SSP Group plc Preliminary Results 2014 27 November 2014 - - PowerPoint PPT Presentation

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SSP Group plc

Preliminary Results 2014

27 November 2014

SSP Group plc

• Group Overview

Kate Swann

• Financial Review

Jonathan Davies

• Business Review

Kate Swann

3 SSP – The Food Travel Experts

Group overview

• Good profit performance up 21% YOY at constant currency (+12% actual)
• LFL sales at +3.3%; net new space in line with plan, taking total sales growth to

+4.0% at constant currency

• Encouraging performance in existing and new geographies
• Operating margin up 50bps
• Strong cash generation and strengthened balance sheet
• Early wins from initiatives to benefit from best practice and international scale
• Forward pipeline positive and in line with plan
• Continued investment in the business and its many growth opportunities

4 SSP – The Food Travel Experts

foodtravelexperts.com

Financial Review

Preliminary Results 2014

Jonathan Davies, CFO

Group financial overview

6

2014 2013 Year on Year Change % £m Constant Currency4 Reported FX Rates Revenue 1,827.1 1,827.2 4.0% Flat LFL Sales1 3.3% 4.3% n/a n/a Operating Profit2 88.5 78.8 20.8% 12.3% Profit Before Tax2 61.8 38.3 n/a 61.4% Proforma Profit Before Tax2 3 71.5 62.7 n/a 14.0% Operating Cash Flow 2 83.3 67.0 n/a 24.3%

1 Same store like‐for‐like sales growth at constant currency 2 Underlying excluding exceptional items and amortisation of intangible assets created at acquisition of SSP Group by EQT in 2006 3 Proforma assumes post‐IPO financing in place throughout both years 4 Constant currency is based on 2013 exchange rates weighted over the year by 2014 results SSP – The Food Travel Experts

Revenue growth of 4.0% (at constant currency)

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% YoY (at Constant Currency)1 LFL Sales Net Contract Gains/(Losses) Total Revenue Growth UK 4.1% (2.2%) 1.9% Continental Europe 1.1% 0.6% 1.7% North America 5.9% 13.9% 19.8% Rest of World 8.8% 2.4% 11.2% Group 3.3% 0.7% 4.0%

1 Constant currency is based on 2013 exchange rates weighted over the year by 2014 results.

SSP – The Food Travel Experts

Operating profit growth* of 21% (at constant currency)

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Operating Profit* Year on Year Change % £m 2014 2013 Constant Currency Reported FX Rates UK 40.0 34.3 17.2% 16.6% Continental Europe 57.4 54.0 15.0% 6.3% North America (0.1) (1.2) 111.5% 91.7% Rest of World 12.7 13.4 5.8% (5.2%) Non‐attributable (21.5) (21.7) 1.2% 0.9% Group 88.5 78.8 20.8% 12.3%

*Underlying SSP – The Food Travel Experts

Operating profit margin* increased by 0.5% year on year

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£m 2014 2013 Year on Year Change % Sales Revenue 1,827.1 1,827.2 Gross Profit 1,215.0 1,212.5 % Sales 66.5% 66.4% 0.1% Labour Costs 541.8 559.0 % Sales 29.7% 30.6% 0.9% Concession Fees 301.8 296.0 % Sales 16.5% 16.2% (0.3%) Overheads 207.2 204.8 % Sales 11.3% 11.2% (0.1%) Depreciation & Amortisation 75.7 73.9 % Sales 4.1% 4.0% (0.1%) Underlying Operating Profit 88.5 78.8 % Sales 4.8% 4.3% 0.5%

