REG - SSP Group PLC - Final Results <Origin Href="QuoteRef">SSPG.L</Origin> - Part 2
22/11/2017 07:07
- Part 2: For the preceding part double click ID:nRSV1631Xa
At 1 October 2016 4.7 461.2 22.7 (138.0) 350.6 32.1 382.7
Profit for the year - - - 92.8 92.8 18.4 111.2
Other comprehensive income / (expense) for the year - - (14.1) 5.2 (8.9) (2.7) (11.6)
NCI arising on acquisition - - - - - 21.4 21.4
Capital contributions from NCI - - - - - 8.4 8.4
Obligation to acquire additional share of joint venture - - (18.9) - (18.9) - (18.9)
Dividends paid to equity shareholders - - - (29.0) (29.0) - (29.0)
Dividends paid to NCI - - - - - (12.9) (12.9)
Share-based payments - - - 11.9 11.9 - 11.9
Deferred tax on share schemes - - - 1.8 1.8 - 1.8
At 30 September 2017 4.7 461.2 (10.3) (55.3) 400.3 64.7 465.0
1 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 £33.0m in other reserves (2016:
increase of £27.8m) comprises a decrease to the translation reserve of £19.0m
(2016: increase of £31.6m), an increase to the cash flow hedging reserve of
£4.9m (2016: decrease of £3.8m) and the creation of the obligation to acquire
an additional share of a non-controlling interest in a joint venture of £18.9m
(2016: £nil).
Consolidated cash flow statement
for the year ended 30 September 2017
Notes 2017 2016
£m £m
Cash flows from operating activities
Cash flow from operations 6 280.2 208.5
Tax paid (33.3) (20.0)
Net cash flows from operating activities 246.9 188.5
Cash flows from investing activities
Investment in associate - (4.7)
Dividends received from associates 3.8 2.3
Interest received 0.9 0.4
Purchase of property, plant and equipment (107.4) (97.6)
Purchase of other intangible assets (7.6) (6.7)
Acquisition of investment in TFS, net of cash and cash equivalents acquired (27.5) -
Disposal of associate 7.3 -
Net cash flows from investing activities (130.5) (106.3)
Cash flows from financing activities
Repayment of borrowings (31.6) (30.8)
Repayment of finance leases and other loans (1.7) (0.2)
Investment in other financial assets (9.5) -
Interest paid (15.4) (13.7)
Dividends paid to equity shareholders (29.0) (22.3)
Dividends paid to non-controlling interests (12.9) (11.1)
Acquisition of increased share of subsidiary - (0.8)
Capital contribution from non-controlling interests 8.4 8.4
Net cash flows from financing activities (91.7) (70.5)
Net increase in cash and cash equivalents 24.7 11.7
Cash and cash equivalents at beginning of the year 155.8 134.7
Effect of exchange rate fluctuations on cash and cash equivalents (2.4) 9.4
Cash and cash equivalents at end of the year 178.1 155.8
Reconciliation of net cash flow to movement in net debt
Net increase in cash in the year 24.7 11.7
Cash outflow from decrease in debt and finance leases 33.3 31.0
Cash outflow from investment in other financial assets 9.5 -
Change in net debt resulting from cash flows 67.5 42.7
Translation differences (3.4) (39.1)
Acquisition of TFS loans and other financial assets (7.5) -
Other non-cash changes (1.4) (1.2)
Decrease in net debt in the year 55.2 2.4
Net debt at beginning of the year (317.4) (319.8)
Net debt at end of the year (262.2) (317.4)
Notes
1 Preparation
Basis of preparation and statement of compliance
The consolidated financial statements of SSP Group plc have been prepared on a
going concern basis and in accordance with International Financial Reporting
Standards as adopted by the EU ("IFRS") and the Companies Act 2006 applicable
to companies reporting under IFRS. These financial statements are presented in
Sterling and unless stated otherwise, rounded to the nearest £0.1 million. The
financial statements are prepared on the historical cost basis except for the
derivative financial instruments which are stated at their fair value.
