Results for six months period ended 31 March 2018

Transcription

1 16 May 2018 SSP GROUP PLC LEI:213800QGNIWTXFMENJ24 Results for six months period ended 31 March 2018 SSP Group, a leading operator of food and beverage outlets in travel locations worldwide, announces its financial results for the first half of its 2018 financial year, covering the six months ended 31 March Highlights: Underlying operating profit 1 of 55.2m: up 32.6% at constant currency 2, and 29.0% at actual exchange rates Revenue of 1,177.8m: up 11.9% at constant currency; 9.8% at actual exchange rates Like-for-like sales 3 up 2.8%: driven by air passenger travel and retail initiatives Net gains 4 of 7.1%: strong performances in North America and the Rest of the World Acquisitions 5 of TFS in India and Stockheim in Germany added 2.0% to revenue Underlying operating margin 1 (excluding the acquisition impact of TFS) up 50 basis points at constant currency, strategic initiatives delivering well. Including the impact of acquisitions, the combined group underlying operating margin increased a further 20 bps to 4.7% Underlying profit before tax 1 of 48.7m: up 40.3%. Reported profit before tax of 48.4m Underlying earnings per share 1 of 5.6 pence: up 33.3%. Reported earnings per share of 5.6 pence Interim dividend of 4.8 pence per share, up 50.0%. This follows the completion of the c. 100m special dividend and share consolidation, in April 2018 Encouraging pipeline of new contracts Commenting on the results, Kate Swann, CEO of SSP Group, said: SSP has delivered another strong performance in the first half of Operating profit was up 32.6% at constant currency, driven by good like-for-like sales growth, significant new contract openings and further operational improvements. We have continued to grow our presence across the world, particularly in North America and Asia and our new business in India is performing well. Looking forward, the second half 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 our programme of operational improvements. 1

2 Financial highlights: H H Year-on-year change Actual FX rates Constant currency 2 Revenue 1, , % +11.9% Like-for-like sales growth 3 2.8% 2.9% n/a n/a Underlying operating profit % +32.6% Underlying operating margin 1 4.7% 4.0% +70 bps +70 bps Underlying profit before tax % n/a Underlying earnings per share (p) % n/a Dividend per share (p) % n/a Underlying operating cash flow 6 (0.0) (45.1) % n/a Net debt (290.1) (378.8) +23.4% n/a Statutory reported results: The table below summarises the Group s statutory reported results (where the financial highlights above are adjusted). H H Year-on-year change Operating profit % Operating margin 4.6% 3.9% +70 bps Profit before tax % Earnings per share (p) % 1 Stated on an underlying basis which excludes the revaluation of the obligation to acquire an additional 16% ownership share of TFS by the end of calendar year 2018 and the amortisation of intangible assets arising on the acquisition of the SSP business in In the prior period the underlying basis only excluded the amortisation of intangible assets arising on the acquisition of the SSP business in Constant currency is based on average 2017 exchange rates weighted over the financial year by 2017 results. 3 Like-for-like sales represent revenues generated in an equivalent period in each financial period in outlets which have been open for a minimum of 12 months. Like-for-like sales are presented on a constant currency basis. 4 Net contract gains/(losses) represent the net year-on-year revenue impact from new outlets opened and existing units closed in the past 12 months. Net contract gains/(losses) are presented on a constant currency basis. 5 Acquisition impact represents the revenue impact from acquired outlets owned for less than 12 months. Acquisition impact is presented on a constant currency basis. Once the acquisition annualises revenue is included in like-for-like sales or net contract gains where appropriate. 6 Stated on an underlying basis 1 after capital expenditure, net cash flows to/from associates and non-controlling interests, acquisitions and tax. Please refer to page 15 for supporting reconciliations from the Group s statutory reported results to these performance measures. 2

3 CONTACTS: Investor and analyst enquiries Sarah John, Director of Investor Relations, SSP Group plc On 16 May 2018: +44 (0) Thereafter: +44 (0) Media enquiries Peter Ogden / Lisa Kavanagh Powerscourt +44 (0) ssp@powerscourt-group.com SSP Group plc s Interim Results 2018 are available at 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 around 37,000 employees, serving approximately one million customers every day. We have business at approximately 140 airports and 280 rail stations, and operate more than 2,500 units in over 30 countries around the world. SSP operates an extensive portfolio of more than 450 international, national, and local brands. Among these are local heroes such as MASH in Copenhagen, James Martin Kitchen in London, and Hung s Delicacies in Hong Kong. Our range also includes proprietary brands created for the travel sector including Upper Crust, Le Grand Comptoir and Ritazza, as well as international names such as Burger King, Starbucks, Hard Rock Café and YO! Sushi. We also create stunning bespoke concepts such as Five Borough Food Hall in JFK, New York and Walter at Zurich. 3

