SSP Group plc
Interim Results 2016
18 May 2016
foodtravelexperts.com
Presentation structure
1.
Group highlights
Kate Swann
2.
Financial review
Jonathan Davies
3.
Business review
Kate Swann
4.
Q&A
3
Group highlights
• Good first half performance with operating profit up 22.6% at actual exchange rates, 28.0% at constant currency
• Like for Like sales up 3.3%*, strong first quarter, some moderation since then
• Net new space growth strong at +2.0%
• Strong operating margin growth of 50bps
• Strategic initiatives delivering strongly on both growth and efficiency
• Interim dividend 2.5p, up 19%
• Contract wins and medium term pipeline encouraging
• On-going investment in the business and its many growth opportunities
* Excluding impact of extra day in leap year
4
Financial Review
Interim Results 2016
Jonathan Davies, CFO
foodtravelexperts.com
Group Financial Overview
1H 2016
1H 2015
896.7
859.2
LFL Sales Growth 1
3.3%
3.0%
n/a
n/a
Operating Profit 2
30.9
25.2
28.0%
22.6%
23.2
16.4
n/a
41.5%
3.0
2.1
n/a
42.9%
(374.7)
(381.4)
n/a
1.8%
£m (except where stated)
Revenue
Profit Before Tax
2
Earnings per share (p) 2
Net debt
1 Same store like-for-like sales growth at constant currency. Excluding impact of extra day in leap year
6
Change (%)
Constant
Reported FX
Currency
Rates
5.9%
4.4%
2 Underlying excluding amortisation of intangible assets created at acquisition of SSP Group by EQT in 2006
LFL Sales Growth by quarter
Note: Same store like-for-like sales growth at constant currency.
7
* FY16 Q2 LFL sales excluding impact of extra day in leap year
.:
Revenue growth of 5.9%
Change at constant
currency
UK
LFL Sales
2.8%
Net Contract
Gains/(Losses)
(0.6%)
Continental Europe
2.9%
(0.6%)
2.3%
North America
7.6%
14.6%
22.2%
Rest of World
2.2%
10.6%
12.8%
Group (ex. Leap Year)
3.3%
2.0%
5.3%
n/a
n/a
0.6%
Leap Year
Reported Growth
8
Total Revenue
2.2%
5.9%
Operating profit growth of 22.6%
Operating Profit*
1H 2016
1H 2015
26.5
18.0
Continental Europe
11.9
13.9
(7.6%)
(14.4%)
North America
3.7
0.9
300.0%
311.1%
Rest of World
2.4
6.3
(61.3%)
(61.9%)
(13.6)
(13.9)
2.2%
2.2%
30.9
25.2
28.0%
22.6%
£m
UK
Non-attributable
Group
9
Change (%)
Constant
Reported FX
Rates
Currency
47.2%
47.2%
* Operating profit is underlying, at actual currency
UK includes Republic of Ireland
Operating profit margin up by 0.5%
£m
10
1H 2016
1H 2015
Revenue
896.7
859.2
Gross Profit
603.0
573.1
% Sales
67.2%
66.7%
Labour Costs
275.1
267.0
% Sales
30.7%
31.1%
Concession Fees
156.4
145.6
% Sales
17.4%
16.9%
Overheads
106.0
102.0
% Sales
11.8%
11.9%
Depreciation & Amortisation
34.6
33.3
% Sales
3.9%
3.9%
Operating Profit
30.9
25.2
% Sales
3.4%
2.9%
Note: Underlying excluding amortisation of intangible assets created at acquisition of SSP Group by EQT in 2006
YOY change
(% Sales)
0.5%
0.4%
(0.5%)
0.1%
0.0%
0.5%
Net profit up 41.2%
£m
11
1H 2016
1H 2015
Change (%)
Operating Profit 1
30.9
25.2
22.6%
Net Financing Costs
(7.5)
(8.6)
Share of Associates
(0.2)
(0.2)
Profit Before Tax1
23.2
16.4
Tax1
(5.2)
(3.0)
Non-Controlling Interests
(3.6)
(3.2)
Net Profit1
14.4
10.2
41.2%
Earnings per share (p)1
3.0
2.1
42.9%
Dividend per share (p)
2.5
2.1
19.0%
1 Underlying excluding amortisation of intangible assets created at acquisition of SSP Group by EQT in 2006
41.5%
Free cash flow
£m
1H 2016
1H 2015
Operating Profit*
30.9
25.2
Depreciation & Amortisation
34.6
33.3
Working Capital
(19.8)
(24.5)
Capital Expenditure
(49.2)
(39.8)
Net Tax
(9.2)
(7.6)
Investment in JV
(4.7)
-
Other
(2.9)
0.1
(20.3)
(13.3)
(6.7)
(8.4)
(27.0)
(21.7)
Operating Cash Flow*
Net Financing Costs
Free Cash Flow*
12
*Underlying
Net debt increased by £54.9m
£m
Opening net debt (1 October 2015)
Free cash flow
(27.0)
Dividend
(10.5)
Impact of foreign exchange rates
(16.8)
Other
Closing net debt (31 March 2016)
13
(319.8)
(0.6)
(374.7)
Financial summary
•
Robust LFL sales growth of 3.3%
•
Net contract gains strengthening to 2.0%
•
Strategic programmes delivering strong Operating Margin growth (up 50 bps)
•
Operating profit up 28% YoY (at constant currency)
•
EPS up 43% YoY
•
Interim dividend of 2.5p, up 19% YoY
14
Business Review
Interim Results 2016
Kate Swann, CEO
foodtravelexperts.com
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
16
UK - Regional update
