REG - SSP Group PLC - Final Results
08/12/2021 07:00
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RNS Number : 9505U SSP Group PLC 08 December 2021
LEI:213800QGNIWTXFMENJ24
08 December 2021
SSP GROUP PLC
Results for year ended 30 September 2021
SSP Group, a leading operator of food and beverage outlets in travel locations
worldwide, announces its financial results for the year ended 30 September
2021. SSP has delivered a resilient performance in a very challenging market,
materially strengthening its balance sheet and continuing to demonstrate tight
control over its operating costs and cash usage, and is in a strong position
to benefit from the expected recovery of the travel market over the medium
term.
Financial Overview
● Revenue of £834.2m: down 41.8% vs 2020 and 70.1% vs 2019.
● Operating loss of £309.2m on a reported basis under IFRS 16,
including credit for non-underlying net operating costs of £14.1m (2020:
£363.9m operating loss including charge for non-underlying items of £48.5m).
On a pre-IFRS16 basis(3), the underlying operating loss(4) was £209.0m (2020:
£211.7m loss).
● Loss before tax of £411.2m on a reported basis under IFRS 16 (2020:
£425.8m loss). On a pre-IFRS 16 basis(3), the underlying loss before tax(4)
was £251.0m (2020: £239.6m loss).
● Basic loss per share of 51.3 pence on a reported basis under IFRS 16
(2020: basic loss per share of 66.2 pence). On a pre-IFRS 16 basis(3),
underlying basic loss per share(4) of 31.9 pence (2020: underlying basic loss
per share of 39.5 pence).(5)
● Net debt was £1,480.4m, which includes lease liabilities of
£1,172.8m (2020: £2,040.6m, including lease liabilities of £1,349.3m). On a
pre-IFRS 16 basis(3), net debt was £308.0m, down from £692.0m at 30
September 2020.
● Financial position strengthened significantly following the Rights
Issue in April 2021, including the extension of our main bank facilities until
January 2024 and the waiver and amendment of covenants for both the main bank
facilities and US private placement notes.
● Liquidity position strong, with cash and undrawn committed facilities
of approximately £935m at the end of September 2021 (including £300m from
the Covid Corporate Financing Facility ("CCFF") due to be repaid in February
2022).
Business Highlights
● Steadily improving revenue trends over the summer and autumn. Revenue
averaged 66% of 2019 in the first 9 weeks of the new financial year.
● A further c. 800 units reopened since the beginning of June 2021 as
demand has returned, taking the total to c. 1,950 units or c. 72% of the
estate.
● Strong second half performance, with revenue recovering from 21% of
2019 levels at the end of H1 to 53% of 2019 by the end of H2, led by a
recovery in domestic and short-haul leisure traffic.
● Positive underlying EBITDA (on a pre-IFRS 16 basis) of £2.0m and free
cash flow of £82.8m generated in H2, compared with a free cash outflow of
£140.9m in H1.
● Underlying operating profit conversion (on a pre-IFRS 16 basis) on the
reduced sales vs 2019 of 22% for H2, in line with H1, and ahead expectations
of c. 25% for H2.
● Positive and unchanged medium term outlook, with like-for-like
revenues(1 2) and EBITDA margins (on a pre-IFRS 16 basis) expected to return
to around pre-Covid levels by 2024.
● Growing pipeline of new business to mobilise, comprising approximately
200 units, which is expected to add a further 15% to revenue by 2024, and many
new business opportunities emerging. Significant new business development
success, including recently announced joint venture with ADP for Paris Charles
De Gaulle and Orly Airports in France and Suvarnabhumi Airport in Thailand,
and we are today announcing an important new contract in Malaysia.
● Sustainability being further embedded into the business, with new and
strengthened targets set, including commitments to achieve net zero carbon
emissions by 2040 and to publish interim Science Based Targets in line with a
1.5 degree scenario for reduction of scope 1, 2 and 3 carbon emissions within
12 months.
Appointment of Group CEO
On 25(th) November 2021, SSP announced the appointment of Patrick Coveney to
the role of Group CEO, effective 31(st) March 2022, following the announcement
that Simon Smith is to leave the business in December 2021. Patrick will join
SSP from Greencore Group plc, a leading producer of convenience foods in the
UK and Ireland, which is a member of the FTSE 250. Jonathan Davies, in his
role as Deputy CEO and CFO, will lead the Group Executive Committee and
oversee day-to-day business prior to Patrick joining.
Recent Trading and Outlook
Passenger numbers increased steadily over the second half of the financial
year and, consequently, sales strengthened from a very low level at the end of
H1 (approximately 21% of 2019) to reach 53% of 2019 by the end of H2. The
improvement was led initially by North America, and more recently by
Continental Europe and the UK, and was driven principally by increasing
domestic and short-haul leisure travel. In Continental Europe, passenger
numbers increased steadily over the summer following the successful
introduction of the EU Covid passport, and in the UK by the ending of lockdown
restrictions from late July, followed by the government's relaxation of
testing and quarantine rules in response to a greater proportion of the
population having been double-vaccinated.
During the new financial year, sales trends have continued to improve, with
air passenger numbers in the UK and Continental Europe boosted by an extended
European summer holiday season, and rail passenger numbers continuing to
benefit from commuters returning to offices in greater numbers. Conversely,
the recovery has been slower in the Asia Pacific region, principally due to
the slower roll-out of vaccines, which has held back the return of domestic
travel, and the loss of long-haul air travel.
Revenues in the first nine weeks of the new financial year are currently
averaging approximately 66% of 2019 levels. Whilst there remains some
uncertainty in the immediate outlook over the winter months, particularly over
the potential impact of the Omicron variant on travel restrictions, we are
confident in our ability to manage any near term volatility. Our medium term
expectations remain unchanged, which are for a return to like for like revenue
at broadly similar levels to 2019 by 2024.
As previously indicated, for the 2022 financial year we anticipate the drop
through to operating profit (on a pre-IFRS 16 basis) on lost sales compared to
2019 to be at the upper end of a range of 25-30%. The final outturn will be
impacted by a number of external factors including the trajectory of the
recovery, higher input cost inflation, and lower levels of government cost
support compared to 2021. Over the medium-term our expectation for a recovery
in pre-IFRS 16 basis EBITDA margins to broadly pre Covid levels remains
unchanged.
SSP has an important role to play in providing food and beverage services to
the travelling public, and we will continue to re-open units in response to
demand, maximising the profitability of the re-opening programme and
rigorously controlling costs and cash. We firmly believe that demand for
travel will return to pre-Covid levels in the medium term and the actions we
have taken during the pandemic will ensure that SSP is well positioned to
capitalise on future market opportunities.
Commenting on the results, Jonathan Davies, Deputy CEO and CFO of SSP Group,
said:
"Though still in the recovery phase, SSP has made strong progress,
particularly during the second half of the year, when we delivered positive
underlying EBITDA and strong free cash flow generation. The Group has
continued to re-open units in line with passenger demand, with 72% of units
currently open, and has delivered revenues of 66% of 2019 levels in the first
nine weeks of the new financial year. Our teams around the world have
demonstrated great resilience during this challenging period and, most
importantly, have continued to deliver great service to our customers every
day. I would like to thank them for their professionalism, dedication and
commitment to SSP.
Against the backdrop of volatility and disruption in the travel sector, we've
maintained strong operational controls and disciplined management of operating
costs and cash flow, as has been evident from the financial performance of the
business. In addition, as a result of the successful Rights Issue and the
extension of our bank facilities completed in April 2021, we have a very
strong balance sheet, with significant liquidity of £935m (including the
£300m CCFF due to be repaid in February 2022).
Over the past year, we've continued to re-invest in and strengthen important
areas of the business which we believe will underpin our long-term growth,
including our customer offer, our people strategy and our technology
platforms, and we've made real progress in further embedding sustainability
into our business.
Looking ahead, the medium-term outlook remains unchanged, which is for a
return to broadly pre-Covid levels of like-for-like revenue and EBITDA margins
by 2024. We are now starting to mobilise the pipeline of around 200 new
outlets that have already been secured and we anticipate delivering
approximately 15% of additional net contract gains over the medium term.
Furthermore, we expect to utilise our significant financial capacity and
competitive strength to accelerate our new business growth and to capitalise
fully on the recovery in the travel sector."
Financial highlights:
IFRS 16 IFRS 16
2021 2020
£m £m
Revenue 834.2 1,433.1
Revenue change (%)
- vs 2020 (41.8)% N/A
- vs 2019 (70.1%) (48.7)%
Like-for-like sales fall(1 2) (41.0)% (50.8)%
Underlying operating loss(4) (323.3) (315.4)
Underlying loss before tax(4) (393.1) (371.8)
Underlying loss per share (p)(4 5) (46.5) (59.1)
Net debt(5) (1,480.4) (2,040.6)
Pre-IFRS 16(3) Pre-IFRS 16(3)
2021 2020
£m £m
Underlying operating loss(4) (209.0) (211.7)
Underlying loss before tax(4) (251.0) (239.6)
Underlying loss per share (p)(4 5) (31.9) (39.5)
Net debt(6) (308.0) (692.0)
Statutory reported results:
The table below summarises the Group's statutory reported results (where the
financial highlights above are adjusted).
2021 2020
£m £m
Revenue 834.2 1,433.1
Operating loss (309.2) (363.9)
Loss before tax (411.2) (425.8)
Loss per share (p)(5) (51.3) (66.2)
Net debt(6) (1,480.4) (2,040.6)
(1 )Constant currency is based on average 2020 exchange rates weighted over
the financial year by 2020 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. Units temporarily closed as a result of Covid-19 have not been
excluded for the purposes of the like-for-like calculation. Like-for-like
sales are presented on a constant currency basis.
(3) The Group adopted IFRS 16 'Leases' on 1 October 2019 using the modified
retrospective approach to transition. Following the year of transition, we
have decided to maintain the reporting of our profit and other financial
measures like net debt and leverage on a pre-IFRS 16 basis (note that pre-IFRS
16 basis was referred to as 'Pro forma IAS 17' in the Annual Report and
Accounts 2020). Pre-IFRS 16 profit numbers exclude the impact of IFRS 16 by
removing the depreciation on right-of-use (ROU) assets and interest arising on
unwinding of discount on lease liabilities, offset by the impact of adding
back in charges for fixed rent. This is further explained in the section on
Alternative Performance Measures (APMs) on pages 23-27.
(4) Stated on an underlying basis, which excludes non-underlying items as
further explained in the section on Alternative Performance Measures (APMs) on
pages 23-27.
(5 )2020 EPS has been restated to reflect the impact of the 2021 Rights Issue
(6 )Net debt reported under IFRS 16 includes leases liabilities whereas on a
pre-IFRS 16 basis lease liabilities are excluded. Refer to 'Net debt' section
of the 'Financial review' for reconciliation of net debt.
A live webcast will be held at 8.30 a.m (UKT) today, and details of how to
join can be accessed at
https://webcasts.foodtravelexperts.com/results/2021preliminaryresults
(https://webcasts.foodtravelexperts.com/results/2021preliminaryresults)
CONTACTS:
Investor and analyst enquiries
Sarah John, Corporate Affairs Director, SSP Group plc
On 8 December 2021: +44 (0) 7736 089218
Thereafter: +44 (0) 203 714 5251
E-mail: sarah.john@ssp-intl.com
Media enquiries
Peter Ogden / Nick Haynes
Powerscourt
+44 (0) 207 250 1446
E-mail: ssp@powerscourt-group.com
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. Prior to the onset of Covid-19, we served around one
and a half million customers every day at approximately 180 airports and 300
rail stations in 35 countries around the world and operated more than 550
international, national and local brands.
www.foodtravelexperts.com (http://www.foodtravelexperts.com)
Business Review
Financial results
Covid-19 has continued to have a significant impact on the Group's trading
performance, with government- imposed travel restrictions affecting all of our
major markets for a large proportion of the year. Reflecting this, total Group
Revenue of £834.2m fell by 41.8% compared to 2020 (which included five months
prior to the escalation of the global pandemic in March 2020) and by 70.1%
against 2019.