Changes in accounting policy and disclosures
The accounting policies adopted are consistent with those of the previous
year.
The following standards, issued by the IASB and endorsed by the EU, have not
yet been adopted and unless otherwise stated are not expected to have a
material impact on the Group:
IFRS 9 'Financial Instruments' replaces IAS 39 'Financial instruments -
Recognition and Measurement' (effective for the year ending 30 September 2019)
- the Group continues to assess the impact this standard would have on its
consolidated results and financial position.
IFRS 15 'Revenue from Contracts with Customers' (effective for the year ending
30 September 2019) - the Group continues to assess the impact of the new
standard, but based on a preliminary assessment, the Group believes that IFRS
15 will not have a significant impact on the timing and recognition of
revenue.
IFRS 16 'Leases' (effective for the year ending 30 September 2020) - the Group
is reviewing the standard in more detail to ensure it prepares itself for
adoption and expects that IFRS 16 will have a material impact on the Group's
consolidated results and an associated impact on both assets and liabilities.
2 Segmental reporting
SSP operates in the food and beverage travel sector, mainly at airports and
railway stations.
Management monitors the performance and strategic priorities of the business
from a geographic perspective, and in this regard has identified the following
four key "reportable segments": the UK, Continental Europe, North America and
Rest of the World (RoW). The UK includes operations in the United Kingdom and
the Republic of Ireland; Continental Europe includes operations in the Nordic
countries and in Western and Southern Europe; North America includes
operations in the United States and Canada; and RoW includes operations in
Eastern Europe, the Middle East, Asia Pacific and India. These segments
comprise countries which are at similar stages of development and demonstrate
similar economic characteristics.
The Group's management assesses the performance of the operating segments
based on revenue and underlying operating profit. Interest income and
expenditure are not allocated to segments, as they are managed by a central
treasury function, which oversees the debt and liquidity position of the
Group. The non-attributable segment comprises costs associated with the
Group's head office function and depreciation of central assets.
2017 UK Continental Europe North America RoW Non-attributable Total
£m £m £m £m £m £m
Revenue 787.7 910.3 372.9 308.2 - 2,379.1
Underlying operating profit/(loss) 82.1 77.8 14.3 21.2 (32.5) 162.9
2016
Revenue 749.4 796.8 262.7 181.4 - 1,990.3
Underlying operating profit/(loss) 66.4 60.1 12.5 8.6 (26.2) 121.4
The following amounts are included in underlying operating profit:
UK Continental Europe North America RoW Non-attributable Total
£m £m £m £m £m £m
2017
Depreciation and amortisation* (12.2) (32.4) (28.5) (17.4) (5.0) (95.5)
2016
Depreciation and amortisation* (14.2) (34.9) (18.0) (9.9) (1.8) (78.8)
* Excludes amortisation of acquisition related intangible assets.
A reconciliation of underlying operating profit to profit before and after tax
is provided as follows:
Underlying operating profit 162.9 121.4
Adjustments to operating costs (1.9) (1.9)
Share of loss from associates 3.4 1.3
Finance income 0.9 0.5
Finance expense (20.5) (15.7)
Profit before tax 144.8 105.6
Taxation (33.6) (23.8)
Profit after tax 111.2 81.8
Profit after tax
111.2
81.8
3 Earnings per share
Basic earnings per share is calculated by dividing the result for the year
attributable to ordinary shareholders by the weighted average number of
ordinary shares outstanding during the year.
Diluted earnings per share is calculated by dividing the result for the year
attributable to ordinary shareholders by the weighted average number of
ordinary shares outstanding during the year adjusted by potentially dilutive
outstanding share options.
