Half Yearly Report

RNS Number : 8485N

SSP Group PLC

21 May 2015

 

21 May 2015

SSP GROUP PLC 2015 INTERIM RESULTS

SSP Group, a leading operator of food and beverage outlets in travel locations worldwide, announces its results for the first half of its 2015 financial year, covering the six months ended 31 March 2015.

Highlights:

·   Like-for-like sales up 3.0%: strong increases in the UK, North America, Rest of the World

·   Revenue of £859.2m: up 2.6% on a constant currency basis; down 0.8% at actual exchange rates

·   Operating profit¹ of £25.2m: up 35.2% in constant currency, and 27.9% at actual exchange rates

·   Operating margin¹ up 0.6% to 2.9%; tougher comparative in second half

·   Increased investment in the business: capital expenditure up 19.2% to £39.8m

·   Good progress on future development pipeline for the medium-term

·   Brand and concept portfolio further strengthened: working with Jamie Oliver Restaurant Group; James Martin Kitchen opened; new brands include Joe & the Juice and Maan Coffee

·   Maiden interim dividend of 2.1 pence per share, consistent with the policy stated at the IPO

Commenting on the results, Kate Swann, CEO of SSP Group, said:

"We delivered a good performance in the first half of 2015 with profit up 28% and like-for-like sales growth of 3.0%.  We have continued to successfully implement our strategy, and are encouraged by the significant contract wins we have secured so far this year.

Our confidence in the future is supported by our increasing investment in the business and by the further strengthening of the portfolio of brands and concepts we offer to our clients. The second half of the 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 positioned to benefit from the underlying positive trends in our markets."

 

			Change H1 2015 vs H1 2014
	H1 2015 £m	H1 2014 £m	Constant Currency	Actual FX Rates
Revenue	859.2	865.8	+2.6%	(0.8%)
Like-for-like sales growth	-	-	+3.0%	-
Operating profit 1	25.2	19.7	+35.2%	+27.9%
Profit before tax 1	16.4	10.9 2	n/a	+50.5%
Earnings per share (p) 1	2.1	1.3 2	n/a	+61.5%
Dividend per share (p)	2.1	-	n/a	n/a
Operating cash outflow 3	(13.3)	(19.2)	n/a	+30.7%

¹ Stated on an underlying basis, excluding exceptional items in the first half of 2014 and amortisation of intangible assets arising on the acquisition of the Group by EQT in 2006.  Please refer to the consolidated income statement for a reconciliation from the underlying to the statutory reported basis

² Pro-forma results for the first half of 2014, given on a non-audited basis, as if post IPO financing had been in place

³ Stated on an underlying basis after capital expenditure and tax, and excluding exceptional items

Like-for-like (LFL) sales represent revenues generated in an equivalent period in each financial year in outlets which have been open for a minimum of 12 months and occupy a similar sales area.

CONTACTS:

Investor and analyst enquiries

Charles King

Director of Investor Relations, SSP Group plc

On 21 May: [phone]

Thereafter: [phone]

E-mail: [e-mail]

Media enquiries

Jenni Wheller

Head of Communications, SSP Group plc

On 21 May:  [phone]

Thereafter: [phone]

E-mail: [e-mail]

Rory Godson / Rob Greening / Lisa Kavanagh

Powerscourt

[phone]

E-mail: [e-mail]

 

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 a heritage stretching back over 50 years, today SSP has nearly 30,000 employees, serving approximately a million customers every day. As at 31 March 2015, it has business at circa 130 airports and circa 270 rail stations, and operates approximately 2,000 units in 29 countries around the world.

SSP operates an extensive portfolio of approximately 300 international, national, and local brands. These include Upper Crust, Starbucks, Caffè Ritazza, Burger King, M&S Simply Food, Caviar House & Prunier, Millie's Cookies, and YO! Sushi, as well as stunning bespoke concepts such as the Montreux Jazz Café, Café Deco in Hong Kong and Shanghai, and the award winning Center Bar at Zurich.

www.foodtravelexperts.com

 

Business review

Overview

The Group delivered a good performance in the first half of 2015, driven by like-for-like sales growth and the continued successful implementation of our strategy.  We also made good progress in winning new contracts, and in enhancing our competitive position through increased investment and by further strengthening the portfolio of brands and concepts we offer to our clients.

Good financial results

The Group delivered a good financial performance in the first half of the 2015 financial year.

Like-for-like sales grew 3.0%, with continued strong performances in the UK, North America and Rest of World, although trading remains more challenging in some parts of Continental Europe, notably France and Germany given weak consumer spending and strikes.

Net contract losses reduced revenue by 0.4%, principally reflecting the previously announced loss of an on-board rail contract in 2014. We continue to expect a stronger net contract gains performance in the second half of this financial year as we pass the anniversary of this loss and as we see the benefits of a number of new openings, including at Stansted, Nice, and Toronto; we expect positive full year net contract gains.