The first half of the financial year was marked by long periods during which
extensive government restrictions on travel resulted in passenger numbers
remaining very depressed in both the Air and Rail sectors, with revenue
falling to only 20% of the equivalent level in the first half of 2019 (21% of
2020). However, passenger numbers then increased steadily over the second half
of the year, led by domestic and short-haul leisure travel, with revenue
improving to approximately 38% of 2019 levels for the half year as a whole,
and to 53% of 2019 levels by the end of September.
The underlying operating loss for the year was £323.3m (2020: £315.4m). The
operating loss was £309.2m, including a credit for non-underlying items of
£14.1m. Further details of the non-underlying items have been set out in the
section on Alternate Performance Measures on pages 23 - 27. On a pre-IFRS 16
basis, the Group reported an underlying operating loss of £209.0m, compared
to an equivalent loss of £211.7m in the prior year.
The free cash outflow during the year on a pre-IFRS 16 basis was £58.1m,
compared to a £394.9m free cash outflow last year, with the year-on-year
improvement reflecting the Group's continued tight management of operating
costs and working capital over the last twelve months. In the second half of
the year, the Group generated net free cash flow of £82.8m, principally due
to a strong working capital performance, driven by the recovery in sales, as
well by securing further payment deferrals.
Capital expenditure was £69.4m, representing a significant reduction compared
to the £134.5m in the prior year. Following the Covid-19 escalation during
2020, we placed our capital expenditure programme on hold, and have continued
to work with our clients to defer capital expenditure programmes until we have
better visibility over the pace of the recovery in the travel sector. With
passenger numbers in most of our key markets continuing to strengthen during
the autumn, we expect capital expenditure in the year ahead to increase
accordingly and are currently planning for expenditure of around £150m in the
2022 financial year, although we will continue to exercise caution and be
ready to defer projects should the recovery in passenger numbers be slower
than currently expected.
Following the completion of the Rights Issue in late April 2021, the Group's
financial position has been significantly strengthened, including the
extension of the Group's existing bank facilities until January 2024 as well
as the waiver and amendment of covenants under those bank facilities and the
Group's US private placement notes. Incorporating the net proceeds of the
Rights Issue of £450.8m, net debt on a pre-IFRS 16 basis at 30 September 2021
was £308.0m (reported net debt of £1,480.4m), a reduction of £384.0m
compared to the prior year. The Group now has significant available
liquidity, with cash and undrawn available facilities of approximately £935m
at the end of the financial year (including the £300m borrowed under the CCFF
and due to be repaid in February 2022).
Strategy overview
Our vision remains unchanged, to be the leading provider of food and beverage
in travel locations worldwide, delivering for all our stakeholders (our
customers, clients, brand partners, suppliers, investors and, importantly, our
colleagues) in a way that ensures long term sustainable growth.
We continue to believe that the markets in which we operate are fundamentally
attractive. The air and rail travel markets are expected to deliver long-term
growth, albeit from a lower base, as global GDP recovers, and an increasing
proportion of the world's population are willing and able to travel again.
Before the outbreak of Covid-19, the markets in which we operate had
benefitted from several structural long-term growth drivers, the most
significant being:
· growth in global GDP and disposable income, which had led to an
increasing propensity to travel and had driven higher passenger volumes and
expenditure on food and beverage products;
· a trend towards increased eating-out, including eating "on the move";
and
· investment in travel infrastructure and capacity expansion, supported
by both government policy and infrastructure owners increasingly focusing on
retail revenue streams.
Though Covid-19 has impacted these trends in the short term, we believe that
these growth drivers will return in the medium-term once the effects of the
pandemic diminish. While some uncertainty remains about the longer-term impact
of working from home on commuter travel and virtual technology on business
travel, we anticipate a full recovery in leisure travel, which drives the
majority of our business.
Structural advantages
SSP has a number of structural advantages that we believe put us in a strong
position to capitalise on the recovery of the travel sector over the
medium-term:
1. Leading market positions: We have leading positions in some of the
most attractive sectors of the travel food and beverage and convenience retail
market, underpinned by our extensive brand portfolio (comprising our own
brands and bespoke concepts as well as franchised local and global brands) and
established management and operational teams across the 36 countries in which
we operate.
2. Food travel expertise: We provide a compelling proposition for both
clients and customers based on our food travel expertise. This includes a deep
understanding of what our customers are looking for, an extensive offering of
concepts to meet these needs and a knowledge of how to operate in complex
travel environments which are logistically demanding. Our deep understanding
of travel food and beverage has enabled us to adapt our operating model so
that we can operate our units at lower passenger levels whilst still ensuring
a great customer experience.
3. Long-term client relationships: Our principal clients are the owners
and operators of airports and railway stations, but we also have a small
presence in motorway service areas, hospitals and shopping centres. We have
excellent, long-standing relationships with many of our clients and have
maintained high success rates in retaining our contracts.
4. Local insight and international scale: We have a deep knowledge of
the individual markets in which we operate, alongside significant
international scale and expertise. A strong local presence enables us to
understand our customers' tastes and needs, as well as allowing us to maintain
close relationships with clients and brand partners and to create a 'sense of
place' in the locations which we operate.
5. Experienced colleague base: We have highly experienced colleagues
with a broad range of experience across the food and beverage, travel and
retail industries. In all our key markets, we employ dedicated teams of senior
managers focused on business development, sales, marketing and operations, who
work closely with our clients to ensure their requirements are met. They are
supported by experienced, locally-based teams who have a track record of
delivering operational excellence and great customer service.
In the medium-term the Group expects to see the gradual return of passenger
travel to more normalised levels. The actions the Group is taking to rebuild
the business will enable it to emerge better positioned to address the
priorities of our stakeholders and drive competitiveness and long-term
sustainable growth.
Our immediate focus is to re-open our c. 2,700 units and drive profitable
sales. Our approach to re-opening is data driven, the lead indicator being
passenger numbers through the travel locations in which our units are based.
We seek to open the right combination of units at sites to enable us to
capture the sales opportunity, whilst optimising efficiency and controlling
cash.
Our strategic priorities
Our strategy for delivering long term sustainable growth for the benefit of
all our stakeholders focuses on five key priorities. These comprise:
1. Driving like-for-like revenue growth and optimising our existing
space: We seek to optimise the customer proposition and drive like-for-like
revenues through increasing customer capture rates and spend. Our broad
brand portfolio, to which we are constantly adding new and innovative
concepts, enables us to meet both client and customer expectations. The scale
of our business provides us with access to a wealth of consumer insights,
which we use to inform our range and menu choices and to develop our customer
propositions. We cater to a diverse range of customer tastes and dietary needs
as well as providing healthier and more sustainable options. To better serve
the needs of our customers, we are rolling out customer-facing digital
technologies, such as order and payment systems, which in turn help us to
optimise both customer spend and labour efficiency.
2. Business development and adding new space: We have a strong track
record of delivering profitable new space and in the three years prior to
Covid, we had added around 5%-6% of revenue from net gains annually.
Furthermore, we were on track to deliver approximately 8% of net contract
gains in 2020 before the emergence of Covid-19. We invest in those contracts
that have the right strategic fit and are expected to deliver returns in line
with our criteria. Historically most of our growth has come from adding new
units and new locations in the countries in which we already operate, but we
also look to expand into new geographies that have the right risk-reward
profile, as we have done successfully over recent years, including in India,
Brazil, the Philippines, Bahrain and Malaysia. Selective and disciplined
bolt-on M&A has always been part of our strategy and is an important
element of our market entry strategy into new countries. We expect both new
organic growth and acquisition opportunities will arise as we emerge from the
Coronavirus pandemic.
Whilst our focus during Covid has been on optimising our existing estate, with
the start of a recovery in sight our business development priorities are as
follows:
Contract renewals and extensions
We have maintained high retention rates on contracts during Covid-19, in line
with our historical levels. We have also sought to extend and renew contracts
on favourable terms and/or with greater downside protection on minimum
guaranteed rents.
Mobilisation of the existing pipeline
We are starting to mobilise our existing pipeline of around 200 additional
units which are already secured but not yet built. These units are expected to
add around £275m to sales by 2024 1 (#_ftn1) . Furthermore, we will benefit
from the additional sales generated by the units which were opened just before
or during Covid, and therefore that have not yet traded for a full year, or
have only operated at very low volumes. These units are expected to add an
additional approximately £150m to annual revenues by 2024.
In total the new pipeline and new units opened pre and post Covid-19 should
add around £425m to overall revenues by 2024.
New space growth
We see many opportunities to add new space as we emerge from the pandemic.
Clients' expansion projects and the development of new infrastructure were to
an extent put on hold during the crisis. As the travel sector recovers, we
expect this to activity to recommence.
Our strong client and consumer offer positions us well to win space in
competitive tenders. We anticipate that some competitors may retreat from the
travel market, at least in the near term and we have already seen some
examples of this where competitors have chosen not to re-open units.
Our strong financial position and track record of delivery for clients put us
in a very strong position to capitalise on these growth opportunities. The
Base Case scenario as set out in the Rights Issue prospectus envisages
financial headroom to invest up to £350-400m whilst remaining within our
target leverage range of 1.5-2.0x net debt:EBITDA (both on a pre-IFRS 16
basis). Where we invest in new contracts our internal hurdles rates require us
to achieve on average 3-4 year discounted cashflow payback.
3. Efficient profit conversion: Running efficient operations is one of
our core competencies and deeply embedded in our culture. Optimising gross
margins, leveraging the international scale of our business and running an
efficient and effective business with rigorous attention to managing the key
costs of food, labour concession rentals and overheads are core to our
approach.
During Covid-19, our focus was on simplifying our operations, reducing our
cost base and making it more flexible. With the business now starting to
rebuild, we are adding back cost in a disciplined fashion, with a focus on
productivity, and we will seek to retain the key learnings from Covid-19 to
help manage inflation and drive performance. The key areas that we focus on
are:
Optimising Gross Margins:
We continue to re-engineer our customer offer to optimise gross margins by
keeping unnecessary complexity out of our product ranges, whilst providing the
right level of customer choice to cater to a diverse range of customer
preferences. Food cost will continue to be tightly managed with a focus on
volume purchasing, sustainable sourcing and production efficiency, including
through the use of automated technology and waste reduction.
Re-negotiating more flexible concession rents and franchise costs:
We seek to minimise concession rental costs and remove minimum guarantees, or
make them variable with passenger numbers, in our contracts. We are also
working with our franchise brand partners to reduce costs and identify
opportunities for simplification and standardisation, building on our
long-standing relationships and the learnings from Covid-19.
Operating cost efficiency:
We will continue to drive labour efficiency, conscious of the current
pressures on labour rates and availability in certain regions, with continued
focus on staff scheduling and kitchen productivity, as well as using digital
order and pay technology to drive service levels and efficiency. We seek to
have the right level of overhead costs in the business, focussing on taking
out unproductive overhead and simplifying management processes. Allied to
this, we are increasingly seeking to reduce the energy costs in units and
switch to sustainably sourced alternatives and using technology to support
management processes as well as outsourcing back-office activities where that
makes sense.
4. Reinvestment: We are continuously reinvesting in our business, to
build on and enhance our competitive strengths, which underpin our capability
to deliver sustainable growth. The key areas in which we are looking to
strengthen our business platform are:
Enhancing our Customer Offer:
Customer research provides insights into the needs of passengers in the travel
environment, which inform both our operational decision-making and brand
choices. This is particularly important in the current trading environment, as
we recover from the pandemic, and we seek to strengthen and evolve our brand
portfolio. We have made good progress in creating new own brands to meet
current market trends, such as Soul & Grain, a fresh food to go concept
with artisanal coffee, due to launch in the UK early in 2022, and Juniper and
Co, a bar and casual dining concept at Gatwick Airport. We are also trialling
significantly enhanced product ranges at a number of our well-known existing
own brands, such as Upper Crust, based on extensive research and analysis.
