REG - SSP Group PLC - Half-year Report <Origin Href="QuoteRef">SSPG.L</Origin> - Part 2
18/05/2017 07:06
- Part 2: For the preceding part double click ID:nRSR4795Fa
Notes 31 March 2017 30 September 2016
£m £m
Non-current assets
Property, plant and equipment 304.7 272.0
Goodwill and intangible assets 717.6 701.3
Investments in associates 8.3 9.3
Deferred tax assets 18.7 18.1
Other receivables 42.2 37.3
Other financial assets 8 7.1 -
1,098.6 1,038.0
Current assets
Inventories 30.2 29.2
Tax receivable 4.6 4.3
Trade and other receivables 130.0 118.1
Cash and cash equivalents 8 104.3 155.8
269.1 307.4
Total assets 1,367.7 1,345.4
Current liabilities
Short term borrowings 8 (46.0) (30.7)
Trade and other payables (397.9) (404.1)
Tax payable (17.2) (23.8)
Provisions (2.1) (2.3)
(463.2) (460.9)
Non-current liabilities
Long term borrowings 8 (444.2) (442.5)
Post employment benefit obligations (16.6) (19.2)
Provisions (12.0) (13.8)
Derivative financial liabilities 8 (10.8) (14.2)
Obligation to acquire additional share of subsidiary undertaking 9 (19.7) -
Deferred tax liabilities (12.1) (12.1)
(515.4) (501.8)
Total liabilities (978.6) (962.7)
Net assets 389.1 382.7
Equity
Share capital 4.7 4.7
Share premium 461.2 461.2
Capital redemption reserve 1.2 1.2
Other reserves (9.3) 21.5
Retained earnings (126.5) (138.0)
Total equity shareholders' funds 331.3 350.6
Non-controlling interests 57.8 32.1
Total equity 389.1 382.7
Condensed consolidated statement of changes in equity
for the six months ended 31 March 2017
Share capital Share premium Capital redemp-tion reserve Other reserves 1 Retained earnings Total parent equity Non-controlling interests Total equity
£m £m £m £m £m £m £m £m
At 1 October 2015 4.7 461.2 1.2 (6.3) (190.6) 270.2 21.5 291.7
Profit for the period - - - - 13.6 13.6 3.6 17.2
Other comprehensive income for the period - - - 3.7 0.5 4.2 1.4 5.6
Acquisition of additional share in subsidiary - - - - 0.4 0.4 (0.5) (0.1)
Dividends paid to equity shareholders - - - - (10.5) (10.5) - (10.5)
Dividends paid to non-controlling interests - - - - - - (6.1) (6.1)
Share-based payments - - - - 2.7 2.7 - 2.7
At 31 March 2016 4.7 461.2 1.2 (2.6) (183.9) 280.6 19.9 300.5
At 1 October 2016 4.7 461.2 1.2 21.5 (138.0) 350.6 32.1 382.7
Profit for the period - - - - 18.3 18.3 7.3 25.6
Other comprehensive (expense) / income for the period - - - (11.9) 2.3 (9.6) 1.6 (8.0)
Non-controlling interest arising on acquisition (note 9) - - - - - - 22.4 22.4
Obligation to acquire additional share of subsidiary undertaking - - - (18.9) - (18.9) - (18.9)
Capital contributions from non-controlling interests - - - - - - 1.6 1.6
Dividends paid to equity shareholders (note 7) - - - - (13.8) (13.8) - (13.8)
Dividends paid to non-controlling interests - - - - - - (7.2) (7.2)
Share-based payments - - - - 3.9 3.9 - 3.9
Deferred tax on share schemes - - - - 0.8 0.8 - 0.8
At 31 March 2017 4.7 461.2 1.2 (9.3) (126.5) 331.3 57.8 389.1
1Other reserves comprise the foreign currency translation reserve, the cash
flow hedging reserve and other equity. The decrease of £30.8m (2016: increase
of £3.7m) comprises a decrease to the translation reserve of £15.3m (2016:
increase of £6.2m) and an increase to the cash flow hedging reserve of £3.4m
(2016: decrease of £2.5m) and the initial recognition of the obligation to
acquire an additional share of TFS in 2018 of £18.9m.