Total revenue increased by 2.6% on a constant currency basis. At actual exchange rates, total revenue decreased by 0.8% to £859.2m, principally as a result of the strengthening of Sterling against the Euro, the Norwegian Krone and the Swedish Krona when compared to the first half of 2014.

Underlying operating profit of £25.2m grew by 35.2% on a constant currency basis and by 27.9% at actual exchange rates. Underlying operating margin increased by 0.6% to 2.9%, reflecting encouraging progress on gross margin optimisation and on our ongoing programme to improve our operating efficiency.  However, the second half of the year will represent a tougher comparative than the first half in terms of margin improvement, principally because a number of our efficiency initiatives were only at an early stage in the first half of 2014, but were more developed in the second half.  We also anticipate incurring higher pre-opening costs in the second half as new contracts mobilise.  Accordingly, we expect our second half underlying operating margin to be broadly in line with the comparable period last year.

Investment in the business increased in the first half of this year, with capital expenditure of £39.8m, an increase of 19.2%.  Despite this increased capital expenditure, the free cash outflow normally seen in the first half given the seasonality of the business was reduced by £6.6m to £31.0m, and, as a result, including foreign exchange movements, net debt rose only by £10.3m in the half year, to £381.4m.

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.    Driving our like-for-like sales growth

Our focus is on the food and beverage market in travel locations.  We expect to benefit from the structural growth in this market, and our aim is to capitalise on it by using our retail skills to drive profitable like-for-like sales growth.

The underlying trends in this market continued to be positive in the first half of 2015, and all divisions delivered a robust performance.  We saw continued good growth in the UK, driven particularly by the air sector, and in North America. We also saw an encouraging performance in the Rest of the World, with strong sales growth in China, Thailand, and Egypt where we benefited from the recovery in tourism following last year's disruption.  Continental Europe's like-for-like sales were flat, due to the continued challenging trading environment in France and Germany.

Our progress on our 'retail basics' programme benefited our like-for-like sales, with improvements made to the ranges in key categories to ensure that best-selling products are offered in more locations, and gaps in ranges are reduced. We also strengthened merchandising disciplines with the development of improved "planograms" to optimise our displays.  In addition, we have made further progress on optimising our pricing, with our country trials progressing well, supported by increased resource both in the central team and our regions.

2.    Growing profitable new space

As expected, we saw net contract losses reduce revenue in the first half of this year, with a decline of 0.4%. This principally reflected the loss part way through 2014 of a UK rail on-board catering contract, as previously announced, as well as the timing of new contract openings due this year, which will be weighted to the second half. We expect a stronger performance in the second half, as we pass the anniversary of the on-board contract loss and as new contracts open, and for our full year net contract gains to be positive.  Our contract renewal rate in the first half of 2015 was in line with our historic experience.

We had a strong first half in terms of business development, including securing our first business at a number of airports, including Nice Côte d'Azur, in a contract valued at €180m over 11 years, and Montréal-Trudeau International (US$200m over 10 years). In addition, we expanded our presence at Houston George Bush Intercontinental (US$200m over 10 years), Beijing Capital International (£60m over 6 years) and Orlando International (US$70m over 7 years) airports.  We also secured an important contract at Paris Charles de Gaulle airport, subject to approval by the competition authorities, through a new joint venture with Aéroports de Paris for 20 new units and 14 renewed units.

We also further strengthened the portfolio of brands and concepts we offer to our clients.  We are working with the Jamie Oliver Restaurant Group to operate a number of concepts, including Jamie's Italian restaurants, at airports across France, Germany, Switzerland and Holland, and opened the first James Martin Kitchen at Stansted Airport in partnership with the well-known celebrity chef.  Other new brands we are working with include international brands such as Joe & the Juice and Pret A Manger, and strong local and regional brands such as Maan Coffee and Maison Pradier.

3.    Optimising gross margins

We further increased gross margin through leveraging the opportunities that arise from being a large international organisation.  Gross margin improved by 0.6%, or by 0.3% excluding UK rail on-board catering.  We made further progress on our programme to rationalise recipes and ranges, and entered into a number of procurement deals, including agreements for more standardised crockery, glassware and cutlery, and frozen bakery, across Europe.  Our programme is being supported by increased investment in systems to allow closer management of our margin. We are also investing in greater capability, and have established new central and regional teams to improve our management of wastage.

4.    Running an efficient and effective organisation

We made encouraging progress in the first half on our multi-year programme to improve our operating efficiency, with better management of overheads contributing a 0.3% improvement to operating margin. Labour costs (including central labour) contributed 0.1%, or 0.4% on an underlying basis when adjusted for the additional costs in 2015 of being a publicly quoted company. This improvement is being partly driven by the further roll-out of systems and technology. This includes new systems to align labour forecasting, scheduling and KPI reporting, as well as technology to improve our efficiency and service, such as cash counting machines and self-scan systems.  We continue to see good opportunities for further improvement in optimising the alignment of labour to sales.