Digital and technology investment:
We continue to make significant investments to improve the quality of our
information systems and technology infrastructure and are recommencing work on
a number of the major programmes that were slowed down or paused during the
pandemic. These include projects to develop and roll-our enhanced ERP
(finance, inventory and cash management and MIS) and human resources systems
(including HR data, workforce scheduling, recruitment, compensation and
development) to our major countries. As with all our previously successful
deployments, we will pilot and roll-out one country at a time to manage costs
and mitigate risks. Additionally, we have prioritised the roll-out of 'Modern
Workplace' technology (Microsoft Office365) to keep our colleagues informed
and connected, and to improve efficiency, during Covid-19.
People strategy:
We have worked hard to protect our colleagues and maintain engagement during
the pandemic, which has brought extraordinary challenges for many of them. We
have put in place well-being programmes for both those working and those on
furlough, and have sought to mitigate the financial consequences through
accessing government support or providing financial assistance throughout this
period.
In 2021 we carried out our first global engagement survey, with very high
response levels 72% and very encouraging feedback, and have presented the
results back to all colleagues alongside clear action plans for every region
and country. During 2021, we have completed the launch of our values and
behaviours to the business, stepped up our investment in training and
development and set a number of new corporate and regional targets on areas
such as diversity and inclusion, and on human rights (see Embedding
Sustainability below).
Sustainability:
The past twelve months have also seen further investment to help us deliver
against our sustainability commitments (see Embedding Sustainability below).
These focus on three priority areas: our people, our customers and the
environment.
5. Maintain a resilient balance sheet and creating value for
shareholders: Prior to Covid-19, our priority for the use of cash was to
invest in organic growth, where this met our investment criteria, as this
created the most value for our shareholders. As we emerge from the pandemic,
we will continue to take advantage of the structural growth opportunities in
our markets.
Creating shareholder value is extremely important to SSP, and prior to
Covid-19, we had a long track record of delivering upper quartile total
shareholder returns. Once the travel market recovers, the business is expected
to be, once again, highly cash generative allowing us to de-lever the balance
sheet over time. Maintaining balance sheet efficiency will continue to be an
important part of our financial strategy, and we are committed to returning to
our medium-term leverage target in the range of 1.5 - 2.0x EBITDA (on a
pre-IFRS 16 basis).
Embedding sustainability into the business
Embedding sustainability into our business is a critical strategic objective
for SSP. Despite the disruption of the pandemic, we have continued to make
progress on our sustainability agenda. We have built on our existing
commitments in key areas setting new and more stretching targets to help drive
our strategy. We have developed regional strategies and plans, and implemented
measures to monitor and evaluate our progress.
Our sustainability strategy and framework focuses on three pillars:
· Supporting and protecting our colleagues and communities: We seek to
engage our people, to feel valued and to develop with us; we champion
diversity, promote inclusion and ensure equality; we respect and protect human
rights and prevent discrimination; and we positively impact our communities.
· Serving our customers responsibly: We strive to meet the needs of our
customers by offering a range of high-quality products that are appealing,
nutritious and which are sustainably and ethically sourced. We help our
customers to make healthier lifestyle choices, satisfy a range of dietary
needs and preferences and offer the information they need to make informed
choices.
· Protecting our environment: We are committed to managing the
environmental impact of our business by reducing the greenhouse gas emissions
from our operations and wider value chain, by reducing and recycling the
packaging and materials in our packaging stream and reducing the waste we
generate.
These pillars are interdependent: success can only be achieved by advancing in
all three areas, rather than on a single dimension. We report more fully on
what we have achieved, and the commitments and targets we have set in our
Annual Report and Accounts 2021.
Our new or extended targets include those listed below.
Supporting and protecting our colleagues and communities
· Embracing diversity, protecting human rights: Have an inclusive and
diverse Board and senior leadership team including by 2021 at least one third
of Board members to be female; by 2022 have at least one person of colour on
the Board and have diversity in geographic representation on our Board; and by
2025 ensure women comprise at least one third of our Executive committee and
their direct reports.
· Modern slavery training: All senior managers who have completed their
induction to complete modern slavery training by 2022.
· Promoting and protecting safety and well-being: Build on existing
wellbeing activities and deliver a holistic strategy including action to
support colleagues' physical, mental and financial wellbeing by 2022.
· Treating all our employees with care and respect: Undertake annual
engagement surveys in each market, publishing headline results and use them
to direct local and groupwide action.
· Supporting our communities: All divisions globally to have
partnerships with food poverty charities and local charities by 2025.
Serving our customers responsibly
· Offering healthier lifestyle choices and satisfying dietary needs:
Introduce food and drink items that support healthier lifestyle choices
including wellness brands; lower-calorie, plant-based and/or vegetarian meal
options; and non-dairy milk alternatives. Targets include by 2025 at least 30%
of the meals offered by own brands to be plant based and/or vegetarian and all
units that serve coffee in the UK, Europe and North America to offer non-dairy
milk alternatives.
· Sourcing our ingredients and products responsibly and sustainably:
Take proactive steps to ensure suppliers are operating in line with our
sourcing standards and that key ingredients are sourced from certified
sustainable sources. Targets include procuring 100% sustainably sourced palm
oil (for the top 50 products in each country) by 2022 for SSP own brands, and
100% sustainably sourced tea, coffee, hot chocolate and fish by 2025 for SSP
own brands, with further categories to follow.
· Supporting animal welfare: Ensure key suppliers are operating in line
with our animal welfare standards and own brand eggs (by 2025) and chicken (by
2026) are sourced in line with our responsible sourcing standards (existing
target).
Protecting our environment
· Pursuing net zero carbon emissions: By 2040, achieve net zero carbon
emissions (scopes 1, 2 and 3). In support of this, we are setting
science-based targets in line with a 1.5-degree scenario within the next year.
· Reducing, reusing and recycling our packaging: Remove unnecessary
single-use plastic packaging and move all packaging of own-brand products to
be recyclable, reusable or compostable by 2025.
· Reducing food waste: In addition to our existing activities, all
divisions to have programmes to target food waste through reduction,
recycling, anti-food waste partnerships, charitable donations and landfill
diversion by 2025.
Financial review
Group performance
2021
£m Year-on-year change (%)
2020
£m
Revenue 834.2 1,433.1 (41.8)%
Underlying operating loss (323.3) (315.4) (2.5)%
Operating loss (309.2) (363.9) 15.0%
- Underlying operating loss was £209.0m (2020: £211.7m) on a
pre-IFRS 16 basis.
- Revenue in 2019 was £2,794.6m.
Covid-19 has continued to have a significant impact on the Group's trading
performance throughout the year. Total Group Revenue of £834.2m fell by 41.8%
compared to 2020 (which included five months which were substantially
pre-pandemic) and by 70.1% against 2019.
During the first half year, increased infection levels in key markets and
extensive government restrictions on travel resulted in passenger numbers
remaining depressed in both Air and Rail, with revenue falling to only 20% of
those in the equivalent period in 2019 and 21% of 2020. This significant
year-on-year fall was particularly marked during the second quarter,
reflecting the stringent lockdowns imposed from late December across many
markets, notably in the UK and Continental Europe.
During the second half year, the gradual easing of lockdown restrictions and
the successful roll-out of vaccination programmes resulted in increasing
passenger numbers across the travel sector. In the third quarter, revenue
improved to around 27% of 2019 levels, led by a strong recovery in North
America, and in the fourth quarter to 47% of 2019, driven principally by
improving Rail and Air passenger numbers in the UK and Continental Europe.
Since our year end we have seen trading continue to strengthen across all of
our principal markets, with first quarter revenue during the first nine weeks
averaging around 66% of 2019 levels, and approximately 61% of 2020. In the
first week of December, sales were approximately 65% of 2019 levels, and 63%
of 2020. However, the short-term outlook remains uncertain, particularly
regarding any impact from the new Omicron Covid variant.
Operating loss
The underlying operating loss for the year was £323.3m, compared to an
equivalent loss of £315.4m in 2020. On a pre-IFRS 16 basis, the Group
reported an underlying operating loss of £209.0m, compared to an equivalent
loss of £211.7m in the prior year.
On a reported basis, the operating loss for the year was £309.2m, reflecting
a net credit of £14.1m for the non-underlying operating items. The equivalent
operating loss for the prior year was £363.9m.
The impact on the underlying operating loss from the significantly lower sales
following the pandemic continued to be mitigated by the extent of our
operating cost reductions, the extension of government furlough and other
support measures, and our ongoing success in negotiating rent concessions,
principally via waivers of minimum guaranteed rents. Compared to the 2019
financial year, the Group has made savings of over £950m in its labour, rent
and overhead operating cost base. Reflecting this, the underlying pre-IFRS 16
basis operating profit conversion was c. 22% on the reduced sales compared to
the 2019 financial year. Looking forward to the 2022 financial year, against a
backdrop of higher cost of goods and labour inflation, as well as
significantly lower levels of government support, we anticipate that the
profit conversion on the lower sales compared with pre-Covid levels will be at
the upper end of the previously indicated range of 25% to 30%.
Non-underlying operating items
Items which are not considered reflective of the normal trading performance of
the business, and are exceptional because of their size, nature or incidence,
are treated as non-underlying operating items and disclosed separately.
The non-underlying operating items included in the net credit of £14.1m are
summarised below:
- Impairment of goodwill: as a result of past acquisitions, and in
particular the creation of SSP by the acquisition of the SSP business by EQT
in 2006, the Group holds a significant amount of goodwill on its consolidated
balance sheet. This is allocated to, and performance is monitored on, a
country level. Goodwill impairment testing is carried out annually, or more
frequently if indicators of impairments have been identified, by comparing the
value relating to each country with the net present value of its expected
future cash flows. Following the most recent reviews, goodwill impairments of
£26.4m were identified, comprising write downs in the UK, Switzerland and
Germany.
- Impairment of property, plant and equipment and right-of-use
assets: the impact of Covid-19 on the Group's operations is expected to
continue during the current financial year. As a result, the Group has carried
out further reviews for potential impairment across the entire site portfolio.
These impairment reviews compared the value-in-use of individual
cash-generating units, based on management's current assumptions regarding
future trading performance (taking into account the effect of Covid-19) to the
carrying values of the associated assets. Following this review, a charge of
£24.4m has been recognised, which includes a net impairment of right-of-use
assets of £12.5m.
- IFRS 16 rent credit: as part of its response to Covid-19, the
Group has renegotiated rent agreements with its clients, including a
significant number of temporary waivers for the period up to the end of June
2022 totalling £92.0m. In respect of these waivers, the Group has applied the
practical expedient issued by the International Accounting Standards Board as
a part of the Amendment to IFRS 16 to record this as a reduction in rent
expense (rather than a modification of a right-of-use asset) and as a
non-underlying item within the consolidated income statement.
- Restructuring and site exit costs: as a result of the impact of
Covid-19, the Group has recognised a charge of £21.3m relating to its
restructuring programmes and site exits carried out across the Group during
the year. The charge primarily relates to redundancy costs.
- Fees related to extension of bank facilities and associated
covenant waivers: with effect from completion of its Rights Issue in April
2021, the Group's main bank facilities were extended from 15 July 2022 to 15
January 2024. In addition, the Group secured agreement to waivers or
amendments on its principal covenants under both its main bank facilities and
US private placement notes until 2024. In consideration for these extensions
and amendments, the Group incurred fees totalling £5.4m, and this cost has
been recognised as a non-underlying expense in the year.
