Final Results

RNS Number : 9657H

SSP Group PLC

21 November 2018

 

    LEI:213800QGNIWTXFMENJ24

21 November 2018

SSP GROUP PLC

Results for year ended 30 September 2018

"Strong full year results and a further special dividend of c. £150m" 

SSP Group, a leading operator of food and beverage outlets in travel locations worldwide, announces its financial results for the year ended 30 September 2018.

Highlights:                                                                                                                                                        

·    Underlying operating profit¹ of £195.2m: up 22.7% at constant currency², and 19.8% at actual exchange rates.

·    Revenue of £2,564.9m: up 9.5% at constant currency, and 7.8% at actual exchange rates.

·    Like-for-like sales³ up 2.8%: driven by growth in air passenger travel and retailing initiatives.

·    Strong net gains⁴ of 5.1%: driven by North America and the Rest of the World.

·    Underlying operating margin ¹ up 70 basis points, at constant currency and excluding the acquisition impact of TFS in India, driven by further progress on our strategic initiatives. The acquisition impact  added a further 10 basis points bringing the underlying operating margin to 7.6%.

·     Underlying profit before tax of £184.4m: up 24.0%. Reported profit before tax of £182.9m, up 26.3%.

·    Underlying basic earnings per share of 25.1 pence: up 23.6%. Reported basic earnings per share of 24.9 pence, up 27.7%.

·    Final dividend of 5.4 pence per share, bringing the full year ordinary dividend to 10.2 pence per share: up 25.9%, reflecting a payout ratio of 40%.

·    Underlying operating cash inflow⁵ of £90.2m, after another record year of investment of £144.2m in the business.

·    Encouraging pipeline, with significant new contracts underpinning future growth, including at Montparnasse station in Paris, 29 Starbucks stores in the NS rail estate in the Netherlands, at Rio de Janeiro and Sao Paulo Guarulhos International Airports in Brazil, at Goa International Airport in India and in North America, at San Francisco and Seattle Airports.

·    Proposed c. £150m special dividend and share consolidation, underpinning confidence in the business.

Commenting on the results, Kate Swann, CEO of SSP Group, said:

"SSP has delivered another strong performance in 2018. Operating profit was up 22.7% at constant currency, driven by good like-for-like sales growth, substantial new contract openings and further operational improvements. We have continued to expand our global footprint, materially extending our presence in North America, delivering excellent growth in India and entering the important Latin American region with two contracts in Brazil. The new business pipeline is encouraging and underpins our confidence in future growth. Our cash flow is robust and, in addition to investing £144m into the business this year, our highest to date, we are also returning c. £150m cash to shareholders.

The new financial year has started in line with our expectations and, whilst a degree of uncertainty always exists around passenger numbers in the short term, we continue to be well placed to benefit from the structural growth opportunities in our markets."
 

Financial highlights:

			Year-on-year change
	2018 £m	2017 £m	Actual FX Rates	Constant currency2
Revenue	2,564.9	2,379.1	+7.8%	+9.5%
Like-for-like sales growth3	+2.8%	+3.1%	n/a	n/a
Underlying operating profit1	195.2	162.9	+19.8%	+22.7%
Underlying operating margin1	7.6%	6.8%	+80 bps	+80 bps
Underlying profit before tax1	184.4	148.7	+24.0%	n/a
Underlying basic earnings per share (p)1	25.1	20.3	+23.6%	n/a
Underlying diluted earnings per share (p) 1	24.8	20.0	+24.0%	n/a
Dividend per share (p)	10.2	8.1	+25.9%	n/a
Underlying operating cash inflow5	90.2	103.5	-12.9%	n/a
Net debt	(334.7)	(262.2)	-27.7%	n/a

Statutory reported results:

The table below summarises the Group's statutory reported results (where the financial highlights above are adjusted).

	2018 £m	2017 £m	Year-on-year change
Operating profit	193.3	161.0	+20.1%
Operating margin	7.5%	6.7%	+80 bps
Profit before tax	182.9	144.8	+26.3%
Basic - Earnings per share (p)	24.9	19.5	+27.7%
Diluted - Earning per share (p)	24.5	19.2	+27.6%

¹ Stated on an underlying basis which excludes the amortisation of intangible assets arising on the acquisition of the SSP business in 2006 and the revaluation of the obligation to acquire an additional 16% ownership share of TFS.