Condensed consolidated cash flow statement
for the six months ended 31 March 2017
Notes Six months ended 31 March 2017 Six months ended 31 March 2016
£m £m
Cash flows from operating activities
Cash flow from operations 6 71.2 48.4
Tax paid (14.4) (9.2)
Net cash flows from operating activities 56.8 39.2
Cash flows from investing activities
Investment in associate - (4.7)
Dividends received from associates 1.7 1.3
Interest received 0.6 0.2
Purchase of property, plant and equipment (59.1) (48.3)
Purchase of other intangible assets (3.9) (0.9)
Acquisition of TFS, net of cash and cash equivalents acquired 9 (27.5) -
Net cash flows from investing activities (88.2) (52.4)
Cash flows from financing activities
Drawdown / (Repayment) of finance leases and other loans 12.9 (0.1)
Investment in other financial assets (6.3) -
Interest paid (8.5) (6.9)
Dividends paid to equity shareholders (13.8) (10.5)
Dividends paid to non-controlling interests (7.2) (6.1)
Acquisition of increased share of subsidiary - (0.8)
Capital contribution from non-controlling interests 1.6 -
Net cash flows from financing activities (21.3) (24.4)
Net decrease in cash and cash equivalents (52.7) (37.6)
Cash and cash equivalents at beginning of the period 155.8 134.7
Effect of exchange rate fluctuations on cash and cash equivalents 1.2 3.0
Cash and cash equivalents at end of the period 104.3 100.1
Reconciliation of net cash flow to movement in net debt
Net decrease in cash in the period (52.7) (37.6)
Cash (inflow) / outflow from (increase) / decrease in debt and finance leases (12.9) 0.1
Cash inflow from investment in other financial assets 6.3 -
Change in net debt resulting from cash flows (59.3) (37.5)
Translation differences 6.1 (16.8)
Other non-cash changes (0.7) (0.6)
Loans and other financial assets acquired through business combination (7.5) -
Increase in net debt in the period (61.4) (54.9)
Net debt at beginning of the period (317.4) (319.8)
Net debt at end of the period (378.8) (374.7)
Notes to the condensed consolidated financial statements
1 Preparation
Basis of preparation and statement of compliance
The condensed consolidated half-yearly financial statements of SSP Group plc
("the Group") have been prepared in accordance with International Accounting
Standard (IAS) 34, Interim Financial Reporting as adopted by the EU. The
annual consolidated financial statements of the Group are prepared in
accordance with International Financial Reporting Standards as adopted by the
EU ("IFRS") and the Companies Act 2006 applicable to companies reporting under
IFRS. These condensed consolidated half-yearly financial statements do not
comprise statutory accounts within the meaning of Section 435 of the Companies
Act 2006, and should be read in conjunction with the Annual Report and
Accounts 2016. The comparative figures for the year ended 30 September 2016
are not the Group's statutory accounts for that financial year. Those accounts
were reported upon by the Group's auditors and delivered to the registrar of
companies. The report of the auditors was unqualified, did not include a
reference to any matters to which the auditors drew attention by way of
emphasis without qualifying their report and did not contain statements under
Section 498 (2) or (3) of the Companies Act 2006.
Except as described below, the accounting policies adopted in the preparation
of these condensed consolidated half-yearly financial statements to 31 March
2017 are consistent with the accounting policies applied by the Group in its
consolidated financial statements as at, and for the year ended, 30 September
2016 as required by the Disclosure and Transparency Rules of the UK's
Financial Conduct Authority.
Changes in accounting policy and disclosures
There are no EU-endorsed IFRS or IFRIC interpretations that are not yet
effective that are expected to have a material impact on the Group.