- Other non-underlying expenses: these items totalling a net charge
of £0.4m comprise a recurring adjustment for the amortisation of
acquisition-related intangible assets of £1.9m (2020: £1.9m) and other legal
costs of £0.8m, offset by profit on lease disposal of £2.3m.
Regional performance
This section summarises the Group's performance across its four operating
segments. For full details of our key reporting segments, please refer to note
2 on pages 36 and 37.
UK (including Republic of Ireland)
2021 2020
£m £m Year-on-year change (%)
Revenue 190.0 410.1 (53.7)%
Underlying operating loss (52.2) (28.7) (81.9)%
Operating loss (57.4) (39.0) (47.2)%
- Underlying operating loss was £31.1m (2020: £12.4m loss) on a
pre-IFRS 16 basis.
- Revenue in 2019 was £840.5m.
Revenue of £190.0m decreased by 53.7% compared to 2020, and by 77.4% compared
to 2019.
During the first half year, with lockdown restrictions and quarantine measures
in place for most of this period, UK revenue remained at very depressed
levels, averaging around 12% of 2019 levels. During the third quarter however,
as the UK government's roadmap out of lockdown began to take effect, we saw a
steady improvement in trading, principally in our rail business, with UK sales
improving to approximately 19% of 2019 levels for the quarter as a whole. That
trend continued through the fourth quarter, with revenue strengthening to 43%
of 2019 levels, improving more rapidly once lockdown restrictions were removed
in late July, initially led by the Rail channel as passengers increasingly
returned to trains both for leisure purposes and also as they returned to
offices, and then more recently boosted by improving Air passenger numbers as
fewer travel restrictions and less onerous testing requirements made overseas
travel considerably easier. Since our year end we've seen trading in the UK
continue to strengthen, with sales currently running at approximately 63% of
2019 levels (and 61% of 2020 levels).
The underlying operating loss for the year for the UK was £52.2m and reported
operating loss was £57.4m. Non-underlying operating items comprised
impairment charges of £25.9m, exceptional restructuring costs of £1.0m and
an adjustment for the amortisation of acquisition-related intangible assets of
£1.5m. These were offset by IFRS 16 rent credits of £20.9m, as well as other
non-underlying income of £2.3m. On a pre-IFRS 16 basis, the underlying
operating loss was £31.1m, which compared to an equivalent loss of £12.4m
last year.
Continental Europe
2021 2020 Year-on-year change (%)
£m £m
Revenue 360.5 558.2 (35.4)%
Underlying operating loss (134.3) (148.1) 9.3%
Operating loss (119.0) (193.5) 38.5%
- Underlying operating loss was £85.7m (2020: £103.2m loss) on a
pre-IFRS 16 basis.
- Revenue in 2019 was £1,036.9m.
Revenue of £360.5m decreased by 35.4% compared to 2020, and by 65.2% compared
to 2019.
During the first half, revenue in Continental Europe was slightly stronger
than in the other regions, averaging 26% of 2019 levels. This was largely the
result of stronger sales in the first quarter, with rail passenger numbers in
Germany and France more resilient than in the UK, and trading in the motorway
sector in these countries less impacted by the pandemic than in other
channels. From January however, the impact of renewed government restrictions,
in response to rising infection rates, meant that sales trends deteriorated
compared to those prior to Christmas, and remained at low levels throughout
the second quarter.
Overall trading in this region remained very subdued for much of the third
quarter, with revenue averaging 27% of 2019 levels, representing only a small
improvement on the first half, principally as a result of further travel
restrictions being imposed in a number of markets in April while vaccination
rates remained low. However, a gradual easing of restrictions across most of
our European markets from mid-May resulted in a significantly improving trend
across the remainder of the second half, with fourth quarter revenue
strengthening to 54% of 2019 levels, driven by a steady improvement in rail
passenger numbers and increased air passenger numbers over the summer holiday
season. Since our year end we've seen trading in the Continental Europe region
make further progress, with sales currently running at approximately 69% of
2019 levels (and 70% of 2020 levels).
The underlying operating loss for Continental Europe was £134.3m and reported
operating loss was £119.0m. Non-underlying operating items comprised an
impairment charge of £10.7m, exceptional restructuring costs of £3.7m and an
adjustment for the amortisation of acquisition-related intangible assets of
£0.4m. These were offset by an IFRS 16 concession credit of £30.1m. On a
pre-IFRS 16 basis, the underlying operating loss was £85.7m, which compared
to an underlying operating loss of £103.2m last year.
North America
Year-on-year change (%)
2021 2020
£m £m
Revenue 194.2 274.9 (29.4)%
Underlying operating loss (48.7) (55.4) 12.1%
Operating loss (51.0) (63.3) 19.4%
- Underlying operating loss was £31.4m (2020: £43.7m loss) on a
pre-IFRS 16 basis.
- Revenue in 2019 was £533.4m.
Revenue of £194.2m decreased by 29.4% compared to 2020, and by 63.6% compared
to 2019.
Revenue trends remained relatively stable throughout the majority of the first
half, averaging 23% of 2019 levels, broadly in line with the Group average for
that period. However, we saw a sustained improvement in domestic passenger
numbers in the United States from early March onwards, and this trend, which
coincided with the successful roll out of the vaccination programme across the
United States, continued throughout the third quarter, where revenue averaged
41% of 2019 levels, comfortably ahead of our other regions at that time. This
recovery was maintained across the summer, with revenue strengthening to 52%
of 2019 levels in the fourth quarter. During the early weeks of the new
financial year trading has continued to improve, and sales are currently
running at approximately 79% of 2019 levels (and 67% of 2020 levels).
The underlying operating loss for North America was £48.7m and reported
operating loss was £51.0m. Non-underlying operating items comprised an
impairment charge of £6.0m, exceptional restructuring and site exit costs of
£9.0m, offset by IFRS 16 concession credits of £12.7m. On a pre-IFRS 16
basis, the underlying operating loss was £31.4m, which compared to an
equivalent loss of £43.7m last year.
Rest of the World
2021 2020
£m £m Year-on-year change (%)
Revenue 89.5 189.9 (52.9)%
Underlying operating loss (51.1) (55.6) 8.1%
Operating loss (33.7) (37.3) 9.7%
- Underlying operating loss was £24.3m (2020: £24.8m loss) on a
pre-IFRS 16 basis.
- Revenue in 2019 was £383.8m.
Revenue of £89.5m decreased by 52.9% compared to 2020, and by 76.8% compared
to 2019.
As was the case with North America, the overall sales trends for the Rest of
the World region remained broadly stable and in line with the Group average
for the majority of the first half, with revenue averaging 21% of 2019 levels
across that period. The third quarter saw a slight deterioration in that
run-rate (to 20% of 2019 revenue, as the impact of the delta variant resulted
in further lockdowns in India, before a more encouraging fourth quarter saw
revenue strengthen to 30% of 2019 levels. Although that improving trend has
continued into the new financial year, with the vaccine roll-out generally
slower across this region, sales have continued to be impacted by lockdowns in
some markets, including Australia and Thailand, and we remain cautious about
the near term outlook in this region as a result. Sales are currently running
at around 46% of 2019 levels (and 45% of 2020).
The underlying operating loss for the Rest of the World was £51.1m and
reported operating loss was £33.7m. Non-underlying operating items comprised
an impairment charge of £8.0m and exceptional restructuring costs of £2.8m,
offset by an IFRS 16 concession credit of £28.2m. On a pre-IFRS 16 basis, the
underlying operating loss was £24.3m, which compared to an equivalent loss of
£24.8m last year.
Share of profit / (loss) of associates
The Group's share of profits from associates was £2.3m (2020: £2.4m loss).
On a pre-IFRS 16 basis, the Group's share of profits from associates was
£1.7m (2020: £1.7m loss).
Net finance costs
The underlying net finance expense for the year was £72.1m, which included
interest on lease liabilities of £28.4m. Reported net finance expense was
£104.3m, including an adjustment of £32.2m relating to non-cash net debt
modification related losses of £31.0m arising from the adoption of the debt
modification rules under IFRS 9, and an additional retrospective interest
charge on US Private Placement notes of £1.2m. This adjustment reflects the
revised agreements with our lending group of banks and US private placement
noteholders, following the amendments signed in December 2020 and the
amendment and extension of our main bank facilities agreed in March 2021,
which became effective on 22 April 2021.
On a pre-IFRS 16 basis, underlying net finance costs increased year-on-year to
£43.7m (2020: £26.2m), primarily due to the higher borrowing costs under the
Group's bank facilities and US private placement notes following the covenant
and facility amendments during the year. Although the Group's net debt reduced
following the Rights Issue, the funds raised were retained as cash thereby
having little impact on underlying net finance costs.
Taxation
The Group's underlying tax credit for the year was £50.6m (2020: £23.7m
credit), representing an effective tax rate of 12.9% (2020: 6.4%) of
underlying loss before tax. On a reported basis, the tax credit for the year
was £48.9m (2020: £28.1m).
On a pre-IFRS 16 basis, the Group's underlying tax credit was £30.6m (2020:
£6.3m), equivalent to an effective tax rate of 12.1% (2020: 2.6%) of the
underlying loss before tax.
The Group's tax rate is sensitive to the geographic mix of profits and losses
and reflects a combination of higher rates in certain jurisdictions, as well
as the impact of losses in some countries for which no deferred tax asset is
recognised. The tax rates for the current and the prior year compared to
historical rates of around 22% are due to the impact of Covid-19 which has led
to a significant change in the Group's geographic mix of profits and losses.
In addition, the Group's effective tax rate has benefited in the year from a
one-off credit of £13.0m in relation to the remeasurement of UK deferred tax
assets. This follows the enactment of legislation during the second half of
the year to increase the main rate of corporation tax in the UK to 25% from
April 2023.
Non-controlling interests
The loss attributable to non-controlling interests was £5.0m (2020: £22.7m).
On a pre-IFRS 16 basis there was a small profit attributable to
non-controlling interests of £2.1m (2020: £9.6m attributable loss), with the
year-on-year change largely reflecting an improved performance from our
partly-owned operations in North America and in the Rest of the World.
Loss per share
The Group's underlying loss per share was 46.5 pence per share (2020: 59.1
pence per share), and its reported loss per share was 51.3 pence per share
(2020: 66.2 pence per share). On a pre-IFRS 16 basis the underlying loss per
share was 31.9 pence per share (2020: 39.5 pence per share).(1)
(1) 2020 EPS has been restated to reflect the impact of the 2021 Rights Issue.
Dividends
Under the terms of the amended financing arrangements with the Group's lending
group of banks and US private placement note holders, the Company is currently
restricted from declaring or paying dividends until the expiry of certain
restrictions that apply during the covenant waiver and amendment period. As
such, no interim dividend was declared during the 2021 financial year and the
Directors will not be recommending a final dividend for the year, which will
result in no ordinary dividends for the year (2020: £nil).
When the existing restrictions are lifted and conditions improve, the Board
will consider the best way to restart the return of capital to shareholders,
recognising the importance of dividends and capital returns to shareholders.
Free Cash flow
The table below presents a summary of the Group's free cash flow during the
year:
2021 2021 2021 2020
H1 H2 FY FY
£m £m £m £m
Underlying operating loss(1) (160.7) (48.3) (209.0) (211.7)
Depreciation and amortisation 50.4 50.3 100.7 113.5
Exceptional restructuring costs(3) (10.6) (7.8) (18.4) (22.7)
Working capital 22.1 149.6 171.7 (67.6)
Net tax (0.4) 1.5 1.1 (11.0)
Capital expenditure(2) (25.2) (44.2) (69.4) (134.5)
Acquisition of subsidiaries, adjusted for net debt acquired and acquisition of (0.4) - (0.4) (26.5)
non-controlling interest
Net dividends to non-controlling interests and from associates (1.0) (1.6) (2.6) (16.8)
Net finance costs (16.1) (16.8) (32.9) (19.6)
Other 1.0 0.1 1.1 2.0
Free cash flow (140.9) 82.8 (58.1) (394.9)
(1) Presented on an underlying pre-IFRS 16 basis (refer to pages 23 - 27 for
details)
(2) Capital expenditure is net of capital contribution cash received from
non-controlling interests of £5.2m (2020: £3.1m)
(3) Refer to the APMs section on pages 23-27 for further details.
