SSP Group PLC · LSE:SSPG
SSP — H1 2016 Earnings Presentation
38 slides from SSP's earnings presentation, May 18, 2016
Slide 1: The Food Travel Experts
The Food Travel Experts
Slide 2: SSP Group plc Interim Results 2016
SSP Group plc Interim Results 2016 18 May 2016 foodtravelexperts.com
Slide 3: Presentation structure
Presentation structure 1. Group highlights Kate Swann 2. Financial review Jonathan Davies 3. Business review Kate Swann 4. Q&A 3
Slide 4: Group highlights
Group highlights • Good first half performance with operating profit up 22.6% at actual exchange rates, 28.0% at constant currency • Like for Like sales up 3.3%*, strong first quarter, some moderation since then • Net new space growth strong at +2.0% • Strong operating margin growth of 50bps • Strat
Slide 5: Financial Review
Financial Review Interim Results 2016 Jonathan Davies, CFO foodtravelexperts.com
Slide 6: Group Financial Overview
Group Financial Overview Change (%) 1H 2016 1H 2015 Constant Reported FX £m (except where stated) Currency Rates Revenue 896.7 859.2 5.9% 4.4% LFL Sales Growth 1 3.3% 3.0% n/a n/a Operating Profit 2 30.9 25.2 28.0% 22.6% 2 Profit Before Tax 23.2 16.4 n/a 41.5% Earnings per share (p) 2 3.0 2.1 n/a 42
Slide 7: LFL Sales Growth by quarter
LFL Sales Growth by quarter Note: Same store like-for-like sales growth at constant currency. * FY16 Q2 LFL sales excluding impact of extra day in leap year 7 .:
Slide 8: Revenue growth of 5.9%
Revenue growth of 5.9% Change at constant Net Contract Total Revenue currency LFL Sales Gains/(Losses) UK 2.8% (0.6%) 2.2% Continental Europe 2.9% (0.6%) 2.3% North America 7.6% 14.6% 22.2% Rest of World 2.2% 10.6% 12.8% Group (ex. Leap Year) 3.3% 2.0% 5.3% Leap Year n/a n/a 0.6% Reported Growth 5.9
Slide 9: Operating profit growth of 22.6%
Operating profit growth of 22.6% Operating Profit* Change (%) Constant Reported FX 1H 2016 1H 2015 £m Currency Rates UK 26.5 18.0 47.2% 47.2% Continental Europe 11.9 13.9 (7.6%) (14.4%) North America 3.7 0.9 300.0% 311.1% Rest of World 2.4 6.3 (61.3%) (61.9%) Non-attributable (13.6) (13.9) 2.2% 2.2%
Slide 10: Operating profit margin up by 0.5%
Operating profit margin up by 0.5% YOY change £m 1H 2016 1H 2015 (% Sales) Revenue 896.7 859.2 Gross Profit 603.0 573.1 % Sales 67.2% 66.7% 0.5% Labour Costs 275.1 267.0 % Sales 30.7% 31.1% 0.4% Concession Fees 156.4 145.6 % Sales 17.4% 16.9% (0.5%) Overheads 106.0 102.0 % Sales 11.8% 11.9% 0.1% Dep
Slide 11: Net profit up 41.2%
Net profit up 41.2% £m 1H 2016 1H 2015 Change (%) Operating Profit 1 30.9 25.2 22.6% Net Financing Costs (7.5) (8.6) Share of Associates (0.2) (0.2) Profit Before Tax1 23.2 16.4 41.5% Tax1 (5.2) (3.0) Non-Controlling Interests (3.6) (3.2) Net Profit1 14.4 10.2 41.2% Earnings per share (p)1 3.0 2.1 4
Slide 12: Free cash flow
Free cash flow £m 1H 2016 1H 2015 Operating Profit* 30.9 25.2 Depreciation & Amortisation 34.6 33.3 Working Capital (19.8) (24.5) Capital Expenditure (49.2) (39.8) Net Tax (9.2) (7.6) Investment in JV (4.7) - Other (2.9) 0.1 Operating Cash Flow* (20.3) (13.3) Net Financing Costs (6.7) (8.4) Free Cas
Slide 13: Net debt increased by £54.9m
Net debt increased by £54.9m £m Opening net debt (1 October 2015) (319.8) Free cash flow (27.0) Dividend (10.5) Impact of foreign exchange rates (16.8) Other (0.6) Closing net debt (31 March 2016) (374.7) 13
Slide 14: Financial summary
Financial summary • Robust LFL sales growth of 3.3% • Net contract gains strengthening to 2.0% • Strategic programmes delivering strong Operating Margin growth (up 50 bps) • Operating profit up 28% YoY (at constant currency) • EPS up 43% YoY • Interim dividend of 2.5p, up 19% YoY 14
Slide 15: Business Review