5.    Optimising investment utilising best practice and shared resource

We are continuing to invest in further resources and improved capability to support both business development and the implementation of best practice across our businesses.  In the first half, we strengthened our business development teams in North America and Asia Pacific, and our dedicated teams which oversee capital projects and concept design. We have also reinforced our teams dedicated to category management, labour scheduling, and wastage management and loss prevention.

Summary and outlook

The Group delivered a good performance in the first half of this financial year, with like-for-like sales in line with our plan and market trends, encouraging progress on margin and efficiency, and success with contract wins and securing important new brands.  The second half of the financial year has started in line with our expectations, and the pipeline of new business opportunities is positive.  Whilst a degree of uncertainty always exists around passenger numbers in the short-term, we are well positioned to benefit from the underlying positive trends in our markets.

 

Financial review

Group performance

				Change
	H1 2015 £m	H1 2014 £m		Reported	Constant Currency	LFL
Revenue	859.2	865.8		(0.8%)	2.6%	3.0%
Underlying operating profit	25.2	19.7		27.9%	35.2%
Underlying operating  margin	2.9%	2.3%		+60bps

Revenue

Compared with the first half of 2014, revenue increased by 2.6% on a constant currency basis, comprising like-for-like growth of 3.0% and net contract losses of 0.4%. At actual exchange rates, total revenue was 0.8% lower compared to the first half of 2014, at £859.2m. 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 growth was strong across most of the Group, including in the UK, North America, the Middle East, Eastern Europe and Asia Pacific. Trading in Continental Europe was more mixed, with good performances in the Nordic region and Spain offset by more challenging trading conditions in some other countries, most notably in France and Germany.  In general, the airport business saw good like-for-like sales growth benefiting from increasing passenger numbers in most territories.

Net contract losses reduced revenue by 0.4%, reflecting the previously announced loss of an on-board rail contract in 2014.  We continue to expect a stronger net contract gains performance in the second half of this financial year, as we pass the anniversary of the on-board rail contract loss, and as we see the benefits of a number of new contracts, including at Stansted, Nice, and Toronto; we expect positive full year net contract gains.

Total revenue at actual exchange rates reflected movements in foreign currencies against Sterling compared to the first half of 2014, principally the strengthening of Sterling against the Euro and Nordic currencies.

Underlying operating profit

Underlying operating profit increased by 35.2% on a constant currency basis, and by 27.9% at actual exchange rates, to £25.2m. The improvement in underlying operating profit margin of 60 basis points to 2.9% primarily reflected encouraging progress on our programmes to improve operational efficiency, and on our productivity initiatives which benefited our gross margin, albeit the benefit was accentuated in the first half given the seasonality of our business.  The second half of the year will represent a tougher comparative than the first half in terms of margin improvement, principally because a number of our efficiency initiatives were only at an early stage in the first half of 2014, but were more developed in the second half.  We also expect higher pre-opening costs in the second half of 2015, given that we will be mobilising a number of large new contracts towards the end of the year.

 

Operating profit

Operating profit was £22.6m, reflecting an adjustment for the amortisation of acquisition-related intangible assets of £2.6m (H1 2014: £2.6m).  Operating profit in the first half of 2014 of £9.3m also reflected an adjustment for redundancy and restructuring costs of £7.8m; there were no such costs in the first half of 2015.

Regional performance

UK
				Change
	H1 2015        £m	H1 2014          £m		Reported	Constant Currency	LFL
Revenue	342.7	344.7		(0.6%)	(0.3%)	3.7%
Underlying operating profit	18.0	13.1		37.4%	37.4%
Underlying operating margin	5.3%	3.8%		+150bps

N.B. UK division also includes Republic of Ireland

Revenue decreased slightly by 0.3% on a constant currency basis, comprising like-for-like growth of 3.7% and net contract losses of 4.0%. Like-for-like growth was particularly strong in the air sector, driven by continued growth in UK airport passenger numbers and increased spend per passenger. The net contract losses were primarily a consequence of the previously reported loss of a rail on-board catering contract part way through 2014.

Underlying operating profit for the UK increased by 37.4% to £18.0m, while underlying operating margin increased by 1.5% to 5.3%, benefiting from good like-for-like sales growth, and from early implementation of our productivity programmes, particularly in the rail estate, which will have a smaller weighting in the second half of the year.