The Group's free cash outflow during the year was £58.1m, a significant
reduction from the £394.9m outflow in the prior year, reflecting the Group's
continued tight management of operating costs and working capital over the
last twelve months. This free cash outflow included £18.4m of exceptional
restructuring costs, largely relating to the costs of further redundancy
programmes completed during the year.
During the first half year, the free cash outflow of £140.9m reflected an
average monthly cash burn of around £23m which was below the £25m-£30m per
month run-rate in the final quarter of 2020, despite sales returning to very
depressed levels as lockdowns were re-introduced over the winter. As sales
improved significantly over the summer, and with the benefit of additional
short term government support, we have been able to return to broadly
breakeven levels of EBITDA on a pre-IFRS 16 basis in the second half and to
generate net free cash flow of £82.8m. The principal driver of this cash
generation in the second half year has been a very strong working capital
inflow of £149.6m.
For the year as a whole, the net cash inflow from working capital was
£171.7m, which was partly driven by the strengthening sales during the second
half and was also a reflection of our further success in securing payment
deferrals during the year. Cumulatively since the start of the pandemic, we
estimate that these deferred liabilities amount to approximately £150m.
Capital expenditure was £69.4m, representing a significant reduction compared
to the £134.5m in the prior year. Following the Covid-19 escalation during
2020, we placed our capital programme on hold, and have continued to work with
our clients to defer capital programmes until we have better visibility over
the pace of the recovery in the travel sector. With passenger numbers in most
of our key markets continuing to strengthen during the autumn, we expect
capital expenditure in the year ahead to increase accordingly and are
currently planning for expenditure of around £150m in the 2022 financial
year, although we will continue to exercise caution and be ready to defer
projects should the recovery in passenger numbers be slower than currently
expected.
Net finance costs paid of £32.9m were £13.3m higher than the prior year,
mainly reflecting increased interest costs on the Group's bank facilities and
US private placement notes.
Net debt
Overall net debt fell by £384.0m to £308.0m on a pre-IFRS 16 basis, with the
free cash outflow in the year of £58.1m offset by the £450.8m proceeds (net
of related fees) from the Group's Rights Issue in the Spring. On a reported
basis under IFRS 16, net debt was £1,480.4m.
The table below highlights the movements in net debt in the year on a pre-IFRS
16 basis.
£m
Net debt excluding lease liabilities at 1 October 2020 (692.0)
Free cash flow (58.1)
Impact of foreign exchange rates 19.9
Net proceeds from April 2021 Rights Issue 450.8
Other non-cash changes(1) (28.6)
Net debt excluding lease liabilities at 30 September 2021 (308.0)
Lease liabilities (1,172.8)
Other 0.4
Net debt including lease liabilities at 30 September 2021 (1,480.4)
(1) Other non-cash changes represent £45.8m of losses recognised on debt
modifications and revised estimated future cash flows, offset by an effective
interest rate gain of £14.8m, capitalised debt modification transaction costs
of £1.3m and government grant accounting on below-market interest rate loans
received of £1.1m.
Available liquidity and medium-term outlook
Since the start of the pandemic, the Group has taken rapid and decisive action
to protect its people and the future of the business, generating significant
additional liquidity, reducing costs and minimising cash usage. Due to the
uncertainty regarding the short and medium term trading outlook for the Group
as a consequence of Covid-19, and having considered a number of different
scenarios and financing alternatives, the Board took proactive action in March
2021 to strengthen the Group's balance sheet, announcing a Rights Issue to
raise gross proceeds of approximately £475m. Alongside and conditional upon
the Rights Issue, the Group secured the extension to January 2024 of its bank
facilities, that were previously due to mature in July 2022, and secured
waivers and modifications of the existing covenants relating to its bank
facilities and US Private Placement notes.
Following the successful completion of the Rights Issue in April and
incorporating the free cash flow generation across the second half year, the
Group had cash on its balance sheet of £773.6m at 30 September 2021, and
total available liquidity of £935.2m at that date. This included £300m in
respect of the Bank of England's Covid Corporate Financing Facility ("CCFF")
which is due to be repaid in February 2022, but even excluding this we now
have approximately £635m of available liquidity and remain in a very strong
position to trade through even our most pessimistic scenario.
The stronger trading and cash flow performance in the second half of the 2021
financial year is encouraging, and with sales continuing to follow our Base
Case scenario as set out in the Rights Issue, our medium-term outlook of a
return to broadly pre-Covid levels of like-for-like revenue and EBITDA margins
(on a pre-IFRS 16 basis) by 2024 remains unchanged. With the travel sector
starting to recover, we also expect to commence the mobilisation of our
secured pipeline which is expected to generate an additional 15% of net
contract gains over the medium term.
As we indicated in the Spring, we believe that the Group is strategically
well-positioned to benefit from the recovery in the travel sector. With our
medium-term strategy for leverage unchanged (i.e. on a pre-IFRS 16 basis, for
leverage to be between 1.5x and 2.0x Net Debt to EBITDA), under our Base Case
scenario this would give us the financial capacity for an additional £350m
- £400m of capex to drive further business growth and to capitalise on the
recovery.
Principal risks
Three new risks relating to sustainability, availability of labour and wage
inflation, and supply chain disruption and product cost inflation have been
added to the principal risks since last year.
The Group's principal risks, together with the Group's risk management
process, will be set out in the Annual Report and Accounts 2021, and relate to
the following areas: impact of Covid-19; business environment and geopolitical
uncertainty; availability of labour and wage inflation; impact of Brexit;
supply chain disruption and product cost inflation; senior management
capability and retention; retention of existing contracts; regulatory
compliance; food safety and product compliance; sustainability; information
security and stability; benefits realisation from efficiency programmes;
innovation and development of brand portfolio; liquidity and funding; changing
client behaviours; outsourcing programmes; tax compliance and responsibility;
and expansion into new markets.
Post balance sheet events
SSP Group's Spanish operating companies ("SSP Spain") operate food and
beverage units in a number of Spanish airports. In late September 2021, a new
law was passed in Spain that came into force on 2 October 2021 which should
result in adjustments to the minimum guaranteed annual rents payable by SSP
Spain for the period from 15 March 2020 onwards. The law will lead to lower
minimum guaranteed rent amounts to be paid until passenger numbers return to
2019 levels. As the new law is effective from 2 October 2021, we consider this
to give rise to a non-adjusting post balance sheet event.
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.
1. Revenue measures
As the Group operates in 36 countries, it is exposed to translation risk on
fluctuations in foreign exchange rates, and as such the Group's reported
revenue and operating profit or loss will be impacted by movements in actual
exchange rates. The Group regularly 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,
like-for-like sales, net contract gains/(losses) and the impact of
acquisitions where appropriate.
(£m) UK Continental Europe North America RoW Total
2021 Revenue at actual rates by segment 190.0 360.5 194.2 89.5 834.2
Impact of foreign exchange 0.1 0.0 13.0 3.6 16.7
2021 Revenue at constant currency(1) 190.1 360.5 207.2 93.1 850.9
2020 Revenue at constant currency 410.1 558.2 274.9 189.9 1,433.1
Constant currency sales fall (53.7)% (35.4)% (24.6)% (50.9)% (40.6)%
Which is made up of:
Like-for-like sales fall(2) (50.3)% (36.2)% (29.8)% (52.3)% (41.0)%
Net contract gains/(losses)(3) (3.4)% 0.8% 5.2% 1.4% 0.4%
(53.7)% (35.4)% (24.6)% (50.9)% (40.6)%
( )
(1 )Constant currency is based on average 2020 exchange rates weighted over
the financial year by 2020 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. Units temporarily closed as a result of Covid-19 have not been
excluded for the purposes of the like-for-like calculation. 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 permanently closed in the
past 12 months. Net contract gains/(losses) are presented on a constant
currency basis.
2. Non-underlying items
The Group presents underlying profit / (loss) measures, including operating
profit / (loss), profit / (loss) before tax, and earnings / (loss) per share,
which exclude a number of items which are not considered reflective of the
normal trading performance of the business, and are considered exceptional
because of their size, nature or incidence. The table below provides a
breakdown of the non-underlying items in both the current year and the prior
year.
Non-underlying items
IFRS 16 IFRS 16
2021 2020
£m £m
Operating costs
Impairment of goodwill (26.4) (33.0)
Impairment of property, plant and equipment (11.9) (38.4)
Impairment of right-of-use assets (12.5) (38.2)
Depreciation - (6.2)
IFRS 16 rent credit 92.0 91.9
Restructuring and site exit costs (21.3) (20.2)
Fees for debt amendment and extension of bank facilities (5.4) (2.5)
Amortisation of intangible assets arising on acquisition (1.9) (1.9)
Profit on lease disposal 2.3 -
Other non-underlying costs (0.8) -
14.1 (48.5)
Finance expenses
Debt modification loss and effective interest rate charge (31.0) (5.4)
Retrospective USPP interest charge (1.2) -
Other - (0.1)
(32.2) (5.5)
Taxation
Tax (charge)/credit on non-underlying items (1.7) 4.4
Total non-underlying items (19.8) (49.6)
Further details of the non-underlying operating items have been provided above
on pages 15 and 16. Furthermore, a reconciliation from the underlying to the
statutory reported basis is presented below:
2021 (IFRS 16) 2020 (IFRS 16)
Underlying Non-underlying Total Underlying Total
Items Non-underlying
Items
Operating (loss) / profit (£m) (323.3) 14.1 (309.2) (315.4) (48.5) (363.9)
Operating margin (38.8)% 1.7% (37.1)% (22.0)% (3.4)% (25.4)%
(393.1) (18.1) (411.2) (371.8) (54.0) (425.8)
Loss before tax (£m)
(46.5) (4.8) (51.3) (59.1) (7.1) (66.2)
Loss per share (p)(1)
(1 )2020 EPS has been restated to reflect the impact of the 2021 Rights Issue.
( )
3. Pre-IFRS 16 basis
The Group adopted IFRS 16 'Leases' on 1 October 2019 using the modified
retrospective approach to transition. Following the year of transition, we
have decided to maintain the reporting of our profit and other key KPIs like
net debt and leverage on a pre-IFRS 16 basis (note that pre-IFRS 16 basis was
referred to as 'Pre-IFRS 16' in the Annual Report and Accounts 2020). This is
because the pre-IFRS 16 profit is consistent with the financial information
used to inform business decisions and investment appraisals. It is our view
that presenting the information on a pre-IFRS 16 basis will provide a useful
and necessary basis for understanding the Group's results. As such, commentary
has also been included in the Business Review, Financial Review and other
sections with reference to underlying profit measures computed on a pre-IFRS
16 basis.