Revenue
• 39% SSP revenue
Profit
400
• Another strong performance in H1
350
300
• 2.2%* sales growth, 47.2% operating profit growth
£m
250
200
150
100
• Benefitting from strengthened management team
50
0
H1
2012
• Key focus on:
H1
2014
H1
2015
H1
2016
H1
2013
H1
2014
H1
2015
H1
2016
30
25
20
£m
- Strategic initiatives driving growth & efficiency
- High renewal rate
- Selective new business
- Brand development
H1
2013
15
10
5
0
17
* Excluding impact of extra day in leap year
Note: All figures at constant currency
H1
2012
Continental Europe - Regional update
Revenue
• 39% SSP revenue
400
• Robust performance despite external factors
350
300
250
£m
• 2.3%* sales growth and small operating profit decline
Profit
200
150
100
• Regional differences: some countries impacted by geopolitical
events, others stronger
50
0
H1
2012
H1
2013
H1
2014
H1
2015
H1
2012
H1
2013
H1
2014
H1
2015
H1
2016
• Key focus on:
14
12
£m
- Efficiency & flexibility in challenging markets
- High renewal rate
- Selective new business
- Efficient mobilisation of contract wins particularly in France
10
8
6
4
2
0
18
* Excluding impact of extra day in leap year
Note: All figures at constant currency
H1
2016
Rest of World – Regional update
Revenue
• 9% SSP revenue
90
• Good sales in H1, performance well managed despite
external factors
80
70
60
50
£m
• 12.8%* sales growth, profit in line with expectations
Profit
40
30
20
10
0
• Regional differences:
- Some countries impacted by external events
- Continued strong like for like growth in others
H1
2012
H1
2013
H1
2014
H1
2015
H1
2016
H1
2012
H1
2013
H1
2014
H1
2015
H1
2016
7
• Substantial contract openings ahead of plan
6
• Key focus on:
- Profitable new business development
- Infrastructure development to support growth
19
* Excluding impact of extra day in leap year
Note: All figures at constant currency
£m
5
4
3
2
1
0
North America – Regional update
Revenue
• 13% of SSP revenue
Profit
120
• Strong performance in H1
100
• 22.2%* sales growth and 300% operating profit growth
£m
80
60
40
• Focus on air channel, opportunity to grow share
20
0
• Strengthened management team delivering growth & efficiency
• Key focus on:
20
Note: All figures at constant currency
H1
2014
H1
2015
H1
2016
H1
2012
H1
2013
H1
2014
H1
2015
H1
2016
3
2
1
0
-1
-2
* Excluding impact of extra day in leap year
H1
2013
4
£m
- Building credentials
- Profitable new business development
- Mobilising new contracts quickly & efficiently
- Generating efficiencies as the business grows
H1
2012
-3
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
21
1
Optimising our offer – LFL sales growth
• LFL growth of 3.3%*, Q2 impacted by geopolitical events
• Underlying positive trends in travel channels
Area of Focus
Improve ranges
• Geographic diversification
Optimise price and promotion
• Strategic initiatives delivering well
• Focus on range improvements
• Strengthening brand portfolio
Upselling
Maximise use of space
Focus on category as well as brand
performance
22
* Excluding impact of extra day in leap year
Like for like growth: Case Study – Best sellers into more units
Opportunity to increase presence of best-sellers
Existing
Range fragmentation reducing, on-going opportunity
100%
Missing
90%
90
80%
80
70%
Proportion of products
100
Presence of bestsellers
70
60
50
40
30
20
60%
11%
6 units
5%
5%
8%
5 units
4 units
3 units
22%
2 units
48%
1 unit
50%
40%
30%
60%
10%
Upper Crust
Ritazza
Retail
Lavazza
Freeflow
M
23
20%
20%
10
0
5%
4%
4%
7%
Bars
0%
Apr-15
Dec - 2015
2
Grow profitable new space
• Strong performance, 2.0% net gains, ahead of expectations
• Renewal rate in line with plan:
- Focus on retention of profitable
business
• Disciplined approach to new business
- Selective investment
- All investments reviewed at centre
- Strict financial criteria
- Post-opening reviews
• Encouraging pipeline in H2
24
Area of Focus
New units within existing sites
Existing markets, new sites
New markets
High renewal rate
New Openings: Luxembourg Airport
• 2.7m pax
• SSP’s debut in the Luxembourg market
• Opened in Spring 2016
• 10 year deal with airport operator Lux- Airport
Starbucks
Lux Brewery
Moselier
Panopolis
• Strong brand line-up:
Luxembourg: Oberweis
26
New Openings: Don Mueang Airport, Thailand
