The Food Travel Experts www.foodtravelexperts.com
Presentation structure 1. Group highlights Kate Swann 2. Financial review Jonathan Davies 3. Business review Kate Swann 4. Q&A All 2
Group highlights Strong performance with operating profit up 34.2% at actual exchange rates, 27.0% at constant currency Like for Like sales up 3.1%, net new space growth strong at 6.0% Total sales growth including India 11.7%* Strong underlying operating margin growth of 50bps, 80bps including India Strategic initiatives, delivering further growth and efficiency EPS 20.3p, up 31.0% Strong cash generation Higher capex 115m Full year dividend 8.1p up 50%, payout ratio 40% Special dividend of c. 100m proposed Indian acquisition, encouraging performance Contract wins underpinning medium term pipeline *At constant currency 3
Financial review Annual Results 2017 Jonathan Davies, CFO 22nd November 2017
Group financial overview Change (%) m 2017 2016 Constant Currency Reported FX Rates Revenue 2,379.1 1,990.3 11.7% 19.5% LFL Sales Growth 3.1% 3.0% n/a n/a Operating Profit * 162.9 121.4 27.0% 34.2% Profit Before Tax * 148.7 107.5 n/a 38.3% Earnings per share (p) * 20.3 15.5 n/a 31.0% Net Debt (262.2) (317.4) n/a 17.4% *Excludes amortisation of intangible assets created at acquisition of the SSP business by EQT in 2006 and the revaluation of the final consideration to acquire an additional 16% of TFS. 5
LFL Sales Growth (%YOY) 2017 LFL sales growth 4.0% 3.5% 3.0% 2.9% 3.3% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Q1 Q2 H1 Q3 Q4 H2 FY17 Note: Same store like-for-like sales growth at constant currency 6
Revenue growth of 11.7% Change at Constant Currency LFL Sales Net Contract Gains/(Losses) Total Revenue UK 2.1% 2.7% 4.8% Continental Europe 2.7% 0.4% 3.1% North America 4.9% 22.9% 27.8% Rest of World (excl India) 7.4% 18.1% 25.5% Group (excl India) 3.1% 6.0% 9.1% Leap Year (0.3)% Group (incl Leap Year) 8.8% India 2.9% Reported Growth 11.7% 7
Operating profit growth of 27.0% * Operating profit is underlying, at actual currency ** UK includes Republic of Ireland m 2017 2016 Operating Profit* Change (%) Constant Currency Reported FX Rates UK** 82.1 66.4 23.2% 23.6% Continental Europe 77.8 60.1 18.6% 29.5% North America 14.3 12.5 0.8% 14.4% Rest of World (excl India) 8.3 8.6 11.8% (3.5)% Non-attributable (32.5) (26.2) (24.0)% (24.0)% Group (excl India) 150.0 121.4 17.5% 23.6% India 12.9 - n/a n/a Group 162.9 121.4 27.0% 34.2% 8
Operating profit margin (excl India) up by 50bps YOY bps Change m 2017 2016 Constant Currency Reported FX Rates Revenue 2,313.9 1,990.3 Gross Profit % Sales Labour Costs % Sales Concession Fees % Sales Overheads % Sales Depreciation & Amortisation % Sales Operating Profit (excl India)* Operating Margin (%) India Operating Margin (%) Operating Profit* 1,602.0 69.2% (677.4) 29.3% (423.2) 18.3% (259.0) 11.2% (92.5) 4.0% 150.0 6.5% 12.9 19.7% 162.9 6.8% 1,353.8 68.0% 90 120 (581.6) 29.2% 20 (10) (349.6) 17.6% (60) (70) (222.4) 11.2% 0 0 (78.8) 4.0% 0 0 121.4 6.1% 50 40 n/a n/a n/a 121.4 6.1% 80 70 *Excludes amortisation of intangible assets created at acquisition of the SSP business by EQT in 2006 and the revaluation of the final consideration to acquire an additional 16% of TFS. 9
Acquisition of 49% stake in TFS In October 2016 SSP announced the acquisition of a 49% JV with Travel Food Services, completed in December 2016 SSP currently owns 33%, the remaining 16% is to be acquired in 2018 SSP has management and operational control TFS is fully consolidated in the SSP figures Significant new opening programme underway Encouraging start and good contract pipeline Fully consolidated (10 months) m Reported FX rates Revenue 65.2 Operating profit 12.9 % 19.7% Net finance charges (0.2) Tax (4.0) % (31.6)% Profit After Tax 8.7 Minorities* (6.8) % (78.7)% Net income 1.9 *SSP s share of the fully consolidated revenue and profit was 11% (December 2016 February 2017) and 26% (March - September 2017). On a fully consolidated basis the minority interest was 82.9% of TFS PAT in H1 17 and 77.2% in H2 17. 10