IFRS 16, Leases, issued in January 2016 with an effective date of 1 January
2019 is not yet EU endorsed. Management is in the process of reviewing the
impact that this will have on the Group.
The accounting policies adopted are consistent with those of the previous
year, with the exception of the recognition of brand names acquired as part of
the TFS acquisition as intangible assets, the recognition of non-controlling
interests in TFS and accounting for the Group's obligation to acquire an
additional 16% of TFS in 2018. The accounting policies adopted for these are
set out below.
Brand names acquired as part of a business combination are stated at fair
value as at the acquisition date, which is determined based on a 'royalty
relief' method of valuation. This is based on an estimation of future sales
and the choice of a suitable royalty and discount rate in order to calculate
the present value. Brand names are amortised over their useful economic
lives.
The Group has recognised the non-controlling interests in TFS at the
non-controlling interests' proportionate share of the fair value of TFS'
identifiable net assets. Subsequent to acquisition, the carrying amount of
non-controlling interests is the amount of those interests at initial
recognition plus the non-controlling interests' share of subsequent changes in
equity. Total comprehensive income is attributed to non-controlling interests
even if this results in the non-controlling interests having a deficit
balance.
The Group recognises obligations to acquire additional shares in its
subsidiary undertakings as a liability in the consolidated balance sheet at
the present value of the estimated exercise price of the forward contract. The
present value of the forward contracts is estimated based on expected earnings
in Board-approved forecasts and the choice of a suitable discount rate. Upon
initial recognition a corresponding entry is made to other equity. For
subsequent changes in the measurement of the liability the corresponding entry
is made to the consolidated income statement.
2 Segmental reporting
SSP operates in the food and beverage travel sector, mainly at airports and
railway stations.
Management monitors the performance and strategic priorities of the business
from a geographic perspective, and in this regard has identified the following
four key "reportable segments": the UK, Continental Europe, North America and
Rest of the World ("RoW"). The UK includes operations in the United Kingdom
and the Republic of Ireland; Continental Europe includes operations in the
Nordic countries and in Western and Southern Europe; North America includes
operations in the United States and Canada; and RoW includes operations in
Eastern Europe, the Middle East, Asia Pacific and India. These segments
comprise countries which are at similar stages of development and demonstrate
similar economic characteristics.
The Group's management assesses the performance of the operating segments
based on revenue and underlying operating profit. Interest income and
expenditure are not allocated to segments, as they are managed by a central
treasury function, which oversees the debt and liquidity position of the
Group. The non-attributable segment comprises costs associated with the
Group's head office function and depreciation of central assets.
Six months ended 31 March 2017 UK Continental Europe North America RoW Non-attributable Total
£m £m £m £m £m £m
Revenue 365.2 409.4 160.6 137.3 - 1,072.5
Underlying operating profit/(loss) 29.7 20.2 5.6 4.8 (17.5) 42.8
Six months ended 31 March 2016 UK Continental Europe North America RoW Non-attributable Total
£m £m £m £m £m £m
Revenue 351.2 346.9 115.7 82.9 - 896.7
Underlying operating profit/(loss) 26.5 11.9 3.7 2.4 (13.6) 30.9
The following amounts are included in underlying operating profit:
UK Continental Europe North America RoW Non-attributable Total
£m £m £m £m £m £m
Six months ended 31 March 2017
Depreciation and amortisation* (7.9) (16.7) (11.5) (6.5) (1.5) (44.1)
Six months ended 31 March 2016
Depreciation and amortisation* (8.4) (14.7) (7.4) (3.1) (1.0) (34.6)
* Excludes amortisation of acquisition-related intangible assets.
