Construction Contracts' and IAS 18
'Revenue'.
The Group has adopted IFRS 15 using the cumulative catch-up
('modified') transition method with the effect of first applying
this standard at the date of the initial application. The Group has
analysed all material revenue streams and concluded that the
application of IFRS 15 will result in the same timing and amount of
revenue recognition as its previous accounting policy.
Consequently, no separate presentation of its impact on the
financial statements is given.
Accounting standards issued but not yet effective
IFRS 16 Leases
IFRS 16 introduces a single, on-balance sheet lease accounting
model for lessees. A lessee recognises a right of use asset
representing its right to use the underlying asset and a lease
liability representing its obligation to make lease payments. There
are recognition exemptions for short-term leases and leases of
low-value items. Lessor accounting remains similar to the current
standard - i.e. lessors continue to classify leases as finance or
operating leases.
IFRS 16 replaces existing leases guidance, including IAS 17
Leases, IFRIC 4 Determining whether an Arrangement contains a
Lease, SIC-15 Operating Leases- Incentives and SIC-27 Evaluating
the Substance of Transactions Involving the Legal Form of a
Lease.
The Group plans to apply IFRS 16 initially on 1 October 2019,
using the modified retrospective approach. Therefore the cumulative
effect of the initial adoption of IFRS 16 will be recognised in the
Consolidated Balance Sheet at the same date, with no restatement of
comparative information.
The Group will recognise new assets and liabilities for its
concession contracts, buildings and other leases. The nature of
expenses related to those leases will now change because the Group
will recognise a depreciation charge for right of use assets and
interest expense arising on the unwinding of the discount on lease
liabilities. Previously the Group recognised operating lease
expense on a straight-line basis over the term of the lease, and
recognised assets and liabilities only to the extent that there was
a timing difference between actual lease payments and the expense
recognised.
In addition, the Group will no longer recognise provisions for
operating leases that it assesses to be onerous. Instead, the Group
will include the payments due under the lease in its lease
liability.
No significant impact is expected for the Group's finance
leases.
Based on the information currently available and our existing
portfolio of leases, the Group estimates that it will recognise a
right of use asset and a corresponding lease liability, each of
approximately GBP1.6bn, and an onerous lease provision of GBP3.8m
will be derecognised. The impact on other working capital balances
on a net basis is not expected to be material. From an income
statement perspective, the indicative impact is:
- EBITDA is expected to increase by approximately GBP345m being
the reduction in the lease charge;
- Depreciation and interest arising on the right of use asset
and unwind of the lease liability is expected to be approximately
GBP370m; and
- Profit before tax is expected to be approximately GBP25m lower
than under current IAS 17 accounting practice.
The impact on the Group cash flow will be neutral with
reclassification of cash flow from operations to net cash flows
from financing activities.
The impact assessment and oversight of the implementation of
IFRS 16 has been carried out by a working group which includes
senior members of Group and divisional finance teams. Progress has
been monitored throughout by the Group Audit and Risk committees.
The adoption of the new standard is in the final stages of
completion.
Other standards
The following amended standards and interpretations are not
expected to have a significant impact on the Group's consolidated
financial statements:
- IFRIC 23 Uncertainty over Tax Treatments.
- Prepayment Features with Negative Compensation (Amendments to IFRS 9).
- Long-term Interests in Associates and Joint Ventures (Amendments to IAS 28).
- Plan Amendment, Curtailment or Settlement (Amendments to IAS 19).
- Annual Improvements to IFRS Standards 2015-2017 Cycle-various standards.
- Amendments to References to Conceptual Framework in IFRS Standards.
- IFRS 17 Insurance Contracts.
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 the 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, Western Europe 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. Revenue is measured in a manner
consistent with that in the income statement.