Net profit up 31.3% m 2017 2016 Change (%) Operating Profit* 162.9 121.4 34.2% Net Financing Cost* (17.6) (15.2) Share of Associates 3.4 1.3 Profit Before Tax* 148.7 107.5 38.3% Tax* (33.8) (24.2) Non-Controlling Interests (18.4) (9.8) Net Profit* 96.5 73.5 31.3% Earnings per share (p)* 20.3p 15.5p 31.0% Dividend per share (p) 8.1p 5.4p 50.0% *Excludes amortisation of intangible assets created at acquisition of the SSP business by EQT in 2006 and the revaluation of the final consideration to acquire an additional 16% of TFS. 11
Free cash generation of 89m m 2017 2016 Operating Profit* 162.9 121.4 Depreciation & Amortisation* 95.5 78.8 Working Capital 18.3 3.8 Capital Expenditure (115.0) (95.9) Net Tax (33.3) (20.0) Sale of/(investment in) Associates 7.3 (4.7) Acquisition of TFS, adjusted for net debt acquired (35.0) - Other 2.8 (5.1) Operating Cash Flow* 103.5 78.3 Net Financing Costs (14.5) (13.3) Free Cash Inflow* 89.0 65.0 *Excludes amortisation of intangible assets created at acquisition of the SSP business by EQT in 2006 and the revaluation of the final consideration to acquire an additional 16% of TFS. 12
Net debt of 262m m Leverage (Net Debt/EBITDA) Opening Net Debt (1 October 2016) (317.4) 1.6x Free Cash Flow 89.0 Dividend (29.0) Impact of foreign exchange rates (3.4) Other (1.4) Closing Net Debt (30 September 2017) (262.2) 1.0x 13
Uses of cash and balance sheet efficiency Organic Investment Significant structural growth opportunities around the world Dividend Pay-out ratio increased to 40% Balance sheet efficiency Medium term leverage: c1.5x - 2.0x M&A Review of potential M&A opportunities Return to shareholders c. 100m proposed via a special dividend 14
Financial summary Robust LFL sales growth of 3.1% Net contract gains (excl India) stronger at 6.0% Strategic programmes delivering strong operating margin growth (excl India) up 50bps India adding 2.9% to revenue and an additional 30bps to operating margin Operating profit up 27.0% EPS up 31.0% Strong Free Cash Flow of 89m Full year dividend per share of 8.1p and c. 100m special dividend proposed 15
Business review Annual Results 2017 Kate Swann, CEO 22nd November 2017
SSP business fundamentals Multiple structural market growth drivers Market leader in attractive channels and regions Strong business platform combining international scale and local expertise 5 key levers to drive growth and efficiency Sales growth, margin expansion and strong cash generation 17
UK update 33%* of SSP revenue, strong presence in rail and air Air continues to grow strongly, rail softer Further good profit performance Strategic initiatives delivering well Planning well advanced for cost pressures going forward Focus on Strategic initiatives High renewal rate Further brand development Selective new business * SSP revenue by region %s is calculated, adjusting for the impact of annualised India sales Note: All figures in constant currency 800 780 760 740 720 700 680 660 640 90 80 70 60 50 40 30 20 10 0 Revenue 2013 2014 2015 2016 2017 Operating profit 2013 2014 2015 2016 2017 18
Continental Europe update 38%* of SSP revenue, strong presence in rail and air Improved performance Management changes to reflect changing market and business needs Focus on Cost efficiency and flexibility of labour High renewal rate Selective new business Mobilisation of new contracts, particularly in France, Germany and Norway * SSP revenue by region %s is calculated, adjusting for the impact of annualised India sales Note: All figures in constant currency 820 800 780 760 740 720 700 680 660 640 80 70 60 50 40 30 20 10 0 Revenue 2013 2014 2015 2016 2017 Operating profit 2013 2014 2015 2016 2017 19
North America update 16%* of SSP revenue Focus on air channel, increasing share 27.8% sales growth including 22.9% net gains Successful year for new openings and new contract wins Strategic initiatives improving profitability Focus on Profitable new business Mobilising new contracts quickly and efficiently Infrastructure and people to support growth Generating efficiencies over time as business grows * SSP revenue by region %s is calculated, adjusting for the impact of annualised India sales Note: All figures in constant currency 350 300 250 200 150 100 50 0 15 10 5 0-5 Revenue 2013 2014 2015 2016 2017 Operating profit 2013 2014 2015 2016 2017 20