4 Business review Overview The Group delivered a good performance in the first half of the year, driven by like-for-like sales growth, new contract openings across the world and the ongoing implementation of our programme of operational improvements. We are continuing to invest in the growth and development of the business and to bring new brands and concepts to our clients and customers. We have made further good progress in the development of the business in North America and Asia Pacific, and the performance of TFS, our joint venture in India, has been encouraging. Margin growth has been driven by good like-for-like growth and the ongoing roll out of our strategic initiatives. Cash flows have been strong and the seasonal cash outflow reduced. We are recommending an ordinary dividend of 4.8 pence per share, anticipating a full year payout ratio of 40%. This, together with the payment of a c. 100m special dividend in April 2018, reflects our confidence in the business and our commitment to maintaining an efficient balance sheet. Financial results The financial performance of the Group is presented on an underlying basis, for which the statutory reported results are adjusted to take account the amortisation of intangible assets created on the acquisition of the SSP business in 2006 and the revaluation of the obligation to acquire an additional share of TFS by the end of calendar year The statutory reported performance of the Group is explained in the financial review, with a detailed reconciliation between statutory and underlying performance provided on page 15. The Group delivered a good financial performance in the first half of Underlying operating profit increased to 55.2m, an increase of 32.6% on a constant currency basis. Total revenue increased by 11.9%, on a constant currency basis, including like-for-like sales growth of 2.8%, net contract gains of 7.1% and revenue from acquisitions of 2.0%. In the first half of the year like-for-like sales growth was 2.8%, benefiting slightly from the earlier timing of Easter this year. Like-for-like sales in the air sector grew more strongly than in rail driven by the continued growth in air passenger numbers. Trading in the rail sector remained softer. Looking forward to the rest of the year, with the current level of economic and geopolitical uncertainty, we anticipate like-for-like sales to remain in the region of 2% to 3%. Net contract gains were 7.1% with strong contributions from North America (+31.1%) and the Rest of the World (+9.5%). In North America, net gains included the benefit of the full year effect of the major contracts that started in the second half of last year, in particular at Chicago Midway and at JFK T7. We have also opened a number of new outlets during the first half, including at Newark, San Francisco and Toronto. In the Rest of the World, net gains were driven by the Asia Pacific region, including new contracts at airports in Shenyang in China, Phuket in Thailand and Delhi in India. We continue to focus on retaining profitable contracts and our contract renewal rate in the first half of 2018 was in line with our historical trends. We are encouraged by the pipeline of new contracts. In the first half we won a number of significant new airport contracts including in North America, at Phoenix, Seattle and San Francisco, and in the Rest of the World, at Sheremetyevo airport in Moscow and across India. We expect to begin operating these contracts progressively over the next two years. 4

5 Looking forward to the second half of the year, we will meet the anniversary of the opening of many of the new units last year, when net gains were around 8%, and hence net gains are expected to return to a more normal level of around 2% in the second half of Net gains for the full year would therefore equate to around 4%, with acquisitions expected to add a further c.1.5% to revenue. Underlying operating profit increased to 55.2m, a 32.6% increase on a constant currency basis. The underlying operating margin (excluding the acquisition impact of TFS) increased by 50bps, on a constant currency basis, driven by the ongoing roll out of our strategic initiatives. Including the impact of acquisitions, the combined group underlying operating margin increased a further 20 bps to 4.7%. Looking forward to the second half of the year, we expect to see similar trends in operating margin growth, excluding the acquisition impact of TFS. The underlying free cash outflow was 6.5m, after completing the acquisition of Stockheim for net consideration of 18.8m. Capital expenditure was 61.5m, consistent with the first half of We expect a slightly higher level of capital expenditure in the second half of the year, taking the full year to c. 130m - 140m, reflecting the start of major redevelopments at Chicago Midway and JFK T7, as well as the ongoing development of new units. Net debt increased by 27.9m during the first half of 2018 to 290.1m, reflecting our normal seasonal cash cycle, and was 88.7m lower than last year, with leverage reducing from 1.7 times to 1.1 times EBITDA. Strategy Our strategy is focused on creating long-term sustainable value for our shareholders, delivered through five key levers. We made further progress on each of these levers in the period: 1. Optimising our offer from the positive trends in our markets We are focused on the food and beverage markets in travel locations, which benefit from long-term structural growth. We aim to use our broad portfolio of brands and retailing skills to drive profitable likefor-like sales, ensuring that we benefit from the positive trends in these markets. Like-for-like sales growth in the period was driven by the ongoing roll out of our retailing programmes which are delivering well. We have also made further good progress on optimising our product ranges and have developed a number of premium products to provide customers with additional choice. In addition to our owned brands, we are increasingly working with our brand partners. For example, in conjunction with Starbucks, we are launching a new premium range with products specifically designed for the travelling customer. 2. Growing profitable new space The travel food and beverage market in airports and railway stations is valued at approximately 14bn and is characterised by long-term structural growth. It offers excellent opportunities for us to expand our business across the globe. Net contract gains in the first half were 7.1%, driven by new unit openings and high levels of contract retention. The higher level of net gains was driven by strong performances in North America and in the Rest 5