² Constant currency is based on average 2017 exchange rates weighted over the financial year by 2017 results.

³ Like-for-like sales represent revenues generated in an equivalent period in each financial year in outlets which have been open for a minimum of 12 months. Like-for-like sales are presented on a constant currency basis.

⁴ Net contract gains / (losses) represent the net year-on-year revenue impact from new outlets opened and existing units closed in the past 12 months. Net contract gains / (losses) are presented on a constant currency basis.

⁵ Stated on an underlying basis after capital expenditure, net cash flows to/from associates and non-controlling interests, acquisitions and tax.

Please refer to page 15 for supporting reconciliations from the Group's statutory reported results to these performance measures.
 

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014.

CONTACTS:

Investor and analyst enquiries

Sarah John, Director of Investor Relations, SSP Group plc

On 21 November: [phone]

Thereafter: [phone]

E-mail: [e-mail]

Media enquiries

Peter Ogden / Lisa Kavanagh

Powerscourt

[phone]

E-mail: [e-mail]

SSP Group plc's Preliminary Results 2018 are available at www.foodtravelexperts.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. With over 50 years of experience, today we have more than 37,000 employees, serving approximately one and a half million customers every day. We have business at approximately 140 airports and 280 rail stations, and operate more than 2,600 units in 33 countries around the world.

SSP operates an extensive portfolio of more than 500 international, national, and local brands. Among these are local heroes such as Brioche Doree in Paris, LEON in London, and Hung's Delicacies in Hong Kong. Our range also includes proprietary brands created for the travel sector including Upper Crust, Cabin Bar and Ritazza, as well as international names such as M&S, Burger King, Starbucks, Jamie's Deli and YO! Sushi. We also create stunning bespoke concepts such as Five Borough Food Hall in JFK, New York and Norgesglasset Bar in Oslo Airport.

www.foodtravelexperts.com 

 

Business review

Overview

The Group delivered a strong performance in the year, driven by robust like-for-like sales growth, strong new contract openings across the world and the further implementation of our programme of strategic initiatives. We are continuing to invest in the growth and development of the business and to bring new brands and concepts to our clients and customers. We have made further good progress in the development of the business in North America, and we have seen strong growth from TFS, our joint venture in India. We have delivered another year of margin improvement driven by like-for-like sales growth and the on-going roll out of our operational efficiency programmes. Cash flow has been strong, funding another record year of investment in the business. The increase in the ordinary dividend, which again represents a payout ratio of 40%, and the proposed c. £150m special dividend reflect our confidence in the business and our desire to maintain an efficient balance sheet.

Financial results

The financial performance of the Group is presented on an underlying basis, for which the statutory reported results are adjusted for the impact of foreign exchange, the amortisation of intangible assets created on the acquisition of the SSP business in 2006 and the revaluation of the obligation to acquire an additional share of TFS. The statutory reported performance of the Group is explained in the financial review, with a detailed reconciliation between statutory and underlying performance provided on page 15.

The Group delivered a strong financial performance in 2018, with underlying operating profit increasing by 22.7% (on a constant currency basis) to £195.2m. Total revenue increased by 9.5% on a constant currency basis, including like-for-like sales growth of 2.8%, net contract gains of 5.1% and revenue from acquisitions of 1.6%.

Like-for-like sales growth has remained at a broadly similar level throughout the year and was in line with the expectations we set at the start of the year of between 2% and 3%. Like-for-like sales growth has been driven by increased passenger numbers in the air sector, whilst trading in the rail sector has remained softer, in line with recent trends. Looking forward to 2019 with the on-going level of geopolitical and economic uncertainty, we continue to plan conservatively, anticipating like-for-like sales growth to continue to be between 2% and 3%.

Net contract gains in the year were 5.1% benefitting from the full year effect of some significant contracts which opened in the second half of 2017, including new openings at Chicago Midway and JFK T7 Airports in North America. We also saw a number of important new openings during this year, including at airports in North America at Newark, Seattle, LaGuardia, San Francisco and Toronto, in the Rest of the World at Shenyang in China, and Delhi in India, and in Continental Europe at Marseille, Nice, Frankfurt and Barcelona.  We continue to focus on retaining profitable contracts, and our contract renewal rate in 2018 was in line with historical levels.