Continental Europe
				Change
	H1 2015           £m	H1 2014          £m		Reported	Constant Currency	LFL
Revenue	351.3	379.0		(7.3%)	1.3%	0.0%
Underlying operating profit	13.9	15.4		(9.7%)	0.0%
Underlying operating margin	4.0%	4.1%		(10bps)

Revenue increased by 1.3% on a constant currency basis, comprising stable like-for-like sales and net contract gains of 1.3%. Like-for-like sales included a strong performance in Spanish airports and further growth in the Nordic region, offset by continued more difficult trading in France and Germany, primarily as a result of weak consumer expenditure and strikes in both countries which impacted our rail operations. Net contract gains were driven by new operations in several locations, including Bordeaux airport and the opening of our first outlets at Nice airport.

At actual exchange rates, total revenue of £351.3m fell by 7.3%, reflecting the strengthening of Sterling against the Euro and Nordic currencies during the period.

Underlying operating profit for Continental Europe was flat on a constant currency basis and decreased by 9.7% at actual exchange rates to £13.9m. Underlying operating margin decreased by 10 basis points to 4.0%, with the impact of weaker sales mitigated by continued progress on our productivity programmes, notably in the larger countries.

North America
				Change
	H1 2015           £m	H1 2014        £m		Reported	Constant Currency	LFL
Revenue	91.6	78.0		17.4%	12.3%	7.0%
Underlying operating  profit / (loss)	0.9	(2.1)		n/m	n/m
Underlying operating margin	1.0%	(2.7%)		+370bps

Revenue increased by 12.3% on a constant currency basis, comprising like-for-like growth of 7.0% and net contract gains of 5.3%. Like-for-like growth benefited from positive trends in airport passenger numbers in the North American market, the transfer of additional Delta passengers into Terminal 4 at New York JFK airport, and a good contribution from the major new contracts opened last year. Net contract gains were driven principally by new outlets opened in the prior year at a number of airports, including Phoenix, JFK, San Diego and Sacramento. At actual exchange rates, total revenue of £91.6m grew by 17.4%, reflecting the strengthening of the US dollar against Sterling compared to the first half of 2014.

Underlying operating profit was £0.9m, compared with a loss of £2.1m in the first half of 2014, and underlying operating margin improved by 370 basis points to 1.0%, driven both by the benefit of increased sales and by a lower level of start-up costs than in the first half of 2014.

Rest of the World
				Change
	H1 2015          £m	H1 2014         £m		Reported	Constant Currency	LFL
Revenue	73.6	64.1		14.8%	13.4%	13.1%
Underlying operating profit	6.3	4.6		37.0%	30.0%
Underlying operating margin	8.6%	7.2%		+140 bps

Revenue increased by 13.4% on a constant currency basis, comprising like-for-like growth of 13.1% and net contract gains of 0.3%. Like-for-like sales reflected very good passenger growth across most of the region, including Asia Pacific and the Middle East, notably in China and Thailand, and in our Egyptian business which saw some recovery from last year's disruption.  At actual exchange rates, total revenue of £73.6m grew by 14.8%.

Underlying operating profit for the Rest of the World increased by 30.0% on a constant currency basis, and by 37.0% at actual exchange rates to £6.3m, with margin increasing 1.4% to 8.6%, benefiting from strong like-for-like sales growth.

Share of profit or loss of associates

The Group's share of the loss of associates was £0.2m, compared to a profit of £0.6m in the first half of 2014. This reduction primarily reflects the disposal of the Group's minority shareholding in Momentum Services Ltd.

Net finance costs

Net finance costs were £8.6m, a reduction of £7.0m compared to the first half of 2014, due to lower average levels of net debt. This primarily reflected the significant repayment of borrowings following the Group's IPO in July 2014.

Taxation

The Group's underlying tax charge was £3.0m (H1 2014: £5.9m), equivalent to an effective tax rate of 21.5% on reported profit before tax.

Earnings per share

Underlying earnings per share was 2.1 pence per share. This compares to an underlying loss per share of 1.3 pence in the first half of 2014.  Basic earnings per share was 1.6 pence (H1 2014: loss of 5.6 pence per share).

Dividends

The Board has declared an interim dividend of 2.1 pence per share (H1 2014: £nil), consistent with the Board's intentions as stated in the IPO prospectus for a progressive dividend policy, with an initial payout ratio of approximately 30 to 40 per cent of annual underlying profit after tax, with the total annual payment to be split equally between the interim and final dividends.

The dividend will be paid on 3 July 2015 to shareholders registered on 5 June 2015.  The ex-dividend date will be 4 June 2015.

 

Cash flow

The table below presents a summary of the Group's free cash flow for the first half of 2015:

	H1 2015	H1 2014
	£m	£m
Underlying operating profit	25.2	19.7
Depreciation and amortisation	33.3	34.3
Working capital	(24.5)	(32.4)
Capital expenditure	(39.8)	(33.4)
Net tax	(7.6)	(6.9)
Net dividends to/from minorities/associates	(2.0)	(0.7)
Other	2.1	0.2
Underlying operating cash flow	(13.3)	(19.2)
Net finance costs	(8.4)	(14.5)
Exceptional costs	(9.3)	(3.9)
Free cash flow	(31.0)	(37.6)

The underlying operating cash outflow in the first half of 2015 was £13.3m.  This represents an improvement of £5.9m compared to the first half of 2014, despite increased investment in the business, with capital expenditure up £6.4m, or 19.2%, compared to the first half of 2014.