A reconciliation of underlying operating profit to profit before and after tax
is provided as follows:
Underlying operating profit 42.8 30.9
Adjustments to operating costs (1.0) (1.0)
Share of profit / (loss) from associates 0.7 (0.2)
Finance income 0.6 0.3
Finance expense (10.1) (7.8)
Profit before tax 33.0 22.2
Taxation (7.4) (5.0)
Profit after tax 25.6 17.2
Profit after tax
25.6
17.2
3 Earnings per share
Basic earnings per share is calculated by dividing the result for the period
attributable to ordinary shareholders by the weighted average number of
ordinary shares outstanding during the period.
Diluted earnings per share is calculated by dividing the result for the period
attributable to ordinary shareholders by the weighted average number of
ordinary shares outstanding during the period adjusted by potentially dilutive
outstanding share options and other share-based payment arrangements.
Underlying earnings per share is calculated the same way except that the
result for the period attributable to ordinary shareholders is adjusted for
specific items as detailed below:
Six months ended 31 March 2017 Six months ended 31 March 2016
£m £m
Profit attributable to ordinary shareholders 18.3 13.6
Adjustments:
Amortisation of acquisition-related intangibles 1.0 1.0
Unwind of discount on obligation to acquire additional share of subsidiary undertaking 0.1 -
Foreign exchange losses on revaluation of obligation to acquire additional share of subsidiary undertaking 0.6 -
Tax effect of adjustments (0.2) (0.2)
Underlying profit attributable to ordinary shareholders 19.8 14.4
Basic weighted average number of shares 475,207,748 475,150,145
Dilutive potential ordinary shares 4,441,475 1,669,650
Diluted weighted average number of shares 479,649,223 476,819,795
Earnings per share (p):
- Basic 3.8 2.9
- Diluted 3.8 2.9
Underlying earnings per share (p):
- Basic 4.2 3.0
- Diluted 4.1 3.0
The number of ordinary shares in issue as at 31 March 2017 was 475,211,687 (30
September 2016: 475,199,063).
4 Operating costs
Six months ended 31 March 2017 Six months ended 31 March 2016
£m £m
Cost of food and materials:
Cost of inventories consumed in the period (333.7) (293.7)
Labour cost:
Employee remuneration (327.5) (275.1)
Overheads:
Depreciation of property, plant and equipment (41.3) (32.5)
Amortisation of intangible assets - software (2.8) (2.1)
Amortisation of acquisition-related intangible assets (1.0) (1.0)
Rentals payable under operating leases (195.5) (156.4)
Other overheads (128.9) (106.0)
(1,030.7) (866.8)
Adjustments to operating costs
Amortisation of intangible assets arising on acquisition (1.0) (1.0)
(1.0) (1.0)
For the periods presented above, underlying operating profit excludes non-cash
accounting adjustments relating to amortisation of intangible assets arising
on acquisition of the SSP business in 2006.
5 Finance income and expense
Six months ended 31 March 2017 Six months ended 31 March 2016
£m £m
Finance income
Interest income 0.6 0.2
Net foreign exchange gains - 0.1
Total finance income 0.6 0.3
Finance expense
Total interest expense on financial liabilities measured at amortised cost (5.6) (5.6)
Net change in fair value of cash flow hedges utilised in the period (1.9) (1.1)
Unwind of discount on provisions (0.4) (0.3)
Net interest expense on defined benefit pension obligations (0.2) (0.3)
Other (1.3) (0.5)
Net foreign exchange losses (0.7) -
Total finance expense (10.1) (7.8)
Adjustments to finance expense
The adjustments to finance expense in the six months to 31 March 2017 comprise
adjustments to the financial liability recognised in respect of the obligation
to acquire an additional 16% ownership share of TFS in 2018.