6 of the World. These large and growing markets (where we still have a relatively small share), provide attractive expansion opportunities and the pipeline of new contracts is encouraging. We have strong disciplines around the contract tendering process which enables us to deliver attractive returns from new business investment. Our new business growth is underpinned by our ability to deliver attractive and effective food solutions at travel locations internationally. An important element of this is the brand line up we can offer. Our brands include both international brands which we franchise, such as Burger King and Starbucks, and our own proprietary brands such as Upper Crust and Ritazza, as well as bespoke concepts and local heroes. We have recently signed a new partnership agreement with Crussh, the London-based healthy food and juice chain, to take the brand into rail and airport locations in the UK and Europe and we have further expanded our relationships with high profile chefs, including the renowned French chef Michel Roth, to open Terroirs de Lorraine at Gare de Metz station. A significant development for us has been our entry into India. India is the world s second most populous country, with over one billion inhabitants, and has seen sustained strong passenger growth in recent years, which is forecast to continue. Infrastructure growth is expected to support this and the government is expected to invest US$120bn in airport infrastructure over the next decade. We acquired 33% of TFS in India in December 2016 and will acquire a further 16% interest by the end of calendar year TFS operates over 200 units, with operations in six of the main airports in India including Delhi and Mumbai, as well as in railway stations. TFS has delivered a strong financial performance since its acquisition. On 1 December 2017, we also announced the acquisition of part of the Stockheim group, a travel concessions business based in Germany. The business operates 25 food and beverage outlets in airports and railway stations, including at Düsseldorf and Cologne. The acquisition will further strengthen our presence in travel locations across Germany. 3. Optimising gross margins Gross margin increased by 100 bps in the period at constant currency. The higher growth in the air sector in the period, which typically has higher gross margins but higher concession fees than the rail sector, contributed approximately 50 bps of this improvement. This performance is encouraging given the ongoing pressure from food cost inflation, and has been driven by the roll out of gross margin initiatives across our regions which are progressing well. Key areas of focus include procurement disciplines, range and recipe rationalisation and the management of waste and losses. We are making good progress in the introduction of equipment that automates food preparation processes in our sites. This helps to improve the product consistency and reduce waste, as well as driving labour efficiency. To support these initiatives, we continue to invest in both central and local resources. 4. Running an efficient and effective organisation We have a multi-year programme of initiatives to improve operating efficiency, which is important to the Group given the backdrop of ongoing labour cost inflation. Labour efficiencies contributed 30 bps improvement to our operating margin. 6

7 We continue to develop systems to better align labour to sales, allowing us to optimise service levels and labour costs. We have developed a more standardised, systematised approach to labour forecasting and scheduling through a programme called Better Service Planning. The roll out of the new system has been completed in the UK and is progressing well in Sweden and Norway, with encouraging initial results. We are now undertaking further pilot studies across a number of other countries. We continue to trial self-scan and self-serve checkouts at a number of units, both of which can contribute to improving the customer experience as well as driving greater efficiency. 5. Optimising investment utilising best practice and shared resource We have maintained our focus on generating efficiencies to optimise our investments, drive returns and use best practice and shared resources. We are continuing to look at how shared back office services can reduce cost and drive simpler, more efficient processes. We have now established two outsourced shared service centres in Pune in India and Lodz in Poland which are used by a number of SSP s countries for financial transaction processing. We continue to look for further opportunities to outsource administration and financial processes. In addition to this, we have made good progress in driving energy efficiencies and have introduced a number of programmes which have helped to reduce overall energy usage. Summary and outlook The Group delivered a good financial performance in the first half of the year with solid like-for-like sales growth, strong net gains and a further improvement in operating margin. The second half has started in line with our expectations and the pipeline of new contracts is encouraging. Looking forward, with the current level of general economic and geopolitical uncertainty, we continue to plan cautiously, anticipating like-for-like sales to remain in the region of 2% - 3% and expect to see ongoing increases in food and labour cost inflation. However, the significant structural growth opportunities in the travel sector and our programme to deliver operational improvements leave us well placed to continue to deliver both for our customers and our shareholders. 7