The main driver of this year-on-year improvement was the strong growth in underlying operating profit, which was further enhanced by a reduced working capital outflow. Taxes paid were £7.6m, while cash dividends to minorities, net of dividends received from associates, amounted to £2.0m.

Net finance costs paid of £8.4m were substantially lower than in the first half of 2014, mainly as a result of lower average net debt. Exceptional costs of £9.3m reflected amounts accrued in 2014, but paid in the first half of this year, principally in respect of the IPO.

Net debt

Net debt increased by £10.3m in the first half of the year to £381.4m, reflecting the seasonal cash outflow of the business, partly offset by £21.4m of foreign exchange gains, mainly arising on the proportion of the Group's bank debt that is denominated in currencies other than Sterling. The committed Revolving Credit Facility remained undrawn during the half year, and together with the cash on our balance sheet of £102.0m, provides ample headroom to meet future development and funding needs.

The table below explains the movement in net debt during the first half of 2015:

		£m
Opening net debt (30 September 2014)		(371.1)
Free cash flow		(31.0)
Impact of foreign exchange rates		21.4
Other		(0.7)
Closing net debt (31 March 2015)		(381.4)

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 2014.

These risks, together with the Group's risk management process, are detailed on pages 8 to 12 of the Annual Report and Accounts 2014, and relate to the following areas: Strategic: business environment, strategic development, brand portfolio, client relationships; Operational: business interruption, supply chain, food commodity price inflation, key personnel, technology and infrastructure systems, data protection; Financial: interest rate risk, currency risk, liquidity and debt covenants; Legal and Regulatory: compliance, food safety, and labour laws and unions.

 

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:

a)            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

b)           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

20 May 2015                                                                       20 May 2015

 

Independent review report to SSP Group plc

Introduction

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 2015 which comprises the condensed consolidated income statement, the condensed consolidated statement of 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.  We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. 

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 Disclosure and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("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.

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. 

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU.  The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting 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. 

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.  A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) 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. 

Conclusion

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 2015 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FCA. 

Tudor Aw

for and on behalf of KPMG LLP 

Chartered Accountants 

15 Canada Square

London E14 5GL

20 May 2015

 

Condensed consolidated income statement

for the six months ended 31 March 2015

	Notes	Six months ended 31 March 2015			Six months ended 31 March 2014
		Underlying *	Adjustments	Total	Underlying *	Adjustments	Total
		£m	£m	£m	£m	£m	£m
Revenue	2	859.2	-	859.2	865.8	-	865.8
Operating costs	4	(834.0)	(2.6)	(836.6)	(846.1)	(10.4)	(856.5)
Operating profit		25.2	(2.6)	22.6	19.7	(10.4)	9.3
Share of (loss) / profit of associates		(0.2)	-	(0.2)	0.6	-	0.6
Loss on disposal of business		-	-	-	-	(0.7)	(0.7)
Finance income	5	0.4	-	0.4	0.3	-	0.3
Finance expense	5	(9.0)	-	(9.0)	(15.9)	-	(15.9)
Profit / (loss) before tax		16.4	(2.6)	13.8	4.7	(11.1)	(6.4)
Taxation		(3.0)	-	(3.0)	(5.9)	0.1	(5.8)
Profit / (loss) for the period		13.4	(2.6)	10.8	(1.2)	(11.0)	(12.2)
Profit / (loss) attributable to:
Equity holders of the parent		10.2	(2.6)	7.6	(3.2)	(11.0)	(14.2)
Non-controlling interests		3.2	-	3.2	2.0	-	2.0
Profit  / (loss) for the period		13.4	(2.6)	10.8	(1.2)	(11.0)	(12.2)
Earnings / (loss) per share (pence):
-          Basic	3	2.1		1.6	(1.3)		(5.6)
-          Diluted	3	2.1		1.6	(1.3)		(5.6)

*   Underlying operating profit excludes items that are considered to be exceptional in nature. In the prior period, these included redundancy and restructuring costs associated with a number of significant organisation changes.  It also excludes non-cash accounting adjustments relating to amortisation of intangible assets arising on acquisition of the Group by EQT in 2006. 

.