*Underlying SSP – The Food Travel Experts

Underlying net profit of £39.8m

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2014 2014 2013 £m Reported Adjustments Underlying Underlying Revenue 1,827.1 ‐ 1,827.1 1,827.2 Operating Costs (1,787.1) 48.5 (1,738.6) (1,748.4) Operating Profit 40.0 48.5 88.5 78.8 Net Financing Costs (54.3) 26.1 (28.2) (42.9) Share of Associates 1.5 ‐ 1.5 2.4 Loss on Disposal of Business (0.7) 0.7 ‐ ‐ (Loss)/Profit Before Tax (13.5) 75.3 61.8 38.3 Tax (14.3) (3.6) (17.9) (14.0) Non‐Controlling Interests (4.1) ‐ (4.1) (3.5) Net (Loss)/Profit (31.9) 71.7 39.8 20.8

SSP – The Food Travel Experts Proforma net financing costs of £18.5m in 2014

Free cash flow of £51.5m

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£m 2014 2013 Operating Profit* 88.5 78.8 Depreciation & Amortisation 75.7 73.9 Working Capital 12.7 5.7 Capital Expenditure (76.0) (78.0) Net Tax (15.7) (12.3) Other (1.9) (1.1) Operating Cash Flow* 83.3 67.0 Net Financing Costs (25.1) (34.2) Exceptional Redundancy Costs (6.7) (8.0) Free Cash Flow 51.5 24.8

*Underlying SSP – The Food Travel Experts

Net debt at £371m

SSP – The Food Travel Experts 12

£m £m Opening Net Debt (1 Oct 2013) (870.4) Free Cash Flow 51.5 Net IPO Proceeds to delever: ‐ Gross issue proceeds 467.1 ‐ Less: settlement to B1 investors (32.0) ‐ Less: other transaction expenses (31.7) 403.4 Impact of FX Rates 43.9 Other Non Cash Movements 0.5 Closing Net Debt (30 Sept 2014) (371.1)

Financial summary

• Strong operating profit growth, up 21% (at constant currency)
• Good sales growth, up 4.0% (at constant currency)
• Early benefits from efficiency programmes, operating margin up 50 bps
• Healthy free cash flow, +£51.5m
• Strengthened balance sheet post IPO, leverage down to 2.3x EBITDA at year end

13 SSP – The Food Travel Experts

foodtravelexperts.com

Kate Swann, CEO

Business Review

Preliminary Results 2014

Simple strategy to deliver value for our shareholders

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

15 SSP – The Food Travel Experts

• 1. Good growth in all divisions
• Group LFL +3.3%, total sales +4.0%
• All divisions performed strongly

— Good growth in the UK — Trading mixed in Continental Europe — Strong growth in North America and substantial opening programme — Encouraging growth in Rest of the World but impacted by political instability

• Continued underlying positive tailwinds expected
• Broadly based business with good geographic diversification

16 SSP – The Food Travel Experts

• 1. Progress on key retail basics

Ranging

• Processes being established for ongoing range

management

• Better matching of ranges to market demand

and trends Trading up

• Perfect partner programme introduced in all

major countries

• Menus developed to encourage trading up

17 SSP – The Food Travel Experts

1.Progress on key retail basics

Merchandising and impulse purchase

• Early success with improved displays
• Further impulse lines being introduced

Category management

• Speciality hot drinks
• Burger category

SSP The food travel experts 18

Upper Crust Truffle burger Impulse products

• 1. Better understanding of pricing, but still early

days

• Improved understanding of pricing

elasticity but early days

• Base pricing still very mixed

19

• 4%

29% 0% 7% 21%

• 13%
• 2%
• 14%
• 2%

6% 7%

Example: SSP pricing vs competitors

Source: SSP price checks 2014

TOTAL

0%

Baguettes Bockwurst Bratwurst Meat dishes Soups Sandwiches Chocolate bars Ice creams Cola Beer Coffee

SSP – The Food Travel Experts

• Net gains in the year +0.7%, in line with our plan
• Always likely to be lumpy due to nature of contract wins
• 48 net new units opened in 2013/14
• Substantial opening programme in North America
• 2. Grow profitable new space – new units opened