Rest of World update excl. India 10%* SSP revenue, focused on air, initial trials in rail 25.5% sales growth including 18.1% net gains Regional differences Large geographical spread Terminal developments impacting some countries Continued good LFL growth elsewhere Operating profit growth in line with expectations Focus on Profitable new business development Selective geographic expansion Infrastructure and people to support growth * SSP revenue by region %s is calculated, adjusting for the impact of annualised India sales Note: All figures in constant currency 250 200 150 100 50 0 20 15 10 5 0 Revenue 2013 2014 2015 2016 2017 Operating profit 2013 2014 2015 2016 2017 21
Rest of World India update Joint venture combines SSP s international expertise and TFS local knowledge Focused on air, trials in Rail and MSA Strong performance throughout the year Successful Delhi renewal and expansion Good progress on integration Focus on Integration Profitable new business Infrastructure and people 22
Our focus remains on five key levers to deliver value 1 Optimise our offer to benefit from the positive trends in our markets 2 Grow profitable new space 3 Optimise gross margin and leverage scale benefits 4 Run an efficient and effective business 5 Optimise investment using best practice and shared resource 23
1 Optimising our offer Areas of Focus LFL growth of 3.1% Geographic diversification helps mitigate specific country issues Underlying positive trends in travel market Strategic initiatives delivering well Improve ranges Optimise price and promotion Upselling Maximise use of space Focus on category as well as brand performance 24
Optimising our offer: Premiumisation Customers demanding better quality and more innovation Premiumisation initiatives drive ATV, delivering sales and profit growth Premiumisation needs to be accessible and engaging Successfully introducing premium lines across many formats and geographies 25
Optimising our offer: Premiumisation case study On board offer with Virgin Trains East Coast First class - Introduced new menus in collaboration with James Martin Standard class - added James Martin Kitchen lines to existing offer Double digit sales increases Customer advocacy increased immediately after launch Won industry and client awards James Martin First Class menu 26
2 Grow profitable new space Very strong performance, 6% net gains Successful growth in existing sites, new sites and new markets Impact on P&L in first year varies Good pipeline for FY18 Disciplined approach to new business Renewal rate in line with plan Areas of Focus New units within existing sites Existing markets, new sites New markets High renewal rate 27
Strong progress on new contracts - including: Boston 3 units UK 3 units Stavanger 2 units Helsinki 5 units Seattle 12 units Marseille 13 units Ibiza 5 units China 3 units Key: Phoenix 2 units H1 Contract Wins Los Angeles 6 units Chicago 18 units Toronto 4 units Toronto City 4 units New York 7 units Greece 5 units Chennai 4 units Philippines 21 units Thailand 3 units H2 Contract Wins SSP presence 28
New opening: Chicago Midway New contract win, Chicago Midway airport 22.6 million PAX SSP selected to improve consumer experience and bring greater choice Operating all units on temporary basis from May 2017 Gradual conversion programme over next few years New brands planned - iconic Chicago brands, e.g. Big & Little s, Home Run Inn, Reilly s Daughter, M Burger Big & Little s Reilly s Daughter Home Run Inn M Burger 29
New Contract Win: Philippines New contract win 21 units at Cebu airport Growing airport with 11m PAX annually High levels of interest in tender JV with client and local partner SSP selected for combination of local and international expertise Brand line up includes Lechon, Burger King, Ritazza, Camden Development expected to commence Summer 2018 30
Brand portfolio continues to develop SSP has strong and growing portfolio of international brands, local heroes, bespoke concepts and own brands We now operate over 450 brands Paul Hollywood - Euston Brands drive LFL sales, new business and renewals Developing concepts with high profile chefs Refreshing own brands for use internationally Upper Crust - Brisbane Camden Food Co Dubai 31