2019 UK Continental Europe North America RoW Non-attributable Total
GBPm GBPm GBPm GBPm GBPm GBPm
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
------- ------------------- -------------- ------- ----------------- --------
2018
------- ------------------- -------------- ------- ----------------- --------
Revenue 798.1 971.7 436.3 358.8 - 2,564.9
------- ------------------- -------------- ------- ----------------- --------
Underlying operating
profit/(loss) 89.5 79.5 27.7 35.7 (37.2) 195.2
------- ------------------- -------------- ------- ----------------- --------
The following amounts are included in underlying operating profit:
UK Continental Europe North America RoW Non-attributable Total
GBPm GBPm GBPm GBPm GBPm GBPm
2019
------- ------------------- -------------- ------- ----------------- --------
Depreciation and amortisation* (15.2) (35.6) (31.3) (18.6) (4.6) (105.3)
------- ------------------- -------------- ------- ----------------- --------
2018
------- ------------------- -------------- ------- ----------------- --------
Depreciation and amortisation* (12.9) (34.5) (28.0) (17.0) (5.3) (97.7)
------- ------------------- -------------- ------- ----------------- --------
* Excludes amortisation of acquisition related intangible
assets.
A reconciliation of underlying operating profit to profit before
and after tax is provided as follows:
2019 2018
GBPm GBPm
Underlying operating profit 221.1 195.2
Adjustments to operating costs (1.9) (1.9)
Share of profit from associates 4.1 4.8
Finance income 2.3 2.8
Finance expense (28.4) (18.0)
------- -------
Profit before tax 197.2 182.9
Taxation (43.7) (40.2)
------- -------
Profit after tax 153.5 142.7
======= =======
3 Earnings per share
Basic earnings 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 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 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 in the below table.
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 to be paid on 26 April 2019. 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, a special dividend of 32.1 pence
per share was paid to shareholders, equating to a total payment of
GBP149.8m.
2019 2018
GBPm GBPm
Profit attributable to ordinary shareholders 126.9 117.2
Adjustments:
Amortisation of acquisition-related intangibles 1.9 1.9
Net revaluation and unwind of discount on obligation
to acquire shareholding from non-controlling
interest (note 5) 1.9 (0.4)
Interest expense arising from the adoption 2.2 -
of IFRS 9 (notes 1 and 5)
Tax effect of adjustments (1.4) (0.3)
------------ ------------
Underlying profit attributable to ordinary
shareholders 131.5 118.4
============ ============
Basic weighted average number of shares 452,360,460 471,499,626
Dilutive potential ordinary shares 5,953,867 6,515,410
------------ ------------
Diluted weighted average number of shares 458,314,327 478,015,036
============ ============
The number of ordinary shares in issue as at 30 September 2019 was
444,852,520 (2018: 464,008,266).
2019 2018
Earnings per share (p):
- Basic 28.1 24.9
- Diluted 27.7 24.5
Underlying earnings per share (p):
- Basic 29.1 25.1
- Diluted 28.7 24.8
4 Operating costs
2019 2018
GBPm GBPm
Cost of food and materials:
Cost of inventories consumed in the
year (806.7) (763.5)
Labour cost:
Employee remuneration (809.3) (736.3)
Overheads:
Depreciation of property, plant and
equipment (98.3) (90.3)
Amortisation of intangible assets (8.9) (9.3)
Rentals payable under operating leases (551.8) (489.6)
Other overheads (300.4) (282.6)
(2,575.4) (2,371.6)
========== ==========
Adjustments to operating costs
Amortisation of intangible assets arising
on acquisition (1.9) (1.9)
---------- ----------
(1.9) (1.9)
========== ==========
5 Finance income and expense
2019 2018
GBPm GBPm
Finance income
Interest income 2.3 1.9
Foreign exchange gains on revaluation of obligation
to acquire additional share of subsidiary
undertaking - 0.9
------- -------
Total finance income 2.3 2.8
======= =======
Finance expense
Total interest expense on financial liabilities
measured at amortised cost (18.1) (9.4)
Net change in fair value of cash flow hedges
utilised in the year (3.8) (4.5)
Unwind of discount on provisions (0.4) (0.6)
Net interest expense on defined benefit pension
obligations - (0.3)
Unwind of discount on obligation to acquire
additional share of subsidiary undertaking (0.3) (0.5)
Foreign exchange losses on revaluation of
obligation to acquire additional share of (1.6) -
subsidiary undertaking
Other net foreign exchange losses (0.7) (0.8)
Other (3.5) (1.9)
Total finance expense (28.4) (18.0)
======= =======
Adjustments to finance expense
The adjustments to finance expense comprise adjustments to the
financial liability recognised in respect of the obligation to
acquire an additional 16% ownership share of TFS. This liability
was settled in April 2019. Furthermore, in 2019, an adjustment has
also been made to record additional non-cash interest expense
arising as a result of changes to the effective interest rate
following the adoption of IFRS 9.