A reconciliation of key underlying IFRS 16 profit measures to 'Pre-IFRS 16'
numbers is presented below:
Year ended Year end
30 September 2021 30 September 2020
Notes Underlying IFRS 16 Impact of IFRS 16 Underlying
£m £m Pre-IFRS 16
£m
Underlying Impact of Underlying
IFRS 16 IFRS 16 Pre-IFRS 16
£m £m £m
Revenue 2 834.2 - 834.2 1,433.1 - 1,433.1
Operating costs 4 (1,157.5) (114.3) (1,043.2) (1,748.5) (103.7) (1,644.8)
Operating loss (323.3) (114.3) (315.4) (211.7)
(209.0) (103.7)
Share of profit / (loss) of associates 2.3 0.6 1.7 (2.4) (0.7) (1.7)
Finance income 5 2.6 - 2.6 2.5 - 2.5
Finance expense 5 (74.7) (28.4) (46.3) (56.5) (27.8) (28.7)
Loss before tax (393.1) (142.1) (251.0) (371.8) (132.2) (239.6)
Taxation 50.6 20.0 30.6 23.7 17.4 6.3
Loss for the period (342.5) (122.1) (220.4) (348.1) (114.8) (233.3)
Loss attributable to:
Equity holders of the parent (323.9) (101.4) (222.5) (334.7) 111.0 (223.7)
Non-controlling interests (18.6) (20.7) 2.1 (13.4) 3.8 (9.6)
Loss for the period (342.5) (122.1) (220.4) (348.1) 114.8 (233.3)
Loss per share (pence):
- Basic 3 (46.5) (31.9) (59.1) (39.5)
- Diluted 3 (46.5) (31.9) (59.1) (39.5)
(1 )2020 EPS has been restated to reflect the impact of the 2021 Rights Issue.
IFRS 16 increases the underlying operating loss, whereby the depreciation of
the right-of-use assets of £245.7m is offset primarily by the reduced rent
expense of £119.5m and a gain on lease disposals of £11.9m, resulting in a
net charge to underlying operating loss of £114.3m. This loss, together with
the interest charge on the lease liabilities of £28.4m and the gain from
associates of £0.6m, give the underlying loss before tax impact of £142.1m.
The impact of IFRS 16 on net debt is due to the lease liability balance.
Pre-IFRS 16 basis underlying EBITDA is a key measure of profitability for the
Group. A reconciliation to pre-IFRS 16 basis underlying operating loss for the
period is presented below:
Year ended Year ended
30 September 2021 30 September 2020
£m
£m
Pre-IFRS 16 underlying EBITDA (108.3) (98.2)
Depreciation of property, plant and equipment (90.9) (111.0)
Amortisation of intangible assets (11.7) (10.6)
Adjustment for amortisation of intangible assets arising on acquisition 1.9 1.9
Adjustment for accelerated depreciation - 6.2
Pre-IFRS 16 underlying operating loss for the period (209.0) (211.7)
Furthermore, a reconciliation from pre-IFRS 16 underlying operating loss for
the period to the statutory loss for the period is as follows:
Year ended Year ended
30 September 2021 30 September 2020
£m
£m
Pre-IFRS 16 underlying operating loss for the period (209.0) (211.7)
Depreciation of right-of-use assets (245.7) (305.3)
Fixed rent on leases 119.5 201.3
Gain on lease disposal 11.9 0.3
Non-underlying operating gain / (expense) (note 4) 14.1 (48.5)
Share of profit / (loss) from associates 2.3 (2.4)
Finance expense (72.1) (54.0)
Non-underlying finance expense (note 5) (32.2) (5.5)
Taxation 48.9 28.1
Loss after tax (362.3) (397.7)
4. Liquidity
Liquidity remains a key KPI for the Group. Available liquidity at 30 September
2021 was £935.2m, comprising cash and cash equivalents of £773.6m, undrawn
revolving credit facility of £150.0m, as well as smaller undrawn local
facilities of £11.6m.
Consolidated income statement
for the year ended 30 September 2021
Year ended 30 September 2021 Year ended 30 September 2020
Notes Underlying(1) Non-underlying items Total Underlying(1) Non-underlying items Total
£m £m £m £m £m £m
Revenue 2 834.2 - 834.2 1,433.1 - 1,433.1
Operating costs 4 (1,157.5) 14.1 (1,143.4) (1,748.5) (48.5) (1,797.0)
Operating (loss) / profit (323.3) 14.1 (309.2) (315.4) (48.5) (363.9)
Share of profit/(loss) of associates 2.3 - 2.3 (2.4) - (2.4)
Finance income 5 2.6 - 2.6 2.5 - 2.5
Finance expense 5 (74.7) (32.2) (106.9) (56.5) (5.5) (62.0)
Loss before tax (393.1) (18.1) (411.2) (371.8) (54.0) (425.8)
Taxation 50.6 (1.7) 48.9 23.7 4.4 28.1
Loss for the year (342.5) (19.8) (362.3) (348.1) (49.6) (397.7)
(Loss) / profit attributable to:
Equity holders of the parent (323.9) (33.4) (357.3) (334.7) (40.3) (375.0)
Non-controlling interests (18.6) 13.6 (5.0) (13.4) (9.3) (22.7)
Loss for the year (342.5) (19.8) (362.3) (348.1) (49.6) (397.7)
Loss per share (p):
- Basic(2) 3 (46.5) - (51.3) (59.1) (66.2)
- Diluted(2) 3 (46.5) - (51.3) (59.1) (66.2)
(1) Stated on an underlying basis, which excludes non-underlying items as
further explained in the section on Alternative Performance Measures (APMs) on
pages 23 - 27.
(2)( )2020 EPS has been restated to reflect the impact of the 2021 Rights
Issue.
Consolidated statement of other comprehensive income
for the year ended 30 September 2021
2021 2020
£m £m
Other comprehensive income / (expense)
Items that will never be reclassified to the income statement
Remeasurements on defined benefit pension schemes 3.5 1.2
Tax charge relating to items that will not be reclassified (2.5)
(1.1)
Items that are or may be reclassified subsequently to the income statement
Net gain on hedge of net investment in foreign operations 22.3 4.2
Other foreign exchange translation differences (22.0) (19.7)
Foreign exchange reclassified to income statement (0.5) -
Effective portion of changes in fair value of cash flow hedges 0.5 (1.8)
Cash flow hedges - reclassified to income statement 2.6 1.6
Tax (charge) / credit relating to items that are or may be reclassified (2.1) 0.5
Other comprehensive income/(expense) for the year 3.2 (16.5)
Loss for the year (362.3) (397.7)
Total comprehensive expense for the year (359.1) (414.2)
Total comprehensive expense attributable to:
Equity shareholders (350.3) (386.1)
Non-controlling interests (8.8) (28.1)
Total comprehensive expense for the year (359.1) (414.2)
Consolidated balance sheet
as at 30 September 2021
Notes 2021 2020
£m £m
Non-current assets
Property, plant and equipment 388.7 437.2
Goodwill and intangible assets 684.1 731.2
Right-of-use assets 1,002.9 1,271.2
Investments in associates 12.0 12.2
Deferred tax assets 93.2 49.8
Other receivables 69.7 73.8
2,250.6 2,575.4
Current assets
Inventories 23.7 23.5
Tax receivable 15.3 10.1
Trade and other receivables 118.4 125.3
Cash and cash equivalents 773.6 185.0
931.0 343.9
Total assets 3,181.6 2,919.3
Current liabilities
Short-term borrowings 8 (304.2) (158.2)
Trade and other payables (519.1) (399.0)
Tax payable (24.9) (20.9)
Lease liabilities (299.9) (289.1)
Provisions (17.7) (12.3)
(1,165.8) (879.5)
Non-current liabilities
Long-term borrowings 8 (777.0) (718.1)
Post-employment benefit obligations (14.9) (18.6)
Lease liabilities (872.9) (1,060.2)
Other payables (7.2) (4.0)
Provisions (21.5) (21.4)
Derivative financial liabilities (2.1) (5.1)
Deferred tax liabilities (9.5) (10.4)
(1,705.1) (1,837.8)
Total liabilities (2,870.9) (2,717.3)
Net assets 310.7 202.0
Equity
Share capital 8.6 5.8
Share premium 472.7 472.7
Capital redemption reserve 1.2 1.2
Other reserves 7.7 211.0
Retained losses (249.9) (559.6)
Total equity shareholders' funds 240.3 130.1
Non-controlling interests 70.4 71.9
Total equity 310.7 202.0
Consolidated statement of changes in equity
for the year ended 30 September 2021
Share capital Share premium Capital redemption reserve Merger relief reserve Other reserves (1) Retained losses Total parent equity NCI Total equity
£m £m £m £m £m £m £m £m £m
At 1 October 2019 4.8 461.2 1.2 - 12.9 (152.1) 328.0 87.6 415.6
Loss for the year - - - - - (375.0) (375.0) (22.7) (397.7)
Other comprehensive expense for the year - - - - (9.8) (1.3) (11.1) (5.4) (16.5)
Capital contributions from NCI - - - - - - - 30.5 30.5
Acquisition of shares in partly owned subsidiary from NCI - - - - - (4.3) (4.3) (0.7) (5.0)
Equity issues(3) 1.0 11.5 - 206.9 - - 219.4 - 219.4
Share buyback - - - - - (1.7) (1.7) - (1.7)
Dividends payable to equity shareholders(2) - - - - - (26.8) (26.8) - (26.8)
Dividends paid to NCI - - - - - - - (20.4) (20.4)
Share-based payments - - - - - 2.0 2.0 - 2.0
Tax on share-based payments - - - - - 0.5 0.5 - 0.5
Other movements - - - - - (0.9) (0.9) 3.0 2.1
At 30 September 2020 5.8 472.7 1.2 206.9 3.1 (559.6) 130.1 71.9 202.0
At 1 October 2020 5.8 472.7 1.2 206.9 3.1 (559.6) 130.1 71.9 202.0
Covid waiver extension amendment - - - - - 0.2 0.2 - 0.2
Loss for the year - - - - - (357.3) (357.3) (5.0) (362.3)
Other comprehensive expense for the year - - - - 4.6 2.4 7.0 (3.8) 3.2
Capital contributions from NCI - - - - - - - 10.3 10.3
Acquisition of shares in partly owned subsidiary from NCI - - - - - - - (0.4) (0.4)
Transaction with NCI - - - - - (0.4) (0.4) 0.4 -
Rights Issue(3) 2.8 - - 454.1 - - 456.9 - 456.9
Reclassification of merger relief reserve to retained losses - - - (661.0) - 661.0 - - -
Dividends paid to NCI - - - - - - - (4.6) (4.6)
Share-based payments - - - - - 1.8 1.8 - 1.8
Tax on share-based payments - - - - - (0.2) (0.2) - (0.2)
Other movements - - - - - 2.2 2.2 1.6 3.8
At 30 September 2021 8.6 472.7 1.2 - 7.7 (249.9) 240.3 70.4 310.7
(1) At 30 September 2020 and 30 September 2021, the other reserves include the
translation reserve and cash flow hedging reserve.
(2) Refer to note 7 for details of dividends paid.
(3) Refer to note 9 for details of the equity issues.