3 Further progress optimising gross margin Gross margin improved by 90bps* Some increase in food inflation Key initiatives continue to deliver good results Good progress on simplification and standardisation Areas of Focus Procurement disciplines Simplify and standardise recipes Reduce waste and losses * At constant currency excluding India 32
Optimising Gross Margin: Case Study Equipment and process changes Central kitchens common in big sites Traditionally very manual Specialised equipment introduced Cutting and slicing Automatic depositer Wrapping machine Conveyor tables Robot Coupe Automated depositer Successfully trialled in three US airports Improves recipe compliance, portion size, waste and efficiency Roll-out commenced Conveyor tables Wrapping machine 33
4 Encouraging progress on operating efficiency Labour costs 20bps improvement* Continued rising labour costs; minimum wage, living wage Service optimisation; a major focus in parallel with forecasting and scheduling Successful UK rollout, Nordics and North America now in pilot Further technology being tested Areas of Focus Service optimisation Improve forecasting and scheduling Employ technology to improve efficiency Improve reporting and accountability * At constant currency excluding India 34
Optimising Efficiency: Case Study self-pay and self-order Self-scan checkouts successful trialled in UK M&S stores Self-scan participation now in excess of 60% Roll-out planned for 2018 Useful learnings for further trials Self-order functionality now being piloted in the UK and in the US in QSR Initial results encouraging 35
Summary and outlook Strong full year financial performance, profit up 27.0%, 34.2% at actual exchange rates Good LFL sales 3.1% Net new openings well ahead of plan at 6% On-going good progress on margin and efficiency EPS 20.3p, up 31.0% Strong free cash generation 89m Full year dividend of 8.1p, up 50%, payout ratio increased to 40% Special dividend of c. 100m proposed Pipeline encouraging, continue to invest in our many opportunities Continued focus on delivering value for our shareholders 36
Q & A
Disclaimer Certain statements in the presentation may constitute forward-looking statements. These statements reflect the Company s current beliefs and expectations and are based on numerous assumptions regarding the Company s present and future business strategies and the environment the Company and members of its group will operate in and are subject to risks and uncertainties that may cause actual results, performance or achievements to differ materially. Forward-looking statements involve inherent known and unknown risks, uncertainties and contingencies because they relate to events and depend on circumstances that may or may not occur in the future and may cause the actual results, performance or achievements of the Company to be materially different from those expressed or implied by such forward looking statements. Many of these risks and uncertainties relate to factors that are beyond the Company s ability to control or estimate precisely, such as future market conditions, currency fluctuations, the behaviour of other market participants, the actions of regulators and other factors such as the Company s ability to continue to obtain financing to meet its liquidity needs, changes in the political, social and regulatory framework in which the Group operates or in economic or technological trends or conditions. As a result, you are cautioned not to place undue reliance on such forward-looking statements. Additionally, forward-looking statements regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. Forward-looking statements speak only as of their date and the Company, any other member of the Group, its parent undertakings, the subsidiary undertakings of such parent undertakings, and any of such person s respective directors, officers, employees, agents, affiliates or advisers expressly disclaim any obligation to supplement, amend, update or revise any of the forward-looking statements made herein, except where it would be required to do so under applicable law or regulatory obligations. It is up to the recipient of this presentation to make its own assessment as to the validity of such forward-looking statements and assumptions. Nothing in this presentation shall exclude any liability under applicable laws that cannot be excluded in accordance with such laws. 38