Six months ended 31 March 2017£m Six months ended 31 March 2016
£m
Unwind of discount on obligation to acquire additional share of subsidiary undertaking (0.1) -
Foreign exchange losses on revaluation of obligation to acquire additional share of subsidiary undertaking (0.6) -
(0.7) -
6 Cash flow from operations
Six months ended 31 March 2017 Six months ended 31 March 2016
£m £m
Profit for the period 25.6 17.2
Adjustments for:
Depreciation 41.3 32.5
Amortisation 3.8 3.1
Share-based payments 3.9 2.7
Finance income (0.6) (0.3)
Finance expense 10.1 7.8
Share of (profit) / loss of associates (0.7) 0.2
Taxation 7.4 5.0
90.8 68.2
Decrease / (increase) in trade and other receivables 5.2 (6.9)
Decrease in inventories 0.1 0.6
(Decrease) in trade and other payables, and in provisions (24.9) (13.5)
Cash flow from operations 71.2 48.4
7 Dividends
Six months ended 31 March 2017 Six months ended 31 March 2016
£m £m
Prior year final dividend of 2.9p per share (2016: 2.2p) (13.8) (10.5)
The proposed interim dividend of 3.2 pence per share (2016: 2.5 pence per
share), totalling £15.2m (2016: £11.8m), will be paid on 3 July 2017 to
shareholders on the register on 2 June 2017.
8 Fair value measurement
Certain of the Group's financial instruments are held at fair value.
The fair values of financial instruments held at fair value have been
determined based on available market information at the balance sheet date,
and the valuation methodologies detailed below:
- the fair values of the Group's borrowings are calculated based on the
present value of future principal and interest cash flows, discounted at the
market rate of interest at the balance sheet date; and
- the derivative financial liabilities relate to interest rate swaps. The
fair values of interest rate swaps have been determined using relevant yield
curves and exchange rates as at the balance sheet date.
Carrying amounts and fair values of certain financial instruments
The following table shows the carrying amounts of financial assets and
financial liabilities. It does not include information for financial assets
and financial liabilities not measured at fair value if the carrying amount is
a reasonable approximation of fair value.
Carrying amounts
31 March 2017 30 September 2016
£m £m
Financial instruments measured at fair value:
Non-current
Derivative financial liabilities (10.8) (14.2)
Financial instruments not measured at fair value:
Non-current
Other financial assets 7.1 -
Long term borrowings (444.2) (442.5)
Current
Cash and cash equivalents 104.3 155.8
Short term borrowings (46.0) (30.7)
Financial assets and liabilities in the Group's consolidated balance sheet are
either held at fair value, or their carrying value approximates to fair value,
with the exception of loans, which are held at amortised cost. The fair value
of total borrowings estimated using market prices at 31 March 2017 is £494.5m
(30 September 2016: £476.7m).
All of the financial assets and liabilities measured at fair value are
classified as level 2 using the fair value hierarchy, whereby inputs which are
used in the valuation of these financial assets and liabilities and have a
significant effect on the fair value are observable, either directly or
indirectly. There were no transfers during the year.
9 Business combinations
The Group has created a joint venture with K Hospitality Group, whereby SSP
will ultimately own a 49% share in Travel Food Services Private Limited
("TFS").
On 13 December 2016, the Group acquired 15.1% of the issued share capital of
TFS, a leading operator of food and beverage concessions in travel locations
in India. A further 17.9% of the issued share capital was acquired on 3 March
2017 bringing the total shareholding to 33%. The Group also entered into an
agreement to acquire a further 16% shareholding by the end of 2018.
The acquisition provides an entry point for the Group into the Indian market
and the Group expects to benefit from TFS' established strong local presence.
The Group will have control over TFS' relevant activities and as such is
consolidating TFS and its group companies.
The goodwill calculation is summarised below:
Provisional fair value of assets acquired Book value Measurement adjustment Fair value
£m £m £m
Property, plant and equipment 14.5 - 14.5
Intangible assets - 2.2 2.2
Other financial assets 0.8 - 0.8
Inventories 1.2 - 1.2
Cash and cash equivalents 15.2 - 15.2
Trade and other receivables 1 21.8 - 21.8
Trade and other payables (15.3) - (15.3)
Long and short-term borrowings (8.3) - (8.3)
Deferred tax assets / (liabilities) 1.0 (0.7) 0.3
Net identifiable assets 30.9 1.5 32.4
Non-controlling interest (21.3) (1.1) (22.4)
Goodwill on acquisition 32.7
Cash consideration 42.7
1 All acquired receivables held at fair value, which is equivalent to the
gross contractual amount receivable. All contractual cash flows are expected
to be collected.