8 Financial review Group performance H H Reported Change Constant currency Revenue 1, , % +11.9% +2.8% Underlying operating profit % +32.6% Underlying operating margin 4.7% 4.0% +70 bps +70 bps Operating profit % Operating margin 4.6% 3.9% +70 bps LFL Revenue First half revenue increased by 11.9%, on a constant currency basis, comprising like-for-like sales growth of 2.8%, net contract gains of 7.1% and the impact of acquisitions of 2.0%. At actual exchange rates, total revenue grew by 9.8%, to 1,177.8m. 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. In the first half of the year like-for-like sales growth was 2.8%, benefiting slightly from the earlier timing of Easter this year. Like-for-like growth in the air sector was strong across most regions, while like-for-like growth in the rail sector remains softer. Looking forward to the rest of the year, with the current level of economic and geopolitical uncertainty, we anticipate like-for-like sales to remain in the region of 2% to 3%. Net contract gains increased revenue by 7.1%, helped by strong contributions from North America, which benefited from the new business opened last year but also further gains at Newark, San Francisco and Toronto. The Rest of the World also had strong net contract gains of 9.5%, primarily driven by new openings in China, Thailand and India. We expect the contribution from net gains in the second half to be around 2% and around 4% for the full year. The acquisitions of TFS and Stockheim, which added 2.0% to first half revenues and are expected to add a further c.1.5% to revenue for the full year. Trading results from outside the UK are converted into Sterling at the average exchange rates for the period. The overall impact of the movement of foreign currencies on revenue (principally the Euro, US Dollar and pegged currencies, Norwegian Krone and Indian Rupee) during the first half of 2018 compared to the 2017 average was negative 2.1%. If the current spot rates were to continue through to the end of 2018, we would expect a negative currency impact on revenue in the full year of around 2% compared to the average rates used for This is however a translation impact only. Underlying operating profit Underlying operating profit increased to 55.2m, an increase of 32.6% on a constant currency basis. The underlying operating margin (excluding the acquisition impact of TFS) increased by 50bps, on a constant currency basis, driven by the ongoing roll out of our strategic initiatives. Including the impact of acquisitions, the combined group underlying operating margin increased a further 20 bps to 4.7%. 8

9 Gross margin increased by 100 bps year-on-year, on a constant currency basis. The sales mix in the first half, with weaker sales in the rail sector relative to the air sector, contributed approximately 50 bps of this improvement. The strong underlying performance was driven by the continued roll out of our strategic initiatives, including improved ranging and mix management, food procurement, and waste and loss reduction. Labour costs improved by 30 bps year-on-year, on a constant currency basis, driven by our broadly based programmes to optimise service levels and labour costs. Concession fees rose by 70 bps, with the stronger growth in air sales contributing approximately 40 bps to the year-on-year increase. We expect this rate of increase to continue into the second half of the year. Looking forward to the second half, we anticipate ongoing inflationary pressure on food and labour costs. However, with our broad range of strategic initiatives, we are well placed to mitigate these costs and hence we expect to see similar trends in operating margin growth (excluding the acquisition impact of TFS), to those seen in the first half of the year. Operating profit Operating profit was 54.2m, on a reported basis (H1 2017: 41.8m), reflecting an adjustment for the amortisation of acquisition-related intangible assets of 1.0m (H1 2017: 1.0m). 9

10 Regional performance The following shows the Group s segmental performance. For full details of our key reporting segments, refer to note 2. UK (including Republic of Ireland) H H Reported Change Constant currency Revenue % +1.2% +0.7% Underlying operating profit % +12.5% Underlying operating margin 9.1% 8.1% +100 bps +90 bps Note Statutory reported operating profit was 32.7m (H1 2017: 29.0m) and operating margin was 8.8% (H1 2017: 7.9%) reflecting an adjustment for the amortisation of acquisition related intangible assets of 0.7m (H1 2017: 0.7m). LFL Revenue increased by 1.2% on a constant currency basis, comprising like-for-like growth of 0.7% and net contract gains of 0.5%. Like-for-like growth in the air sector was stronger than in the rail sector which remains soft. Like-for-like growth in the air sector was driven by increasing passenger numbers. We saw some impact in the first half from the closure of Monarch and reduced schedules from Ryanair. In the rail sector, the underlying trends remained unchanged in the first half albeit we saw some impact from the adverse weather conditions at the end of the period. Underlying operating profit for the UK increased by 12.5%, on a constant currency basis, to 33.4m, with underlying operating margin increasing by 90 bps, on a constant currency basis, to 9.1%. This represented a good performance, with our operating efficiency programmes and lower depreciation more than mitigating the impact of lower like for like sales and inflationary pressures on food and labour. Continental Europe H H Reported Change Constant currency Revenue % +6.8% +2.2% Underlying operating profit % +9.0% Underlying operating margin 4.9% 4.9% +0 bps +10 bps Note Statutory reported operating profit was 21.5m (H1 2017: 19.9m) and operating margin was 4.9% (H1 2017: 4.9%) reflecting an adjustment for the amortisation of acquisition related intangible assets of 0.3m (H1 2017: 0.3m). LFL Revenue increased by 6.8% on a constant currency basis, comprising like-for-like growth of 2.2%, net contract gains of 2.9%, and the acquisition of Stockheim adding a further 1.7%. As with the UK, like-for-like sales were stronger in air than in rail, with good growth in the air businesses particularly in France, Germany, Switzerland and Spain, which continues to benefit from tourists switching from the Middle East. Underlying operating profit increased to 21.8m, an increase of 9.0% on a constant currency basis. This growth was helped by the improved like-for-like sales and our operating efficiency initiatives, but was impacted by food and labour cost inflation, pre-opening costs at Marseille and integration costs at the new acquisition, Stockheim, in Germany. 10