Business Review Interim Results 2016 Kate Swann, CEO foodtravelexperts.com
Slide 16: SSP business fundamentals
SSP business fundamentals • Multiple structural market growth drivers • Market leader in attractive channels and regions • Strong business platform combining international scale and local expertise • 5 key levers to drive growth and efficiency • Sales growth, margin expansion and strong cash generat
Slide 17: UK - Regional update
UK - Regional update Revenue Profit • 39% SSP revenue 400 • Another strong performance in H1 350 300 250 • 2.2%* sales growth, 47.2% operating profit growth 200 £m 150 100 • Benefitting from strengthened management team 50 0 H1 H1 H1 H1 H1 2012 2013 2014 2015 2016 • Key focus on: - Strategic initiat
Slide 18: Continental Europe - Regional update
Continental Europe - Regional update Revenue Profit • 39% SSP revenue 400 • Robust performance despite external factors 350 300 250 • 2.3%* sales growth and small operating profit decline 200 £m 150 100 • Regional differences: some countries impacted by geopolitical 50 0 events, others stronger H1 H
Slide 19: Rest of World – Regional update
Rest of World – Regional update Revenue Profit • 9% SSP revenue 90 • Good sales in H1, performance well managed despite 80 70 external factors 60 50 £m 40 • 12.8%* sales growth, profit in line with expectations 30 20 10 0 • Regional differences: H1 H1 H1 H1 H1 2012 2013 2014 2015 2016 - Some countri
Slide 20: North America – Regional update
North America – Regional update Revenue Profit • 13% of SSP revenue 120 • Strong performance in H1 100 80 • 22.2%* sales growth and 300% operating profit growth 60 £m 40 • Focus on air channel, opportunity to grow share 20 0 H1 H1 H1 H1 H1 • Strengthened management team delivering growth & efficienc
Slide 21: Our focus remains on five key levers to deliver value
Our focus remains on five key levers to deliver value 1 Optimise our offer to benefit from the positive trends in our markets 2 Grow profitable new space 3 Optimise gross margin and leverage scale benefits 4 Run an efficient and effective business 5 Optimise investment using best practice and shared
Slide 22: Optimising our offer – LFL sales growth
1 Optimising our offer – LFL sales growth • LFL growth of 3.3%*, Q2 impacted by geopolitical events Area of Focus • Underlying positive trends in travel channels Improve ranges • Geographic diversification Optimise price and promotion • Strategic initiatives delivering well Upselling • Focus on rang
Slide 23: Case Study – Best sellers into more units
Like for like growth: Case Study – Best sellers into more units Opportunity to increase presence of best-sellers Range fragmentation reducing, on-going opportunity 100% Existing Missing 5% 4% 11% 6 units 100 90% 4% 5% 5 units 7% 90 80% 5% 4 units 80 8% 3 units 70% 20% Proportion of products 70 60% 2
Slide 24: Grow profitable new space
2 Grow profitable new space • Strong performance, 2.0% net gains, ahead of expectations Area of Focus • Renewal rate in line with plan: - Focus on retention of profitable New units within existing sites business • Disciplined approach to new business Existing markets, new sites - Selective investmen
Slide 25: New Openings: Luxembourg Airport
New Openings: Luxembourg Airport • 2.7m pax • SSP’s debut in the Luxembourg market • Opened in Spring 2016 • 10 year deal with airport operator Lux- Airport Starbucks Lux Brewery • Strong brand line-up: Moselier Panopolis
Slide 26: Luxembourg: Oberweis
Luxembourg: Oberweis 26
Slide 27: New Openings: Don Mueang Airport, Thailand
New Openings: Don Mueang Airport, Thailand • Don Mueang - 22m Pax, 70% domestic • Rapid contract agreement & opening programme • 17 of 20 units opened within 6 months of the contract award Dairy Queen The Pizza Company • Five year deal with the Airport Operator Airports of Thailand • Mix of internat