Underlying earnings per share is calculated the same way except that the
result for the year attributable to ordinary shareholders is adjusted for
specific items as detailed below:
2017 2016
£m £m
Profit attributable to ordinary shareholders 92.8 72.0
Adjustments:
Amortisation of acquisition-related intangibles 1.9 1.9
Revaluation and discount unwind of the TFS financial liability (refer to note 7) 2.0 -
Tax effect of adjustments (0.2) (0.4)
Underlying profit attributable to ordinary shareholders 96.5 73.5
Basic weighted average number of shares 475,214,310 475,169,510
Dilutive potential ordinary shares 7,487,883 3,579,804
Diluted weighted average number of shares 482,702,193 478,749,314
The number of ordinary shares in issue as at 30 September 2017 was 475,226,453 (30 September 2016: 475,199,063).
2017 2016
Earnings per share (p):
- Basic 19.5 15.2
- Diluted 19.2 15.0
Underlying earnings per share (p):
- Basic 20.3 15.5
- Diluted 20.0 15.4
4 Operating costs
2017 2016
£m £m
Cost of food and materials:
Cost of inventories consumed in the year (727.0) (636.5)
Labour cost:
Employee remuneration (687.2) (581.6)
Overheads:
Depreciation of property, plant and equipment (89.3) (74.2)
Amortisation of intangible assets - software (6.2) (4.6)
Amortisation of acquisition-related intangible assets (1.9) (1.9)
Rentals payable under operating leases (438.0) (349.6)
Other overheads (268.5) (222.4)
(2,218.1) (1,870.8)
Adjustments to operating costs
Amortisation of intangible assets arising on acquisition (1.9) (1.9)
(1.9) (1.9)
5 Finance income and expense
2017 2016
£m £m
Finance income
Interest income 0.9 0.4
Net foreign exchange gains - 0.1
Total finance income 0.9 0.5
Finance expense
Total interest expense on financial liabilities measured at amortised cost (11.2) (10.5)
Net change in fair value of cash flow hedges utilised in the year (4.0) (2.7)
Unwind of discount on provisions (0.5) (0.6)
Net interest expense on defined benefit pension obligations (0.3) (0.4)
Net foreign exchange losses (0.2) -
Net revaluation of TFS financial liability (2.0) -
Other (2.3) (1.5)
Total finance expense (20.5) (15.7)
Adjustments to finance expense
The adjustments to finance expense in the year to 30 September 2017 includes
the revaluation of the obligation to acquire an additional 16% share of TFS in
late 2018.
2017 2016
Unwind of discount on obligation to acquire additional share of subsidiary undertaking (0.4) -
Revaluation of obligation to acquire additional share of subsidiary undertaking (2.4) -
Foreign exchange gains on revaluation of obligation to acquire additional share of subsidiary undertaking 0.8 -
Net revaluation of TFS financial liability 2.0 -
6 Cash flow from operations
2017 2016
£m £m
Profit for the year 111.2 81.8
Adjustments for:
Depreciation 89.3 74.2
Amortisation 8.1 6.5
Share-based payments 11.9 4.5
Finance income (0.9) (0.5)
Finance expense 20.5 15.7
Share of profit of associates (3.4) (1.3)
Taxation 33.6 23.8
270.3 204.7
Decrease/(increase) in trade and other receivables 3.9 (18.7)
Decrease in inventories (2.4) (0.1)
Decrease in trade and other payables including provisions 8.4 22.6
Cash flow from operations 280.2 208.5
7 Dividends
2017 2016
£m £m
Interim dividend paid in the year of 3.2p per share (2016: 2.5p) (15.2) (11.8)
Prior year final dividend of 2.9p per share paid in the year (2016: 2.2p) (13.8) (10.5)
(29.0) (22.3)
The proposed dividend of 4.9 pence per share, amounting to a final dividend of
£23.3m, is not included as a liability in these financial statements, and
subject to shareholder approval, will be paid on 29 March 2018 to shareholders
on the register on 16 March 2018.
8 Fair value measurement
Certain of the Group's financial instruments are held at fair value.