11 North America H H Reported Change Constant currency Revenue % +34.2% +3.1% Underlying operating profit % +20.0% Underlying operating margin 3.2% 3.5% -30 bps -40 bps Note There are no adjustments between underlying operating profit and statutory reported operating profit. LFL Revenue increased by 34.2% on a constant currency basis, comprising like-for-like growth of 3.1% and net contract gains of 31.1%. Like-for-like growth benefited from positive trends in airport passenger numbers in the North American market, but continued to be adversely impacted by changes in airline route scheduling and passenger flows at a small number of our airports. Net contract gains of 31.1% included the benefit of the full year effect of the major contracts that started in the second half of last year, in particular at Chicago Midway and at JFK T7. We have also opened a number of new outlets during the first half, including at Newark, San Francisco and Toronto. Looking forward to the second half of the year, the pipeline is encouraging, however we will meet the anniversary of many of the new units which opened in the second half of last year. We also expect to see the closure of the temporary units and redevelopment of new units at Chicago Midway and JFK T7. Underlying operating profit increased to 6.4m, an increase of 20.0% on a constant currency basis. Underlying operating margins have decreased slightly due to a significant increase in depreciation year-onyear, which was due to an impairment charge at Houston airport, which has been adversely impacted by significant changes in airline flight schedules and passenger flows. Excluding depreciation, the EBITDA margin improved by 40bps, reflecting continued progress on operating efficiencies. Rest of the World H H Reported Change Constant currency Revenue % +30.4% +10.3% Underlying operating profit % % Underlying operating margin 8.0% 3.5% +450 bps +470 bps Note There are no adjustments between underlying operating profit and statutory reported operating profit. LFL Revenue increased by 30.4% on a constant currency basis, with an increase in like-for-like sales of 10.3%, net contract gains of 9.5%, and the additional two months relating to the acquisition of TFS in India contributing a further 10.6%. Like-for-like sales were driven by the strong trading performance in India but also ongoing passenger growth in Hong Kong and Egypt, which continues its recovery from the terrorist incidents a few years ago. Net gains came from new units in China at Shenyang, in Thailand at Phuket, and in India where we opened new units in Delhi and Kolkata airports, and in Vijayawada and Agra railway stations. Underlying operating profit for the Rest of the World was 13.6m, an increase of 202.1% on a constant currency basis, in part due to the inclusion of 6 months trading from TFS in India, compared to 4 months in 11

12 the first half of last year, but also strong year-on-year growth in the Indian business and strong profit performance in Asia Pacific and the Middle East. Share of profit of associates The Group s share of profit from associates was 0.2m (H1 2017: 0.7m) with our joint venture operations in the Rest of the World delivering strong performances. The reduction year-on-year is mainly driven by the disposal of our investment in Avecra in the second half of Net finance costs Underlying net finance costs decreased year-on-year to 6.7m (H1 2017: 8.8m), primarily due to the reduction in interest rates negotiated through an amend and extend of the Group s debt facility in October 2017 and lower net debt. Reported net finance costs were 6.0m (H1 2017: 9.5m), the additional 0.7m income being the unwind of the discount and revaluation of the financial liability to acquire the remaining 16% interest in TFS. Underlying net finance costs are expected to rise in the second half as a result of the special dividend paid in April 2018, and therefore for the full year are expected to be approximately 15m - 16m. Taxation The Group's underlying tax charge for the period was 10.7m (H1 2017: 7.6m), equivalent to an effective tax rate of 22.0% (H1 2017: 22.0%) of underlying profit before tax. On a reported basis the tax charge for the period was 10.5m (H1 2017: 7.4m). Looking forward we expect the underlying tax rate to remain at around 22% for the full year. Non-controlling interests The non-controlling interests increased year-on-year by 3.8m to 11.1m. The increase largely reflects the performance of TFS and the growth in our joint venture businesses (accounted for as subsidiaries), most of which are in North America and the Rest of the World. For the full year, we expect our non-controlling interests to be approximately 24m 25m. Earnings per share Underlying earnings per share was 5.6 pence per share (H1 2017: 4.2 pence per share), an increase of 33.3% year-on-year. Reported earnings per share was 5.6 pence per share (H1 2017: 3.8 pence per share). Dividends The Board has declared an interim dividend of 4.8 pence per share (H1 2017: 3.2 pence), with a view to maintaining the pay-out ratio for the full year at 40%, consistent with the Group s stated priorities for the uses of cash and after careful review of the capital expenditure requirements for the coming years. The dividend will be paid on 29 June 2018 to shareholders registered on 1 June The ex-dividend date will be 31 May Post balance sheet events On 16 April 2018, the Company completed a share consolidation to maintain the comparability of the Company s share price before and after the special dividend. Each shareholder received 30 new ordinary shares in substitution for every 31 existing ordinary shares held at the record date. Following this, on 27 April 2018, the special dividend of 20.9 pence per share was paid to shareholders. 12