20

Doha Airport Doha Airport Bordeaux Airport JFK Airport San Diego Airport Phoenix Airport

SSP – The Food Travel Experts

• 2. Phoenix Sky Harbor International Airport case

study

Phoenix Sky Harbor International Airport

The SSP package for Phoenix Sky Harbor International Airport

“Phoenix Sky Harbor International Airport's goal of providing customers with a mix of local, regional and national favorites has received international recognition. Passengers are delighted to find establishments like Matt's Big Breakfast, Lo‐ Lo's Chicken and Waffles and Four Peaks Brewing Company as they travel through our busiest terminal." Tamie Fisher, Acting Aviation Director

• The 11th largest airport in the US, handling over 40

million passengers1

• The airport has a stated mission to be the ‘friendliest’

airport in the US and to ‘support the local community’

• SSP offered a creative solution of brands based on

community‐anchored dining

• 10 year contract for 26 outlets
• Local heroes and bespoke concepts

1 Airports Council International (ACI) website

21 SSP – The Food Travel Experts

• Key renewals secured during 2013/14
• 2. Good progress on contract renewals and

encouraging pipeline

22

Helsinki Airport Hurghada Airport Newcastle Airport

• Some key contract wins during the period
• Timing often difficult to predict

Beijing Airport Dubai Airport London Stansted Airport

SSP – The Food Travel Experts

• 2. Continued development of new brands and concepts

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Innovating with our international brand partners Trend for bespoke new and unique continues

SSP – The Food Travel Experts

• 2. Continued development of new brands and

concepts

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Partnering with experts and chefs in the industry Further development of our own brands

James Martin Flying Hippo, Newcastle Airport Mum’s Kitchen, Malaga Airport

SSP – The Food Travel Experts

Alan Yau

• 3. Early progress on gross margin optimisation
• Gross margin improvement 10 bps YOY
• Utilising international scale
• Simplification and rationalisation based
• n improved data collection
• Waste an area of focus
• Roll out of systems to allow better

margin management

25 Example: Waste losses by outlet UK % of COS, 2013 SSP – The Food Travel Experts

• 4. Encouraging progress on operating efficiency
• Labour efficiency projects in 8 countries
• Introduced scheduling technology
• Improved scheduling capability:

— Shift lengths — Multi‐skilling — Management ratios

SSP The food travel experts

0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 0.0 1.0 2.0 3.0 4.0 5.0 Labour Costs (€m) Sales (€m)

Comparison of Spend vs. Sales of QSR in Spain

Similar sales, although labour spend ~75% higher Represents individual units

Comparison of sales, transactions and labour hours by time of day Labour v management hours

Sales £ / Transactions ~4 transactions / man hr Overstaffed? ~15 transactions / man hr Understaffed?

1

Hours – Manager Hours – Team Sales Transactions

Management / supervision share of hours worked Total management & supervision labour costs €k

• 4. Encouraging progress on operating efficiency
• Technology enabled:

— Digital customer feedback introduced — Cash counting — LED bulbs

• Overheads in the centre and in unit:

— Relocated Group head office —Group deals on healthcare, telecoms, uniforms

27

Eat on the Move website

SSP – The Food Travel Experts

• 5. Optimising investment using international scale

and best practice

• Central commercial function under Mark Angela – Group Chief Commercial Officer

— New Group Marketing Director and Head of Brands — New Group Capital Projects Director

• Investing in analytical capability and information systems

— Capital projects database — Common group‐wide recipes

• Continued focus on international benchmarking of unit performance

28 SSP – The Food Travel Experts

Summary

• Strong 2014 financial performance
• Margins benefitted from early implementation of gross margin and efficiency initiatives
• Pipeline encouraging and wide range of initiatives to drive growth
• 2015 has started in line with our expectations

29 SSP – The Food Travel Experts

foodtravelexperts.com

SSP Group plc

Preliminary Results 2014 – Q&A

27 November 2014

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

• f 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