The fair values of financial instruments held at fair value have been
determined based on available market information at the balance sheet date,
and the valuation methodologies detailed below:
- the fair values of the Group's borrowings are calculated based on the
present value of future principal and interest cash flows, discounted at the
market rate of interest at the balance sheet date; and
- the derivative financial liabilities relate to interest rate swaps. The
fair values of interest rate swaps have been determined using relevant yield
curves and exchange rates as at the balance sheet date.
Carrying amounts and fair values of certain financial instruments
The following table shows the carrying amounts of financial assets and
financial liabilities. It does not include information for financial assets
and financial liabilities not measured at fair value if the carrying amount is
a reasonable approximation of fair value.
Carrying amounts
2017 2016
£m £m
Financial instruments measured at fair value:
Non-current
Derivative financial liabilities (9.0) (14.2)
Financial instruments not measured at fair value:
Non-current
Other financial assets 10.3 -
Long term borrowings (419.2) (442.5)
Current
Cash and cash equivalents 178.1 155.8
Short term borrowings (31.4) (30.7)
Financial assets and liabilities in the Group's consolidated balance sheet are
either held at fair value, or their carrying value approximates to fair value,
with the exception of loans, which are held at amortised cost. The fair value
of total borrowings estimated using market prices at 30 September 2017 is
£454.2m (30 September 2016: £476.7m).
All of the financial assets and liabilities measured at fair value are
classified as level 2 using the fair value hierarchy, whereby inputs which are
used in the valuation of these financial assets and liabilities and have a
significant effect on the fair value are observable, either directly or
indirectly. There were no transfers during the year.
9 Business combinations
The Group has created a joint venture with K Hospitality Group, whereby SSP
will ultimately own a 49% share in Travel Food Services Private Limited
(TFS).
On 13 December 2016, the Group acquired 15.1% of the issued share capital of
TFS, a leading operator of food and beverage concessions in travel locations
in India. A further 17.9% of the issued share capital was acquired on 3 March
2017 bringing the total shareholding to 33%. As part of the acquisition the
Group agreed to acquire a further 16% shareholding by the end of calendar year
2018.
The acquisition provides an entry point for the Group into the Indian market
and the Group expects to benefit from TFS' established strong local presence.
By virtue of the agreement with the other shareholders, the Group has control
over TFS' relevant activities including establishing budgets and operating
plans, appointment of key management personnel and ongoing review of
performance and reporting procedures and as such is consolidating TFS and its
group companies.
The goodwill calculation is summarised below:
Provisional fair value of assets acquired Book value Measurement adjustment Fair value
£m £m £m
Property, plant and equipment 14.6 - 14.6
Intangible assets - 1.5 1.5
Other financial assets 0.8 - 0.8
Inventories 1.2 - 1.2
Cash and cash equivalents 15.2 - 15.2
Trade and other receivables 1 21.2 - 21.2
Trade and other payables (15.8) - (15.8)
Long and short-term borrowings (8.3) - (8.3)
Deferred tax assets / (liabilities) 1.0 (0.5) 0.5
Net identifiable assets 29.9 1.0 30.9
Non-controlling interest (21.0) (0.4) (21.4)
Goodwill on acquisition 33.2
Cash consideration 42.7
1 All acquired receivables held at fair value, which is equivalent to the
gross contractual amount receivable. All contractual cash flows are expected
to be collected.
Reconciliation of consideration to cash flow statement
£m
Cash consideration 42.7
Less: cash and cash equivalents acquired (15.2)
Acquisition of investment in TFS, net of cash and cash equivalents acquired 27.5
Less: other financial assets acquired (0.8)
Add: long and short term borrowings acquired 8.3
Acquisition of TFS, adjusted for net debt acquired 35.0
The intangible assets acquired represent the fair value of the brand names
acquired, namely Caféccino, Idli.com, Flying Bites and Curry Kitchen. The
Board believe that the excess of consideration paid over the fair value of the
net identifiable assets is best considered as goodwill on acquisition
representing relationships with airports, extensive knowledge of the Indian
travel catering market and future operating synergies.