Consolidated cash flow statement
for the year ended 30 September 2021
Notes 2021 2020
£m £m
Cash flows from operating activities
Cash flow from operations 6 129.4 13.4
Tax refund/(paid) 1.1 (11.0)
Net cash flows from operating activities 130.5 2.4
Cash flows from investing activities
Dividends received from associates 2.0 3.6
Interest received 2.0 2.4
Purchase of property, plant and equipment (65.7) (120.3)
Purchase of other intangible assets (8.9) (17.3)
Acquisitions, net of cash and cash equivalents acquired - (21.5)
Other (0.1) -
Net cash flows from investing activities (70.7) (153.1)
Cash flows from financing activities
Equity funding from shareholders 474.9 227.2
Equity raising expenses (16.5) (7.8)
Capitalised debt modification fees paid (1.3) -
Share buyback - (1.7)
Receipt of bank loans 28.0 32.1
Repayment of borrowings (1.6) -
Repayment of revolving credit facility - (97.5)
Receipt of US Private Placement debt - 101.8
Drawdown on Covid Corporate Financing Facility 175.0 125.0
Payment of lease liabilities - principal (61.4) (172.6)
Payment of lease liabilities - interest (28.4) (27.8)
Acquisition of shares in partly owned subsidiary from non-controlling interest (0.4) (5.0)
Interest paid excluding interest on lease liabilities (34.9) (22.0)
Dividends paid to equity shareholders - (26.8)
Dividends paid to non-controlling interests (4.6) (20.4)
Capital contribution from non-controlling interests 5.2 3.1
Net cash flows from financing activities 534.0 107.6
Net increase/(decrease) in cash and cash equivalents 593.8 (43.1)
Cash and cash equivalents at beginning of the year 185.0 233.3
Effect of exchange rate fluctuations on cash and cash equivalents (5.2) (5.2)
Cash and cash equivalents at end of the year 773.6 185.0
Reconciliation of net cash flow to movement in net debt
Net increase/(decrease) in cash in the year 593.8 (43.1)
Cash inflow from Covid Corporate Financing Facility (175.0) (125.0)
Cash inflow from other changes in debt (26.4) (36.4)
Change in net debt resulting from cash flows, excluding lease liabilities 392.4 (204.5)
Translation differences 19.9 (2.0)
Other non-cash changes (28.6) (1.4)
Decrease / (increase) in net debt excluding lease liabilities in the year 383.7 (207.9)
Net debt at beginning of the year (691.3) (483.4)
Net debt excluding lease liabilities at end of the year (307.6) (691.3)
Recognition of lease liabilities upon transition to IFRS 16 - (1,465.6)
Lease liabilities at beginning of the year (1,349.3) -
Cash outflow from payment of lease liabilities 89.8 200.4
Lease amendments 34.9 (89.9)
Translation differences 51.8 5.8
Lease liabilities at end of the year (1,172.8) (1,349.3)
Net debt including lease liabilities at end of the year (1,480.4) (2,040.6)
Notes
1 Basis of preparation and accounting policies
1.1 Basis of preparation
SSP Group plc (the Company) is a company incorporated in the United Kingdom
under the Companies Act 2006. The Group financial statements consolidate those
of the Company and its subsidiaries (together referred to as the Group) and
equity-account the Group's interest in its associates. These financial
statements have been prepared in accordance with international accounting
standards in conformity with the requirements of the Companies Act 2006, and
International Financial Reporting Standards adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the European Union.
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.
1.2 Going concern
These financial statements are prepared on a going concern basis.
The Board has reviewed the Group's financial forecasts, incorporating the
impact on SSP of Covid-19, as part of the preparation of its financial
statements, including cash flow forecasts prepared for a period of 16 months
from the date of approval of these financial statements and taking into
consideration a number of different scenarios. The appropriate period of
assessment was considered to be 16 months given that this included the testing
of reinstated adjusted interest cover and leverage covenants at the 31 March
2023 testing date. Having carefully reviewed these forecasts, the Directors
have concluded that it is appropriate to adopt the going concern basis of
accounting in preparing these financial statements for the reasons set out
below.
Since the start of the pandemic, the Group has taken rapid and decisive action
to protect its people and the future of the business, generating significant
additional liquidity, reducing costs and minimising cash usage. Due to the
uncertainty regarding the short and medium term trading outlook for the Group
as a consequence of Covid-19, and having considered a number of different
scenarios and financing alternatives, the Board took proactive action in March
2021 to strengthen the Group's balance sheet, announcing a Rights Issue to
raise gross proceeds of approximately £475m. Alongside and conditional upon
the Rights Issue, the Group secured the extension to January 2024 of its bank
facilities, that were previously due to mature in July 2022, and secured
waivers and modifications of the existing covenants relating to its bank
facilities and US Private Placement notes.
As at 30 September 2021, following the successful completion of its Rights
Issue, the Group had £1,061.7 million outstanding under its borrowing
arrangements, including: (i) US private placement notes of £329.6 million
with maturities between October 2025 and July 2031; (ii) a facilities
agreement with a maturity of 15 January 2024 which includes two term
facilities totalling £373.7 million, both of which are fully drawn; (iii)
various government backed facilities comprising (a) a facility from the UK
Covid Corporate Financing Facility ("CCFF"), a joint Bank of England and HM
Treasury lending facility, under which it has drawn £300 million, available
until February 2022, and (b) a number of smaller local government backed
facilities amounting to £55.6 million; and (iv) a number of other smaller
local facilities amounting to £2.8 million.
As at 30 September 2021, the Group had available liquidity of £935.2 million,
including cash of approximately £773.6 million and the aforementioned
committed undrawn revolving credit facility of £150.0 million, as well as
smaller undrawn local facilities totalling £11.6 million.
In making the going concern assessment, the Directors have considered forecast
cash flows and the liquidity available over the period to 31 March 2023. In
doing so they assessed a number of scenarios, including a base case scenario
and a severe but plausible downside scenario. The base case scenario reflects
an expectation of a slow but steady recovery in passenger numbers in most of
our key markets during the next 16 months, with Group sales reaching
approximately 80% of 2019 levels by September 2022 and approximately 95% by
March 2023.
Given the considerable uncertainty surrounding the ongoing impact of Covid-19,
a downside scenario has also been modelled, applying severe but plausible
assumptions to the base case. This downside scenario reflects a much more
pessimistic view of the travel markets for the remainder of the current
financial year, assuming the introduction of renewed travel restrictions and
working from home guidance in the UK and Continental Europe during the winter
months. The downside scenario then assumes a gradual recovery during the
second half of the 2022 financial year and the first half of the 2023
financial year, but at a slower pace than envisaged in the base case, with
Group sales reaching approximately 74% of 2019 levels by September 2022 and
approximately 92% by March 2023.
Following the successful completion of the Rights Issue, the Group must comply
with monthly covenants regarding a minimum level of liquidity of £200m until
January 2022, falling to £150m thereafter, and a maximum level of
consolidated net debt on a pre-IFRS 16 basis of £800m. The Group will next be
tested on its leverage and interest cover covenants at March 2023, with a
maximum leverage multiple of nine times EBITDA and a minimum interest cover
multiple of one times EBITDA (both on a pre-IFRS 16 basis) at that date. In
both its base case and its severe but plausible downside case scenarios, the
Group would have headroom against all of these covenant tests at all testing
dates during the next 16 months.
In the light of the very recent news regarding the emergence of the Omicron
variant, the Directors have also considered its potential impact on the
Group's financial forecasts. While the Directors believe that an out-turn that
is worse than their current downside scenario is very unlikely to materialise,
they have nevertheless further stress-tested those downside assumptions. They
have modelled the impact of additional lockdowns and extensive travel
restrictions across all markets during the second quarter of the Group's 2022
financial year, and reflected available mitigating actions with the control of
the Group in such circumstances, including further deferrals of planned
capital expenditure. This additional scenario assumes sales and EBITDA losses
on a pre-IFRS 16 basis in the second quarter of next financial year would be
in line with the equivalent quarter of the 2021 financial year, despite the
extensive roll out of vaccines over the subsequent twelve months, and as such
is deemed to be extremely pessimistic. Having applied this additional
sensitivity, the Directors are satisfied that there would be sufficient
headroom for the Group to operate within its modified covenants throughout the
next 16 months.
The ongoing impact of the Covid-19 pandemic cannot be accurately predicted and
it is not possible to assess all possible future implications for the Group.
Nevertheless, based on the scenarios modelled, the Directors are confident
that the Group and the Company will have sufficient funds to continue to meet
their liabilities as they fall due for a period of at least 16 months from the
date of approval of the financial statements. The Directors have therefore
deemed it appropriate to prepare the financial statements for the year ended
30 September 2021 on a going concern basis.
1.3 Changes in accounting policies and disclosures
The following amended standards and interpretations have been adopted by the
Group in the current period:
· Amendments to references to the conceptual framework in IFRS
standards
· Definition of a Business (Amendments to IFRS 3)
· Definition of material (Amendments to IAS 1 and IAS 8)
· Amendments to IFRS 16 'Covid-19-Related Rent Concessions beyond 30
June 2021
There is no significant impact of adopting these new standards on the Group's
consolidated financial statements.
The Group has adopted Covid-19-Related Rent Concessions beyond 30 June 2021 -
Amendment to IFRS 16 issued on 31 March 2021 in the period. The Group applies
the practical expedient allowing it not to assess whether eligible rent
concessions that are a direct consequence of the Covid-19 pandemic are lease
modifications. The Group applies the practical expedient consistently to
contracts with similar characteristics and in similar circumstances. The
Amendment extends the date a lessee is permitted to apply the practical
expedient by a year, from payments due on or before 30 June 2021 to payments
due on or before 30 June 2022. The amendment has been applied retrospectively,
resulting in a £0.2 million credit to retained earnings.
The effect of adopting the amendment in the period is an increase in reported
profit of £2.5 million, an increase in right-of-use assets of £11.7 million
and an increase in lease liabilities of £9.2 million. For rent concessions in
leases to which the Group chooses not to apply the practical expedient, or
that do not qualify for the practical expedient, the Group assesses whether
there is a lease modification.
1.4 New accounting standards not yet adopted by the Group
The following amended standards and interpretations are not expected to have a
significant impact on the Group's consolidated financial statements:
· Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS 9, IAS
39, IFRS 7, IFRS 4 and IFRS 16)
For considerations of the impact of IBOR reform on the Group's hedge
accounting, please refer to note 8.
There are a number of other amendments and clarifications to IFRS, effective
in future years, which are not expected to significantly impact the Group's
consolidated results or financial position.
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, Canada and Bermuda; and RoW includes
operations in Eastern Europe, the Middle East, Asia Pacific, India and South
America. 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.
UK Continental Europe North America RoW Non-attributable Total
£m £m £m £m £m £m
Year ended 30 September 2021
Revenue 190.0 360.5 194.2 89.5 - 834.2
Underlying operating loss (52.2) (134.3) (48.7) (51.1) (37.0) (323.3)
Non-underlying operating costs (5.2) 15.3 (2.3) 17.4 (11.1) 14.1
Operating loss (57.4) (119.0) (51.0) (33.7) (48.1) (309.2)
Year ended 30 September 2020
Revenue 410.1 558.2 274.9 189.9 - 1,433.1
Underlying operating loss (28.7) (148.1) (55.4) (55.6) (27.6) (315.4)
Non-underlying operating costs (10.3) (45.4) (7.9) 18.3 (3.2) (48.5)
Operating loss (39.0) (193.5) (63.3) (37.3) (30.8) (363.9)
The following amounts are included in underlying operating loss:
UK Continental Europe North America RoW Non-attributable Total
£m £m £m £m £m £m
Year ended 30 September 2021
Depreciation and amortisation (55.8) (171.4) (58.6) (50.9) (9.7) (346.4)
Year ended 30 September 2020
Depreciation and amortisation (78.3) (183.7) (72.7) (78.0) (6.1) (418.8)
A reconciliation of underlying operating loss to loss before and after tax is
provided as follows:
2021 2020
£m
£m
Underlying operating loss (323.3) (315.4)
Non-underlying operating profit / (costs) (note 4) 14.1 (48.5)
Share of profit / (loss) from associates 2.3 (2.4)
Finance income 2.6 2.5
Finance expense (74.7) (56.5)
Non-underlying finance expense (note 5) (32.2) (5.5)
Loss before tax (411.2) (425.8)
Taxation 48.9 28.1
Loss after tax (362.3) (397.7)
3 Earnings / (loss) per share
Basic earnings / (loss) 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 / (loss) 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 / (loss) 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:
2021 2020
(restated)
£m £m
Loss attributable to ordinary shareholders (357.3) (375.0)
Adjustments:
Non-underlying operating income / (costs) (14.1) 48.5
Non-underlying finance costs 32.2 5.5
Tax effect of adjustments 1.7 (4.4)
Less non-underlying costs attributable to NCI 13.6 (9.3)
Underlying loss attributable to ordinary shareholders (323.9) (334.7)
Basic weighted average number of shares 696,983,219 566,327,395
Dilutive potential ordinary shares -
Diluted weighted average number of shares 696,983,219 566,327,395
Loss per share (p):
- Basic (51.3) (66.2)
- Diluted (51.3) (66.2)
Underlying loss per share (p):
- Basic (46.5) (59.1)
- Diluted (46.5) (59.1)
The number of ordinary shares in issue as at 30 September 2021 was 795,736,696
which excludes treasury shares (30 September 2020: 537,596,432). The Company
also holds 263,499 treasury shares (2020: 263,499).