13 Cash flow The table below presents a summary of the Group s cash flow for the first half of 2018: H H Underlying operating profit Depreciation and amortisation Working capital (0.5) (19.6) Net tax (17.6) (14.4) Other Underlying net cash flow from operating activities Capital expenditure 2 (61.5) (61.4) Acquisition of subsidiaries, adjusted for net debt acquired 3 (18.8) (35.0) Net dividends to/from non-controlling interests/associates (11.5) (5.5) Underlying operating cash flow (0.0) (45.1) Net finance costs (6.1) (7.9) Other (0.4) - Underlying free cash flow (6.5) (53.0) Dividend paid (23.5) (13.8) Underlying net cash flow (30.0) (66.8) 1 Presented on an underlying basis (refer to page 15 for details) 2 Capital expenditure is net of capital contributions from non-controlling interests of 2.6m (H1 2017: 1.6m) 3 Current period amount relates to the acquisition of Stockheim and comprises consideration ( 19.3m) less cash and cash equivalents acquired ( 0.5m). Prior period amount relates to the acquisition of TFS and comprises consideration of 42.7m adjusted for cash and cash equivalents acquired ( 15.2m), other financial assets acquired ( 0.8m) and long and short term borrowings acquired ( 8.3m). The Group generated net cash flow from operating activities of 91.8m (H1 2017: 56.8m) and underlying free cash flow outflow of 6.5m, a decrease in cash outflow of 46.5m compared to the first half of This improvement is driven by the growth in operating profit and improved working capital, as well as benefiting from lower acquisition costs for Stockheim compared to TFS in the prior year. Capital expenditure remained relatively consistent at 61.5m. Looking forward to the full year, capital expenditure is expected to be in the range of 130m - 140m, a reflection of the timing of our investment into new units and the commencement of redevelopment work at Chicago Midway Airport and JKF T7. Working capital was broadly neutral, compared with our normal first half cash outflow reflecting our normal seasonal working capital cycle. The improvement of 19.1m compared to last year reflected the strong sales growth and the fact that, due to the timing of Easter, some payments at the period end fell into April rather than March. Net finance costs paid of 6.1m were lower than in the first half of 2018, primarily due to the reduction in interest rates negotiated through an amend and extend of the Group s debt facility in October 2017, and the lower level of net debt. The dividend paid of 23.5m reflected the cost of the 2017 final dividend of 4.9 pence per share. Overall, the Group had net cash outflow of 30.0m during the period. 13

14 Balance sheet and net debt Net assets decreased slightly in the first half to 464.8m (30 September 2017: 465.0m), with net debt increasing to 290.1m (30 September 2017: 262.2m) reflecting the normal seasonality of the business ahead of the peak summer trading period. Opening net debt (1 October 2017) (262.2) Net cash flow (excluding impact of foreign exchange) (30.0) Impact of foreign exchange rates 2.3 Investment in loans and other financial assets (3.4) Other 3.2 Closing net debt (31 March 2018) (290.1) The increase in net debt of 27.9m was driven by the net cash outflow of 30.0m partially offset by a foreign exchange translation impact of 2.3m arising from the strengthening of Sterling during the period. Leverage has reduced compared to last half year with net debt:ebitda at 1.1 times, compared with 1.7 times at the end of 31 March Going concern After making due enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for at least 12 months from the date of approval of this report and, therefore, continue to adopt the going concern basis in preparing the accounts. Principal risks The principal risks facing the Group for the remainder of the year are unchanged from those reported in the Annual Report and Accounts These risks, together with the Group s risk management process, are detailed on pages 16 to 21 of the Annual Report and Accounts 2017, and relate to the following areas: business environment; retention of existing client relationships; poor execution and mobilisation of new contracts; labour laws and unions; implementation of efficiency programmes; changing client behaviours; expansion into new markets; senior management capability and retention; intensified competition; impact of Brexit; insufficient business development capability and investment; compliance risk; execution of outsourcing programmes; maintenance/development of brand portfolio; cyber threats; and tax strategy. 14