Included in the 12 month period to 30 September 2017 is revenue of £65.2m and
an operating profit of £12.9m in respect of TFS.
If the acquisition of TFS had been made at the beginning of the financial
year, the estimated contribution to the results of the Group for the year
ended 30 September 2017 would have been £78.0m to revenue and £15.1m to
operating profit.
Obligation to acquire additional share of subsidiary undertaking
The consideration payable for the additional 16% is based on a multiple of
TFS' 2018 Earnings before Interest, Tax, Depreciation and Amortisation
(EBITDA) and has been estimated by reference to most recent financial
statements and internal budgets and forecasts, discounted with a suitable
discount rate and subject to a cap of £21.4m (undiscounted at 30 September
2017 exchange rates).
The discount rate is pre-tax and reflects the current market assessments of
the time value of money and a specific risk premium relevant to the TFS
business. This discount rate is considered to be equivalent to the rate a
market participant would use.
On acquisition, the Group recognised a financial liability of £18.9m in
respect of its obligation to acquire a further 16% of TFS in 2018. As at 30
September 2017 the financial liability was £20.9m. This reflects the TFS
updated assumptions on the forecasted 2018 EBITDA due to the business
exceeding expectations compared to the forecasts at the time of the original
acquisition of the initial shareholding, adjustments for the subsequent
foreign exchange revaluation and the unwind of discounting.
10 Post balance sheet event
On 17 October 2017 the Group completed an "amend and extend" of its existing
Debt Facilities to: extend the final maturity date by two years from July 2020
to July 2022; reduce the margin on the debt and the Revolving Credit Facility
by 25 basis points; and increase the size of the Revolving Credit Facility by
£100m to £150m.
11 Annual General Meeting
The Group's Annual General Meeting will be held on 27 February 2018. Details
of the resolutions to be proposed at that meeting will be included in the
notice of Annual General Meeting that will be sent to shareholders in January
2018.
12 Other information
The financial information for the year ended 30 September 2017 contained in
this preliminary announcement was approved by the Board on 21 November 2017.
This announcement does not constitute statutory accounts of the Company within
the meaning of section 435 of the Companies Act 2006, but is derived from
those accounts.
Statutory accounts for the year ended 30 September 2016 have been delivered to
the Registrar of Companies. Statutory accounts for the year ended 30 September
2017 will be delivered to the Registrar of Companies following the Company's
Annual General Meeting.
The auditors have reported on those accounts. Their reports were not
qualified, did not include a reference to any matters to which the auditors
drew attention by way of emphasis without qualifying their report, and did not
contain a statement under section 498 (2) or (3) of the Companies Act 2006.
The Company's Annual Report and Accounts for the year ended 30 September 2017
will be posted and made available to shareholders on the Company's website in
January 2018.
13 Forward looking statement
This document contains forward-looking statements. These forward-looking
statements include all matters that are not historical facts. Statements
containing the words "believe", "expect", "intend", "may", "estimate" or, in
each case, their negative and words of similar meaning are forward-looking. By
their nature, forward-looking statements involve risks and uncertainties
because they relate to events that may or may not occur in the future. We
caution you that forward-looking statements are not guarantees of future
performance and that the Group's actual financial condition, results of
operations and cash flows, and the development of the industry in which we
operate, may differ materially from those made in or suggested by the
forward-looking statements contained in this document or other made by us or
on the Group's behalf. In addition, even if the Group's financial condition,
results of operations and cash flows, and the development of the industry in
which we operate are consistent with the forward-looking statements in this
document, those results or developments may not be indicative of results or
developments in subsequent periods. Except where required to do so under
applicable law or regulatory obligations, we undertake no obligation to update
any forward looking statements whether as a result of new information, future
events or otherwise.
This information is provided by RNS
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