Condensed consolidated statement of other comprehensive income

for the six months ended 31 March 2015

		Six months ended 31 March 2015	Six months ended 31 March 2014
		£m	£m
Other comprehensive income / (expense)
Items that will never be reclassified to the income statement
Remeasurements on defined benefit pension schemes		(0.7)	1.3
Items that are or may be reclassified subsequently to the income statement
Net gain on hedge of net investment in foreign operations		21.1	6.6
Other foreign exchange translation differences		(22.0)	(8.0)
Effective portion of changes in fair value of cash flow hedges		(7.9)	(1.1)
Cash flow hedges - reclassified to profit and loss		0.2	2.1
Income tax relating to items that have or may be reclassified		1.8	-
Other comprehensive (expense) / income for the period		(7.5)	0.9
Profit / (loss) for the period		10.8	(12.2)
Total comprehensive income / (expense) for the period		3.3	(11.3)
Total comprehensive income / (expense) attributable to:
Equity shareholders		(1.7)	(12.4)
Non-controlling interests		5.0	1.1
Total comprehensive income / (expense) for the period		3.3	(11.3)

 

Condensed consolidated balance sheet

As at 31 March 2015

		31 March 2015	30 September 2014
		£m	£m
Non-current assets
Property, plant and equipment		209.6	201.9
Goodwill and intangible assets		631.0	659.0
Investments in associates		4.1	4.6
Deferred tax assets		4.8	2.5
Other receivables		29.6	27.9
		879.1	895.9
Current assets
Inventories		25.5	24.4
Tax receivable		2.1	0.5
Trade and other receivables		81.6	89.1
Cash and cash equivalents		102.0	133.3
		211.2	247.3
Total assets		1,090.3	1,143.2
Current liabilities
Short term borrowings		(29.3)	(29.8)
Trade and other payables		(299.9)	(340.8)
Tax payable		(6.2)	(9.2)
		(335.4)	(379.8)
Non-current liabilities
Long term borrowings		(454.1)	(474.6)
Post employment benefit obligations		(17.7)	(17.9)
Provisions		(11.7)	(11.6)
Derivative financial liabilities		(8.6)	(0.9)
Deferred tax liabilities		(8.3)	(8.0)
		(500.4)	(513.0)
Total liabilities		(835.8)	(892.8)
Net assets		254.5	250.4
Equity
Share capital		4.8	5.9
Share premium		461.2	461.2
Capital redemption reserve		1.1	-
Other reserves		(3.0)	5.6
Retained earnings		(232.4)	(241.4)
Total equity shareholders' funds		231.7	231.3
Non-controlling interests		22.8	19.1
Total equity		254.5	250.4

 

Condensed consolidated statement of changes in equity

for the six months ended 31 March 2015

	Share capital	Share premium	Capital redemp-tion reserve	Other reserves 1	Retained earnings	Total parent equity	Non-controlling interests	Total equity
	£m	£m	£m	£m	£m	£m	£m	£m
At 1 October 2013	5.4	642.9	-	(5.6)	(857.6)	(214.9)	19.8	(195.1)
(Loss) / profit for the period	-	-	-	-	(14.2)	(14.2)	2.0	(12.2)
Other comprehensive income / (expense) for the period	-	-	-	0.5	1.3	1.8	(0.9)	0.9
Dividends paid to non-controlling interests	-	-	-	-	-	-	(1.4)	(1.4)
At 31 March 2014	5.4	642.9	-	(5.1)	(870.5)	(227.3)	19.5	(207.8)
At 1 October 2014	5.9	461.2	-	5.6	(241.4)	231.3	19.1	250.4
Profit for the period	-	-	-	-	7.6	7.6	3.2	10.8
Other comprehensive (expense) / income for the period	-	-	-	(8.6)	(0.7)	(9.3)	1.8	(7.5)
Cancellation of deferred shares	(1.1)	-	1.1	-	-	-	-	-
Capital contributions from non-controlling interests	-	-	-	-	-	-	1.1	1.1
Dividends paid to non-controlling interests	-	-	-	-	-	-	(2.4)	(2.4)
Share-based payments	-	-	-	-	2.1	2.1	-	2.1
At 31 March 2015	4.8	461.2	1.1	(3.0)	(232.4)	231.7	22.8	254.5

1 The decrease comprises a decrease to the translation reserve of £1.9m (2014: £0.5m) and a decrease to the cash flow hedging reserve of £6.7m (2014: increase of £1.0m).