15 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 impact of acquisitions where appropriate. () UK Continental Europe North America H Revenue at actual rates by segment ,177.8 Impact of foreign exchange 0.1 (0.8) H Revenue at constant currency ,197.0 RoW Total H Revenue at constant currency ,069.8 Constant currency sales growth 1.2% 6.8% 34.2% 30.4% 11.9% Which is made up of: Like-for-like sales growth 2 0.7% 2.2% 3.1% 10.3% 2.8% Net contact gains/(losses) 3 0.5% 2.9% 31.1% 9.5% 7.1% Impact of acquisitions 4-1.7% % 2.0% 1.2% 6.8% 34.2% 30.4% 11.9% 1 Constant currency is based on average 2017 exchange rates weighted over the financial year by 2017 results. 2 Like-for-like sales represent revenues generated in an equivalent period in each financial period in outlets which have been open for a minimum of 12 months. Like-for-like sales are presented on a constant currency basis. 3 Net contract gains/(losses) represent the net year-on-year revenue impact from new outlets opened and existing units closed in the past 12 months. Net contract gains/(losses) are presented on a constant currency basis. 4 Acquisition impact represents the revenue impact from acquired outlets owned for less than 12 months. Acquisition impact is presented on a constant currency basis. Once the acquisition annualises revenue is included in like-for-like sales or net contract gains where appropriate. Underlying profit measures The Group presents underlying profit measures, including operating profit, profit before tax and earnings per share, which excludes the amortisation of intangible assets arising on the acquisition of the SSP business in 2006 and the revaluation of the obligation to acquire an additional 16% ownership share of TFS by the end of calendar year A reconciliation from the underlying to the statutory reported basis is presented below. H H Underlying Adjustments Total Underlying Adjustments Total Operating profit () 55.2 (1.0) (1.0) 41.8 Operating margin 4.7% (0.1)% 4.6% 4.0% (0.1)% 3.9% Profit before tax () 48.7 (0.3) (1.7) 33.0 Earnings per share (p) 5.6 (0.0) (0.4)

16 Responsibility statement of the Directors in respect of the half-yearly report We confirm that to the best of our knowledge: The condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU; The interim management report includes a fair review of the information required by: - DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and - DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so. On behalf of the Board Kate Swann Jonathan Davies Chief Executive Officer Chief Financial Officer 15 May May

17 Independent review report to SSP Group plc Conclusion We have been engaged by the company to review the condensed set of financial statements in the halfyearly financial report for the six months ended 31 March 2018 which comprises the condensed consolidated income statement, the condensed consolidated statement of other comprehensive income, the condensed consolidated balance sheet, the condensed consolidated statement of changes in equity, the condensed consolidated statement of cash flows, and the related explanatory notes. Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2018 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and the Disclosure Guidance and Transparency Rules (the DTR) of the UK s Financial Conduct Authority (the UK FCA). Scope of review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. We read the other information contained in the half-yearly financial report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Directors responsibilities The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA. The annual financial statements of the company are prepared in accordance with International Financial Reporting Standards as adopted by the EU. The directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34 as adopted by the EU. Our responsibilities Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. The purpose of our review work and to whom we owe our responsibilities This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the DTR of the UK FCA. Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached. John Cain for and on behalf of KPMG LLP Chartered Accountants - 15 Canada Square, London, E14 5GL 15 May

18 Condensed consolidated income statement for the six months ended 31 March 2018 Six months ended 31 March 2018 Six months ended 31 March 2017 Notes Underlying* Adjustment Total Underlying* Adjustment Total Revenue 2 1, , , ,072.5 Operating costs 4 (1,122.6) (1.0) (1,123.6) (1,029.7) (1.0) (1,030.7) Operating profit 55.2 (1.0) (1.0) 41.8 Share of profit of associates Finance income Finance expense 5 (7.8) - (7.8) (9.4) (0.7) (10.1) Profit before tax 48.7 (0.3) (1.7) 33.0 Taxation (10.7) 0.2 (10.5) (7.6) 0.2 (7.4) Profit for the period 38.0 (0.1) (1.5) 25.6 Profit attributable to: Equity holders of the parent 26.9 (0.1) (1.5) 18.3 Non-controlling interests Profit for the period 38.0 (0.1) (1.5) 25.6 Earnings per share (p): - Basic Diluted *Presented on an underlying basis, refer to page 15 for details 18

19 Condensed consolidated statement of other comprehensive income for the six months ended 31 March 2018 Six months Six months ended 31 ended 31 March 2018 March 2017 Other comprehensive income/(expense) Items that will never be reclassified to the income statement Remeasurements on defined benefit pension schemes (0.6) 2.7 Income tax credit/(charge) relating to items that will not be reclassified 1.7 (0.4) Items that are or may be reclassified subsequently to the income statement Net gain on hedge of net investment in foreign operations Other foreign exchange translation differences (22.1) (18.9) Effective portion of changes in fair value of cash flow hedges Cash flow hedges - reclassified to the income statement Income tax credit relating to items that are or may be reclassified Other comprehensive expense for the period (11.2) (8.0) Profit for the period Total comprehensive income for the period Total comprehensive income attributable to: Equity shareholders Non-controlling interests Total comprehensive income for the period