Reconciliation of consideration to cash flow statement
£m
Cash consideration 42.7
Less: cash and cash equivalents acquired (15.2)
Acquisition of TFS, net of cash and cash equivalents acquired 27.5
Less: other financial assets acquired (0.8)
Add: long and short term borrowings acquired 8.3
Acquisition of TFS, adjusted for net debt acquired 35.0
The intangible assets acquired represent the fair value of the brand names
acquired, namely Caféccino, Flying Bites and Curry Kitchen. The Board believe
that the excess of consideration paid over the fair value of the net
identifiable assets is best considered as goodwill on acquisition representing
relationships with airports, extensive knowledge of the Indian Travel catering
market and future operating synergies.
Included in the 6 month period to 31 March 2017 is revenue of £24.7m and an
operating profit of £3.7m in respect of TFS.
The estimated contributions from acquisitions completed during the year to the
results of the Group for the six months ended 31 March 2017 if such
acquisitions had been made at the beginning of the financial year are £37.5m
to revenue and £6.0m to operating profit.
Obligation to acquire additional share of subsidiary undertaking
The Group recognised a financial liability of £18.9m in respect of its
obligation to acquire a further 16% of TFS in 2018. As at 31 March 2017, the
financial liability was £19.7m, reflecting adjustments for the subsequent
foreign exchange revaluation and unwind of discounting.
The consideration payable for the additional 16% is based on a multiple of
TFS' 2018 Earnings before Interest, Tax, Depreciation and Amortisation and has
been valued with reference to most recent financial statements and internal
budgets and forecasts, discounted with a suitable discount rate. The
consideration payable for the additional 16% is subject to a cap of an
additional £3.5m (at 31 March 2017 exchange rates).
The discount rate is pre-tax and reflects the current market assessments of
the time value of money and a specific risk premium relevant to the TFS
business. This discount rate is considered to be equivalent to the rate a
market participant would use.
10 Related parties
Related party relationships exist with the Group's subsidiaries, associates,
key management personnel, pension schemes and employee benefit trust. A full
explanation of the Group's related party relationships is provided on pages 94
and 95 of the Annual Report and Accounts 2016.
Expect for those described below, there are no further transactions with
related parties or changes in the related party transactions described in the
last annual report that have had, or are expected to have, a material effect
on the financial performance or position of the Group in the six months to 31
March 2017.
At 31 March 2017, the Group owed £0.8m to The Minor Food Group (PCL) which
owns 51% of Select Service Partner Co. Limited (30 September 2016: £3.8m).
11 Forward looking statement
This document contains forward-looking statements. These forward-looking
statements include all matters that are not historical facts. Statements
containing the words "believe", "expect", "intend", "may", "estimate" or, in
each case, their negative and words of similar meaning are forward-looking. By
their nature, forward-looking statements involve risks and uncertainties
because they relate to events that may or may not occur in the future. We
caution you that forward-looking statements are not guarantees of future
performance and that the Group's actual financial condition, results of
operations and cash flows, and the development of the industry in which we
operate, may differ materially from those made in or suggested by the
forward-looking statements contained in this document or other made by us or
on the Group's behalf. In addition, even if the Group's financial condition,
results of operations and cash flows, and the development of the industry in
which we operate are consistent with the forward-looking statements in this
document, those results or developments may not be indicative of results or
developments in subsequent periods. Except where required to do so under
applicable law or regulatory obligations, we undertake no obligation to update
any forward looking statements whether as a result of new information, future
events or otherwise.
This information is provided by RNS
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