• Don Mueang - 22m Pax, 70% domestic
• Rapid contract agreement & opening programme
• 17 of 20 units opened within 6 months of the contract
award
Dairy Queen
The Pizza Company
Bon Chon Chicken
Bon Chon Chicken
• Five year deal with the Airport Operator Airports of
Thailand
• Mix of international brands, local heroes and SSP propriety
brands
• Thai Express, Yentafo, Caffe Ritazza , Burger King and
BonChon Chicken
Good progress on contract wins including:
Bergen
3 units
Evenes
Hangzhou
2 units
2 units
Dusseldorf
8 units
Vancouver
Shanghai
5 units
2 units
Portland
Newark
1 unit
3 units
San Francisco
2 units
Don Mueang
20 units
Frankfurt
9 units
21
Abu Dhabi
10 units
SSP presence
Sydney
4 units
Brand Portfolio continues to develop
• Brands drive LFL sales, new business & retention
• Developing our portfolio with international and local
brands
• Further development of own brands and bespoke
concepts
Costa
Maan Coffee
Union Street
Ritazza
• Working with more chefs, local heroes and cutting edge
brands
29
3
Further progress optimising gross margin
• Gross margin improved by 50bps
Area of Focus
• Key initiatives making good progress
• Procurement disciplines & recipe rationalisation progressing well
Procurement disciplines
• Progress on waste and loss management
Simplify and standardise recipes
Reduce waste and losses
30
Gross Margin: Case Study – Purchasing Disciplines
• Historically compliance to approved products has been low
• Introduced iTrade to provide unit purchasing analysis
• Real time auditing of purchases to approved product lists
• Detailed records of all purchases
• Improved compliance with approved product since introduction
• Phase 2 planned for H2
31
Gross Margin: Case Study – Seasonal waste UK
4.0%
• Identification of Christmas seasonal buying patterns
3.5%
• Travel locations very different to high street
3.0%
• Product line adjustments to reflect demand
2.5%
• Delivered planned savings in waste
• Plans to roll out across other seasonal periods
Waste %
• Collaborative analysis with M&S
2.0%
1.5%
1.0%
0.5%
0.0%
Prior Year
Christmas Period
32
Current Year
Christmas Period
4
Encouraging progress on operating efficiency
• Total labour costs 40bps improvement
• Overheads 10bps improvement
• Opportunity to improve service & efficiency
• Systems developments - forecasting &
scheduling
• Technology to improve efficiency
• Multi-year programme
33
Area of Focus
Service optimisation
Improve forecasting and
scheduling
Employ technology to improve
efficiency
Improve reporting and
accountability
Operating efficiency: Case Study – Sales forecasting
• Start point for aligning sales & labour better
• Established current practice
>90%
c.78%
• Detailed analysis of historical sales trends
• Developed new forecasting tool
• Early results suggest significantly improved sales forecasting from
c.78% to >90% accuracy
Previous
weekly forecast
accuracy
Old forecasting
accuracy
34
New
forecast
accuracy
Newweekly
forecasting
accuracy
5
Optimising Investment to drive returns
• Capex £49.2m
• Maintenance & expansion capex
• Capex driven by timing of renewals and new openings
• Tight central controls on investment
• Investment in resources and tools
35
Historic cost of fit out
(£ Sqm)
Current cost of fit out
(£ Sqm)
Savings %
International Coffee Brand
£3,200
£2,800
12%
International Casual Dining
£2,700
£2,300
15%
International QSR Brand
£3,400
£2,900
15%
Summary and Outlook
• Strong first half financial performance, ahead of expectations
• LFL sales in line with plan; tougher comparatives in second half
• Net new openings ahead of expectations in H1
• On-going progress on margin and efficiency
• Net margin development strong
• Interim dividend of 2.5p
• Pipeline encouraging – timing difficult to predict
• Focus on delivering value for our shareholders
SSP Group plc
Interim Results 2016 – Q&A
18 May 2016
foodtravelexperts.com
Disclaimer
Certain statements in the presentation may constitute “forward-looking statements”. These statements reflect the Company’s beliefs and expectations and are
based on numerous assumptions regarding the Company’s present and future business strategies and the environment the Company 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