 

Condensed consolidated cash flow statement

for the six months ended 31 March 2015

	Notes	Six months ended 31 March 2015	Six months ended 31 March 2014
		£m	£m
Cash flows from operating activities
Cash flow from operations	6	36.1	21.6
Exceptional redundancy and restructuring costs		(2.2)	(3.9)
Tax paid		(7.6)	(6.9)
Net cash flows from operating activities		26.3	10.8
Cash flows from investing activities
Dividends received from associates		0.4	0.7
Interest received		0.3	0.3
Proceeds from disposal of business		-	0.2
Purchase of property, plant and equipment		(40.5)	(32.7)
Purchase of other intangible assets		(0.4)	(0.7)
Net cash flows from investing activities		(40.2)	(32.2)
Cash flows from financing activities
Repayment of finance leases and other loans		(0.6)	(0.6)
Interest paid		(8.7)	(14.8)
Dividends paid to non-controlling interests		(2.4)	(1.4)
Capital contribution from non-controlling interests		1.1	-
Exceptional IPO related transaction costs		(7.1)	-
Net cash flows from financing activities		(17.7)	(16.8)
Net decrease in cash and cash equivalents		(31.6)	(38.2)
Cash and cash equivalents at beginning of the period		133.3	182.1
Effect of exchange rate fluctuations on cash and cash equivalents		0.3	(1.8)
Cash and cash equivalents at end of the period		102.0	142.1
Reconciliation of net cash flow to movement in net debt
Decrease  in cash in the period		(31.6)	(38.2)
Cash outflow from decrease in debt and finance leases		0.6	0.6
Change in net debt resulting from cash flows		(31.0)	(37.6)
Translation differences		21.4	12.2
Other non-cash changes		(0.7)	(0.9)
Increase in net debt in the period		(10.3)	(26.3)
Net debt at beginning of the period		(371.1)	(870.4)
Net debt at end of the period		(381.4)	(896.7)

 

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 2014. The comparative figures for the year ended 30 September 2014 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.

Except as described below, the accounting policies adopted in the preparation of these condensed consolidated half-yearly financial statements to 31 March 2015 are consistent with the accounting policies applied by the Group in its consolidated financial statements as at, and for the year ended, 30 September 2014 as required by the Disclosure and Transparency Rules of the UK's Financial Conduct Authority.

Changes in accounting policy and disclosures

The accounting policies adopted are consistent with those of the previous period except for the following new and amended IFRSs adopted as of 1 October 2014:

·        IFRS 10 Consolidated Financial Statements

·        IFRS 11 Joint Arrangements

·        IFRS 12 Disclosure of Interests in Other Entities

·        Offsetting Financial Assets and Financial Liabilities - Amendments to IAS 32

·        Recoverable amount disclosures for non-financial assets - Amendments to IAS 36

With the exception of new disclosure requirements, none of these have had a significant impact on the consolidated financial statements of the Group.

There are no EU-endorsed IFRS or IFRIC interpretations that are not yet effective that are expected to have a material impact on the Group.

 

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, France, Belgium, the Netherlands, Germany, Switzerland, Austria, and Spain; North America includes operations in the United States and Canada; and RoW includes operations in Eastern Europe, Middle East and Asia Pacific.

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.

Six months ended 31 March 2015	UK	Continental Europe	North America	RoW	Non-attributable	Total
	£m	£m	£m	£m	£m	£m
Revenue	342.7	351.3	91.6	73.6	-	859.2
Underlying operating profit/(loss)	18.0	13.9	0.9	6.3	(13.9)	25.2
Six months ended 31 March 2014	UK	Continental Europe	North America	RoW	Non-attributable	Total
	£m	£m	£m	£m	£m	£m
Revenue	344.7	379.0	78.0	64.1	-	865.8
Underlying operating profit/(loss)	13.1	15.4	(2.1)	4.6	(11.3)	19.7
The following amounts are included in underlying operating profit:
	UK	Continental Europe	North America	RoW	Non-attributable	Total
	£m	£m	£m	£m	£m	£m
Six months ended 31 March 2015
Depreciation and amortisation*	(8.1)	(14.5)	(6.4)	(2.2)	(2.1)	(33.3)
Six months ended 31 March 2014
Depreciation and amortisation*	(10.1)	(14.2)	(5.6)	(2.3)	(2.1)	(34.3)

*Excludes amortisation of acquisition-related intangible assets.

 

A reconciliation of underlying operating profit to profit / (loss) before and after tax is provided as follows:

	Six months ended 31 March 2015 £m	Six months ended 31 March 2014 £m
Underlying operating profit	25.2	19.7
Adjustments to operating costs	(2.6)	(10.4)
Share of (loss) / profit from associates	(0.2)	0.6
Loss on disposal of business	-	(0.7)
Finance income	0.4	0.3
Finance expense	(9.0)	(15.9)
Profit / (loss) before tax	13.8	(6.4)
Taxation	(3.0)	(5.8)
Profit / (loss) after tax	10.8	(12.2)

3              Earnings / (loss) per share

Basic earnings / (loss) 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 / (loss) 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. In accordance with IAS 33, the dilutive earnings per share are without reference to adjustments in respect of outstanding share options where the impact would be anti-dilutive.