2019 2018
GBPm GBPm
Unwind of discount on obligation to acquire
additional share of subsidiary undertaking (0.3) (0.5)
Foreign exchange (losses)/gains on revaluation
of obligation to acquire additional share of
subsidiary undertaking (1.6) 0.9
-------- --------
Total adjustments to the TFS financial liability (1.9) 0.4
Additional interest expense from adoption of (2.2) -
IFRS 9
-------- --------
Total adjustments to finance income and expense (4.1) 0.4
======== ========
6 Cash flow from operations
2019 2018
GBPm GBPm
Profit for the year 153.5 142.7
Adjustments for:
Depreciation 98.3 90.3
Amortisation 8.9 9.3
Share-based payments 8.2 11.7
Finance income (2.3) (2.8)
Finance expense 28.4 18.0
Share of profit of associates (4.1) (4.8)
Taxation 43.7 40.2
------- -------
334.6 304.6
Increase in trade and other receivables (30.4) (54.1)
Increase in inventories (3.6) (2.5)
Increase in trade and other payables (including
provisions) 37.7 62.1
Cash flow from operations 338.3 310.1
======= =======
7 Dividends
2019 2018
GBPm GBPm
Interim dividend paid in the year of 5.8p
per share (2018: 4.8p) (25.8) (22.2)
Special dividend paid in the year of 32.1p
per share (2018: 20.9p) (149.8) (100.1)
Prior year final dividend of 5.4p per share
paid in the year (2018: 4.9p) (25.2) (23.5)
(200.8) (145.8)
======== ========
The proposed dividend of 6.0 pence per share, amounting to a
final dividend of GBP26.7m, is not included as a liability in these
financial statements and, subject to shareholder approval, will be
paid on 27 March 2020 to shareholders on the register on 6 March
2020.
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 amounts and fair values of certain financial
instruments
The following table shows the carrying amounts 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 amount is a reasonable approximation of fair
value.
Carrying amounts
2019 2018
GBPm GBPm
Financial instruments measured at fair value:
Non-current
Derivative financial liabilities (4.6) (3.2)
Financial instruments not measured at fair
value:
Non-current
Other financial assets - 5.1
Long-term borrowings (587.9) (456.1)
Current
Cash and cash equivalents 233.3 147.8
Short-term borrowings (128.8) (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 (excluding finance lease liabilities) estimated using
market prices at 30 September 2019 is GBP727.1m (30 September 2018:
490.4m).
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.
9 Post balance sheet event
The Company has announced its intention to return up to GBP100m
to its shareholders through a share buyback programme underpinning
its confidence in the business and commitment to maintain an
efficient balance sheet. The buyback programme will begin
immediately and will end no later than 20 November 2020.
10 Annual General Meeting
The Group's Annual General Meeting will be held on 26 February
2020. 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 2020.
11 Other information
The financial information for the year ended 30 September 2019
contained in this preliminary announcement was approved by the
Board on 19 November 2019. This announcement does not constitute
the statutory accounts of the Company within the meaning of section
435 of the Companies Act 2006, but is derived from those
accounts.
Statutory accounts for the year ended 30 September 2018 have
been delivered to the Registrar of Companies. Statutory accounts
for the year ended 30 September 2019 will be delivered to the
Registrar of Companies following the Company's Annual General
Meeting.
The auditor has reported on the 2019 accounts. Their report was
not qualified, did not include a reference to any matters to which
the auditor drew attention by way of emphasis without qualifying
its report, and 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 2019 will be posted and made available to shareholders on
the Company's website in January 2020.
12 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 any other document, 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
FR BLBLTMBTBBTL
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November 20, 2019 02:00 ET (07:00 GMT)
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