Slide 28: Good progress on contract wins including:
Good progress on contract wins including: Evenes Hangzhou Bergen 2 units 2 units 3 units Dusseldorf 8 units Vancouver 5 units Shanghai 2 units Portland 1 unit Newark 3 units San Francisco 2 units Don Mueang 20 units Sydney 4 units Abu Dhabi Frankfurt 10 units 9 units SSP presence 21
Slide 29: Brand Portfolio continues to develop
Brand Portfolio continues to develop • Brands drive LFL sales, new business & retention • Developing our portfolio with international and local brands • Further development of own brands and bespoke Costa Maan Coffee concepts • Working with more chefs, local heroes and cutting edge brands Union Stre
Slide 30: Further progress optimising gross margin
3 Further progress optimising gross margin • Gross margin improved by 50bps Area of Focus • Key initiatives making good progress Procurement disciplines • Procurement disciplines & recipe rationalisation progressing well • Progress on waste and loss management Simplify and standardise recipes Reduce
Slide 31: Gross Margin: Case Study – Purchasing Disciplines
Gross Margin: Case Study – Purchasing Disciplines • Historically compliance to approved products has been low • Introduced iTrade to provide unit purchasing analysis • Real time auditing of purchases to approved product lists • Detailed records of all purchases • Improved compliance with approved pr
Slide 32: Gross Margin: Case Study – Seasonal waste UK
Gross Margin: Case Study – Seasonal waste UK 4.0% • Collaborative analysis with M&S • Identification of Christmas seasonal buying patterns 3.5% • Travel locations very different to high street 3.0% • Product line adjustments to reflect demand 2.5% Waste % • Delivered planned savings in waste 2.0% •
Slide 33: Encouraging progress on operating efficiency
4 Encouraging progress on operating efficiency • Total labour costs 40bps improvement Area of Focus • Overheads 10bps improvement Service optimisation • Opportunity to improve service & efficiency Improve forecasting and scheduling • Systems developments - forecasting & scheduling Employ technology
Slide 34: Operating efficiency: Case Study – Sales forecasting
Operating efficiency: Case Study – Sales forecasting • Start point for aligning sales & labour better >90% • Established current practice c.78% • Detailed analysis of historical sales trends • Developed new forecasting tool • Early results suggest significantly improved sales forecasting from c.78%
Slide 35: Optimising Investment to drive returns
5 Optimising Investment to drive returns • Capex £49.2m • Maintenance & expansion capex • Capex driven by timing of renewals and new openings • Tight central controls on investment • Investment in resources and tools Historic cost of fit out Current cost of fit out Savings % (£ Sqm) (£ Sqm) Internat
Slide 36: Summary and Outlook
Summary and Outlook • Strong first half financial performance, ahead of expectations • LFL sales in line with plan; tougher comparatives in second half • Net new openings ahead of expectations in H1 • On-going progress on margin and efficiency • Net margin development strong • Interim dividend of 2.
Slide 37: SSP Group plc Interim Results 2016 – Q&A
SSP Group plc Interim Results 2016 – Q&A 18 May 2016 foodtravelexperts.com
Slide 38: Disclaimer
Disclaimer Certain statements in the presentation may constitute “forward-looking statements”. These statements reflect the Company’s beliefs and expectations and are based on numerous assumptions regarding the Company’s present and future business strategies and the environment the Company will ope