Underlying earnings / (loss) 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 2015	Six months ended 31 March 2014 (restated)*
	£m	£m
Profit / (loss) attributable to ordinary shareholders	7.6	(14.2)
Adjustments:
Exceptional redundancy and restructuring costs	-	7.8
Amortisation of acquisition-related intangibles	2.6	2.6
Loss on disposal of business	-	0.7
Tax effect of adjustments	-	(0.1)
Underlying profit / (loss) attributable to ordinary shareholders	10.2	(3.2)
Basic weighted average number of shares	475,005,914	252,570,015
Dilutive potential ordinary shares	1,143,293	-
Diluted weighted average number of shares	476,149,207	252,570,015
The number of ordinary shares in issue as at 31 March 2015 was 475,029,144.

 

	Six months ended 31 March 2015	Six months ended 31 March 2014 (restated)*
Earnings / (loss) per share (pence):
-          Basic	1.6	(5.6)
-          Diluted	1.6	(5.6)
Underlying earnings / (loss) per share (pence):
-          Basic	2.1	(1.3)
-          Diluted	2.1	(1.3)

*    As part of the preparation for the IPO, a capital reorganisation was carried out on 15 July 2014 which resulted in an increase in the number of ordinary shares in issue with no corresponding increase in resources.  The loss per share figures have been adjusted retrospectively to reflect the higher number of shares as required by IAS 33.

4              Operating costs

		Six months ended 31 March 2015		Six months ended 31 March 2014
		£m		£m
Cost of food and materials:
Cost of inventories consumed in the period		(286.2)		(293.9)
Labour cost:
Employee remuneration		(267.0)		(269.8)
Overheads:
Depreciation of property, plant and equipment		(31.5)		(32.5)
Amortisation of intangible assets - software		(1.8)		(1.8)
Amortisation of acquisition-related intangible assets		(2.6)		(2.6)
Rentals payable under operating leases		(145.6)		(142.5)
Other overheads		(101.9)		(105.6)
Exceptional redundancy and restructuring costs		-		(7.8)
		(836.6)		(856.5)
Adjustments to operating costs
Redundancy and restructuring costs		-		(7.8)
Amortisation of intangible assets arising on acquisition		(2.6)		(2.6)
		(2.6)		(10.4)

Underlying operating profit excludes items that are considered to be exceptional in nature. In the prior period, these included redundancy and restructuring costs associated with a number of significant organisation changes.  It also excludes non-cash accounting adjustments relating to amortisation of intangible assets arising on acquisition of the Group by EQT in 2006.  In the current period, there are exceptional cash outflows reflecting amounts accrued in 2014 but paid in the first half of 2015, principally in respect of the IPO.

 

5              Finance income and expense

	Six months ended 31 March 2015	Six months ended 31 March 2014
	£m	£m
Finance income
Interest income	0.3	0.3
Net foreign exchange gains	0.1	-
Total finance income	0.4	0.3
Finance expense
Total interest expense on financial liabilities measured at amortised cost	(7.6)	(12.4)
Net change in fair value of cash flow hedges utilised in the period	(0.2)	(2.1)
Unwind of discount on provisions	(0.6)	(0.8)
Net interest expense on defined benefit pension obligations	(0.3)	(0.4)
Other	(0.3)	(0.2)
Total finance expense	(9.0)	(15.9)

6           Cash flow from operations

		Six months ended 31 March 2015	Six months ended 31 March 2014
		£m	£m
Profit / (loss) for the period		10.8	(12.2)
Adjustments for:
Depreciation		31.5	32.5
Amortisation		4.4	4.4
Share-based payments		2.1	-
Loss on disposal of business		-	0.7
Finance income		(0.4)	(0.3)
Finance expense		9.0	15.9
Share of loss / (profit) of associates		0.2	(0.6)
Exceptional costs before tax		-	7.8
Taxation		3.0	5.8
		60.6	54.0
Decrease in trade and other receivables		7.5	-
Increase in inventories		(1.1)	(0.3)
Decrease in trade and other payables, and in provisions		(30.9)	(32.1)
Cash flow from operations		36.1	21.6

7              Dividends

The directors have declared an interim dividend of 2.1 pence per ordinary share (2014 nil), totalling £10.0m (2014 £nil). The dividend will be paid on 3 July 2015 to shareholders registered on 5 June 2015.  The ex-dividend date will be 4 June 2015.

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
	31 March 2015	30 September 2014
	£m	£m
Financial instruments measured at fair value:
Non-current
Derivative financial liabilities	(8.6)	(0.9)
Financial instruments not measured at fair value:
Non-current
Long term borrowings	(454.1)	(474.6)
Current
Cash and cash equivalents	102.0	133.3
Short term borrowings	(29.3)	(29.8)

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 2015 is £487.2m (30 September 2014: £508.3m).

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              Forward looking statement

This announcement contains certain forward looking statements with respect to the operations, strategy, performance and the financial condition of the Group.  By their nature, these statements involve uncertainty since future events and circumstances can cause results to differ from those anticipated.  Nothing in this announcement should be construed as a profit forecast.  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.

 

END

 

 

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