20 Condensed consolidated balance sheet as at 31 March 2018 Notes 31 March September 2017 Non-current assets Property, plant and equipment Goodwill and intangible assets Investments in associates Deferred tax assets Other receivables Other financial assets , ,097.6 Current assets Inventories Tax receivable Trade and other receivables Cash and cash equivalents Total assets 1, ,443.8 Current liabilities Short term borrowings 8 (27.0) (31.4) Trade and other payables (428.7) (419.9) Tax payable (16.0) (22.1) Provisions (10.7) (3.7) Obligation to acquire additional share of subsidiary undertaking (20.2) - (502.6) (477.1) Non-current liabilities Long term borrowings 8 (415.1) (419.2) Post-employment benefit obligations (14.7) (13.9) Other payables (2.0) - Provisions (24.5) (26.4) Derivative financial liabilities 8 (4.7) (9.0) Obligation to acquire additional share of subsidiary undertaking - (20.9) Deferred tax liabilities (11.5) (12.3) (472.5) (501.7) Total liabilities (975.1) (978.8) Net assets Equity Share capital Share premium Capital redemption reserve Other reserves (19.5) (11.5) Retained earnings (47.2) (55.3) Total equity shareholders funds Non-controlling interests Total equity

21 Condensed consolidated statement of changes in equity for the six months ended 31 March 2018 Share capital Share premium Other reserves 1 Retained earnings Total parent equity NCI Total equity At 1 October (138.0) Profit for the period Other comprehensive - - (11.9) 2.3 (9.6) 1.6 (8.0) income/(expense) for the period NCI arising on acquisition Obligation to acquire additional - - (18.9) - (18.9) - (18.9) share of joint venture Capital contributions from NCI Dividends paid to equity (13.8) (13.8) - (13.8) shareholders Dividends paid to NCI (7.2) (7.2) Share-based payments Deferred tax on share schemes At 31 March (8.1) (126.5) At 1 October (10.3) (55.3) Profit for the period Other comprehensive expense for the period - - (8.0) (0.6) (8.6) (2.6) (11.2) Issue of ordinary shares under share option schemes Capital contributions from NCI Dividends paid to equity shareholders (23.5) (23.5) - (23.5) Dividends paid to NCI (11.5) (11.5) Share-based payments Current and deferred tax on share schemes At 31 March (18.3) (47.2) The other reserves includes the capital redemption reserve, translation reserve, cash flow hedging reserve and the obligation to acquire an additional share of a joint venture. The decrease of 8.0m in other reserves (H1 2017: decrease of 30.8m) comprises an increase to the translation reserve of 12.5m (H1 2017: decrease of 15.3m), a decrease to the cash flow hedging reserve of 4.5m (H1 2017: increase of 3.4m) and no movement in the obligation to acquire an additional share of a non-controlling interest in TFS (H1 2017: creation of the obligation to acquire an additional share of a non-controlling interest in TFS of 18.9m). 21

22 Condensed consolidated cash flow statement for the six months ended 31 March 2018 Notes Six months ended 31 March 2018 Six months ended 31 March 2017 Cash flows from operating activities Cash flow from operations Tax paid (17.6) (14.4) Net cash flows from operating activities Cash flows from investing activities Investment in associate (1.0) - Dividends received from associates Interest received Purchase of property, plant and equipment (55.0) (59.1) Purchase of other intangible assets (3.6) (3.9) Acquisition of subsidiary, net of cash and cash equivalents acquired (18.8) (27.5) Net cash flows from investing activities (76.5) (88.2) Cash flows from financing activities (Repayment)/drawdown of finance lease and other loans (1.8) 12.9 Refinancing fee paid (2.0) - Investment in/(sale of) other financial assets 3.4 (6.3) Interest paid (6.9) (8.5) Dividends paid to equity shareholders (23.5) (13.8) Dividends paid to non-controlling interests (11.6) (7.2) Capital contribution from non-controlling interests Net cash flows from financing activities (39.8) (21.3) Net decrease in cash and cash equivalents (30.0) (52.7) Cash and cash equivalents at beginning of the period Effect of exchange rate fluctuations on cash and cash equivalents (2.6) 1.2 Cash and cash equivalents at end of the period Reconciliation of net cash flow to movement in net debt Net decrease in cash in the period (30.0) (52.7) Cash outflow/(inflow) from change in debt and finance leases 1.8 (12.9) Refinancing fee paid Cash (inflow)/outflow from investment in other financial assets (3.4) 6.3 Change in net debt resulting from cash flows (29.6) (59.3) Translation differences Other non-cash changes (0.6) (0.7) Acquisition of loans and other financial assets - (7.5) Increase in net debt in the period (27.9) (61.4) Net debt at beginning of the period (262.2) (317.4) Net debt at end of the period (290.1) (378.8) 22