Potential ordinary shares can only be treated as dilutive when their
conversion to ordinary shares would decrease earnings per share or increase
loss per share. As the Group has recognised a loss for the year, none of the
potential ordinary shares are considered to be dilutive.
Basic and diluted earnings per share figures for the comparative period have
been restated and adjusted for the bonus factor of 1.15 to reflect the bonus
element of the April 2021 Rights Issue, in accordance with IAS 33 Earnings per
Share. Amounts as originally stated at 30 September 2020 were (76.1)p basic
and diluted earnings per share and (68.0)p basic and diluted underlying
earnings per share.
4 Operating costs
2021 2020
£m £m
Cost of food and materials:
Cost of inventories consumed in the year (234.8) (431.1)
Labour cost:
Employee remuneration (352.2) (518.6)
Overheads:
Depreciation of property, plant and equipment (90.9) (111.0)
Depreciation of right-of-use assets (245.7) (305.3)
Amortisation of intangible assets (11.7) (10.6)
Impairment of property, plant and equipment (11.9) (38.4)
Impairment of right-of-use assets (12.5) (38.2)
Impairment of goodwill (26.4) (33.0)
Profit on lease disposal 14.2 0.3
Other exceptional costs (27.5) (22.7)
Rentals payable under leases (96.4) (149.2)
IFRS 16 rent credit 92.0 91.9
Other overheads (139.6) (231.1)
(1,143.4) (1,797.0)
Non-underlying operating items
The non-underlying operating costs in the year to 30 September 2021 are shown
below.
2021 2020
£m £m
Impairment of goodwill (26.4) (33.0)
Impairment of property, plant and equipment (11.9) (38.4)
Impairment of right-of-use assets (12.5) (38.2)
Accelerated depreciation - (6.2)
IFRS 16 rent credit 92.0 91.9
Restructuring and site exit costs (21.3) (20.2)
Fees for debt amendment and extension of bank facilities (5.4) (2.5)
Amortisation of intangible assets arising on acquisition (1.9) (1.9)
Profit on lease disposal 2.3 -
Other non-underlying costs (0.8) -
Total non-underlying operating items 14.1 (48.5)
5 Finance income and expense
2021 2020
£m £m
Finance income
Interest income 2.3 2.5
Other net foreign exchange gains 0.3 -
Total finance income 2.6 2.5
Finance expense
Total interest expense on financial liabilities measured at amortised cost (38.1) (22.8)
Retrospective interest charge on US Private Placement notes (1.2) -
Lease interest expense (28.4) (27.8)
Debt modification losses (43.9) (3.4)
Effective interest rate adjustment 14.8 (2.0)
Changes to estimated future cashflows on US Private Placement notes (1.9) -
Net change in fair value of cash flow hedges utilised in the year (2.6) (1.6)
Unwind of discount on provisions (0.8) (0.4)
Net interest expense on defined benefit pension obligations (0.2) (0.2)
Other net foreign exchange losses - (0.3)
Other (4.6) (3.5)
Total finance expense (106.9) (62.0)
Non-underlying finance costs
The non-underlying finance costs in the year to 30 September 2021 includes
expense arising as a result of amendments and extensions of borrowings under
IFRS 9.
2021 2020
£m £m
Effective interest rate charge and debt modification losses (31.0) (5.4)
Retrospective interest charged on US Private Placement notes (1.2) -
Other - (0.1)
Total non-underlying finance costs (32.2) (5.5)
6 Cash flow from operations
2021
2020
£m £m
Loss for the year (362.3) (397.7)
Adjustments for:
Depreciation of property, plant and equipment 90.9 111.0
Depreciation of right-of-use assets 245.7 305.3
Amortisation of intangible assets 11.7 10.6
Profit on disposal of lease (14.2) (0.3)
Non-cash change in lease liabilities (92.0) (91.9)
Impairments 50.8 109.6
Share-based payments 1.8 2.0
Finance income (2.6) (2.5)
Finance expense 106.9 62.0
Disposal of subsidiary 3.7 -
Share of (profit)/loss of associates (2.3) 2.4
Taxation (48.9) (28.1)
(10.8) 82.4
Decrease in trade and other receivables 7.6 77.2
(Increase) / decrease in inventories (0.2) 15.5
Increase / (decrease) in trade and other payables including provisions 132.8 (161.7)
Cash flow from operations 129.4 13.4
7 Dividends
2021 2020
£m £m
No final dividend for year ended 30 September 2020 has been approved or paid - (26.8)
during the period (2020: final dividend for the year ended 30 September 2019:
6.0p per share)
- (26.8)
No dividend for financial year 2021 is proposed (2020: £nil).
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 value and fair values of certain financial instruments
The following table shows the carrying value of financial assets and financial
liabilities.
As at As at
30 September 2021 30 September 2020
£m £m
Financial assets measured at amortised cost
Cash and cash equivalents 773.6 185.0
Trade and other receivables 155.4 155.1
Total financial assets measured at amortised cost 929.0 340.1
Non-derivative financial liabilities measured at amortised cost
Bank loans (441.1) (411.3)
Covid Corporate Financing Facility (CCFF) (297.7) (123.9)
US private placement notes (342.4) (341.1)
Lease liabilities (1,172.8) (1,349.3)
Trade and other payables (495.1) (380.0)
Total financial liabilities measured at amortised cost (2,749.1) (2,605.6)
Derivative financial liabilities
Interest rate swaps (2.1) (5.1)
Total derivative financial liabilities (2.1) (5.1)
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 excluding lease liabilities estimated using market prices
at 30 September 2021 was £1,061.7m (30 September 2020: £885.4m).
Financial assets and liabilities are measured at fair value and are classified
as level 2. This uses the fair value hierarchy whereby inputs, which are used
in the valuation of these financial assets, and liabilities have a significant
effect on the fair value, are observable either directly or indirectly. There
were no transfers during the period.
Interest rate benchmark reform (Amendments to IFRS 9, IAS 39 and IFRS 7)
During the year, The Financial Conduct Authority announced the dates that
panel bank submissions for all LIBOR settings will cease, after which, some
LIBOR rates will no longer be available. The Group has floating rate bank
facilities in GBP, EUR, USD, NOK and SEK, of which, GBP and USD are impacted
by this change as they are linked to reference rates based in London. 3-month
LIBOR reporting will end for GBP in December 2021 and 3-month LIBOR will end
for USD in June 2023.
The Group has managed this change by amending the main bank facility agreement
during the March 2021 debt amendment to transition to new reference rates,
plus a spread, on the relevant cessation date of each currency IBOR, covering
all loan currencies. In addition, for derivative contracts, the Group has
adopted the ISDA 2020 Protocol. This protocol amends the fallback provisions
incorporated in the derivative contracts so that when a particular IBOR rate
ceases to exist or to represent the underlying market, it will be replaced by
an applicable risk-free rate plus a spread.
The first quarterly period impacted will be from January 2022 in GBP only.
From this date, both the bank debt and derivatives will transition, from using
3-month LIBOR to Sterling Overnight Index Average (SONIA) based indices.
Consequently, hedge accounting relationships will be maintained.
The Group continues to monitor the market and the output from various industry
groups managing the transition to new benchmark interest rates and will look
to implement changes if appropriate in the future.
9 Rights Issue and debt amendments
On 17 March 2021 the Company announced a fully underwritten Rights Issue (the
"Rights Issue") to raise gross proceeds of approximately £475 million. At the
same time the Company announced certain amendments to the terms of the Group's
main bank facilities agreement (the "Facilities Agreement") and its US private
placement notes which came into effect following completion of the Rights
Issue on 22 April 2021 (the "Debt Amendments").
The Rights Issue has further strengthened the Group's balance sheet by
allowing the Group to materially reduce its net indebtedness and allows the
Group to cover liquidity headroom under a reasonable worst-case scenario.
The Rights Issue also facilitated the Debt Amendments which have resulted in
an extension to the maturity date of the Facilities Agreement to January 2024
and allowed the Group to secure further covenant waivers and amendments from
the Group's lenders. Under these amendments, the 6-month covenant tests
introduced in the December 2020 amendments were removed, the original leverage
and interest cover covenant tests were further waived and amended up to and
including the testing period ending on 31 March 2023 (in respect of the
interest cover test) and 30 September 2023 (in respect of the leverage test)
and the monthly liquidity and adjusted net debt covenant tests were amended
and extended until such time as the Group shows compliance with the original
covenants as at or prior to March 2024 testing date.
Upon completion of the Rights Issue, the proceeds were recognised in equity on
22 April 2021. Directly attributable transaction fees incurred were offset
against the Rights Issue proceeds in equity.
10 Post balance sheet events
SSP Group's Spanish operating companies ("SSP Spain") operate F&B units in
a number of Spanish airports. In late September 2021, a new law was passed
in Spain that came into force on 2 October 2021 that should result in
adjustments to the minimum guaranteed annual rents payable by SSP Spain for
the period from 15 March 2020 onward. The law will lead to lower minimum
guaranteed rent amounts to be paid until passenger numbers return to 2019
levels. As the new law is effective from 2 October 2021, we consider this to
give rise to a non-adjusting post balance sheet event.
11 Annual General Meeting
The Group's Annual General Meeting will be held in February 2022. 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 2022.
12 Other information
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 30 September 2021 or 30 September 2020
but is derived from those accounts. Statutory accounts for year ended 30
September 2020 have been delivered to the Registrar of Companies, and those
for year ended 30 September 2021 will be delivered in due course.
The auditor has reported on the accounts for the year ended 30 September 2021;
their report was:
i. unqualified, and
ii. 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 2021
will be posted and made available to shareholders on the Company's website in
January 2022.
13 Forward looking statement
Certain information included in this announcement is forward looking and
involves risks, assumptions and uncertainties that could cause actual results
to differ materially from those expressed or implied by forward looking
statements.
Forward looking statements cover all matters which are not historical facts
and include, without limitation, projections relating to results of operations
and financial conditions and the Company's plans and objectives for future
operations, including, without limitation, discussions of expected future
revenues, financing plans, expected expenditures and divestments, risks
associated with changes in economic conditions, the strength of the food and
support services markets in the jurisdictions in which the Group operates,
fluctuations in food and other product costs and prices and changes in
exchange and interest rates. Forward looking statements can be identified by
the use of forward looking terminology, including terms such as 'believes',
'estimates', 'anticipates', 'expects', 'forecasts', 'intends', 'plans',
'projects', 'goal', 'target', 'aim', 'may', 'will', 'would', 'could' or
'should' or, in each case, their negative or other variations or comparable
terminology. Forward looking statements in this Annual Report and Accounts are
not guarantees of future performance. All forward looking statements in this
Annual Report and Accounts are based upon information known to the Company on
the date of this Annual Report and Accounts. Accordingly, no assurance can be
given that any particular expectation will be met and readers are cautioned
not to place undue reliance on forward looking statements, which speak only at
their respective dates.
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. Other than in accordance with its legal or regulatory
obligations (including under the UK Listing Rules and the Disclosure Guidance
and Transparency Rules of the Financial Conduct Authority), the Company
undertakes no obligation to publicly update or revise any forward looking
statement, whether as a result of new information, future events or otherwise.
Nothing in this announcement shall exclude any liability under applicable laws
that cannot be excluded in accordance with such laws.
1 Excluding units that we will operate under the recently announced Extime
joint venture with ADP in France.
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