During the year, we won a number of important new contracts, including some significant contracts in Continental Europe most notably at Montparnasse station in Paris, a portfolio of 29 Starbucks in railway stations across the Netherlands, and 22 motorway service areas across Germany. In North America we have won contracts at airports in Phoenix, Seattle, San Francisco and LaGuardia, and in the Rest of the World at airports in Moscow, Beijing, Hong Kong, and India, including at Goa. We have also secured our first business in South America, with new contracts at Rio De Janeiro and Sao Paulo airports. We expect to begin operating all of these contracts progressively over the next two years. Looking forward to 2019, we expect net gains to be c. 3%.

The underlying operating margin improvement of 70 bps, excluding the acquisition impact of TFS, was driven by good like-for-like sales and further encouraging progress on our strategic initiatives. The additional two months of TFS (12 months in 2018 compared to 10 months in 2017, following its acquisition in December 2016), contributed a further 10 bps to the overall operating margin, taking it to 7.6%.

The improvement in operating margin also benefitted from a significant contribution from the new contracts at Chicago Midway, JFK T7 and LaGuardia Airports in North America, where we have been operating the units ahead of their redevelopment and hence have incurred limited closure periods, pre-opening and depreciation costs. Furthermore, in India, we benefitted from the reversal of the post-acquisition integration costs incurred in the previous year.

Looking forward to 2019, we expect the year on year operating margin growth across the group to be nearer to 20 basis points, driven by like-for-like sales growth and on-going operational improvements, but net of closure periods, pre opening costs and  higher depreciation as we rebrand units at Chicago Midway, JFK T7 and LaGuardia Airports in North America and mobilise some of the significant contract wins in Continental Europe.

We delivered strong operating cash flow of £90.2m, after investing £144.2m in capital expenditure, which was a £29.2m increase on the prior year. The higher capital expenditure is driven by the net contract gains of 5.1%. Net debt increased from £262.2m to £334.7m, mainly as a result of the £100.1m special dividend paid in April 2018, leaving leverage at the year end broadly in line with the prior year at 1.1x Net Debt: EBITDA.

Use of cash

Having reviewed our medium-term capital requirements, we have taken the decision to increase the ordinary dividend for the 2018 financial year, maintaining a payout ratio of 40% of net income (the top of the range of 30% to 40% we gave at the IPO). Furthermore, we are today proposing a second special dividend of c. £150m which will be accompanied by a share consolidation. Both of these reflect our confidence in the future of the business and our desire to maintain an efficient balance sheet.

We are intending to pay the final dividend in March 2019 and the special dividend in April 2019. The dividends and share consolidation will be subject to shareholder approval at the Annual General Meeting of the Company to be held in February 2019. Further details of the special dividend and share consolidation (including the final amount to be paid, the proposed record date and payment date for the special dividend) will be set out in the notice of Annual General Meeting that will be sent to shareholders in January 2019.

We will continue to keep the balance sheet under review, with the intention of keeping leverage broadly within the 1.5x - 2.0x Net Debt:EBITDA range over the medium term.
 

Strategy

Our strategy is focused on creating long-term sustainable value for our shareholders, delivered through five key levers. We made further progress on each of these levers in the period:

1.    Optimising our offer to benefit from the positive trends in our markets

We are focused on the food and beverage markets in travel locations, which benefit from long-term structural growth. We aim to use our broad portfolio of brands and retailing skills to drive profitable like-for-like sales, ensuring that we benefit from the positive trends in these markets.

Like-for-like sales growth in the year was driven by the on-going roll out of our retailing programmes which are delivering well. We continue to optimise our product ranges and this year we have made good progress in developing a number of premium products, both for our own brands and in conjunction with our brand partners, that will provide customers with additional choice.

2.    Growing profitable new space

The travel food and beverage market in airports and railway stations is valued at approximately £17bn and is characterised by long-term structural growth. It offers excellent opportunities for us to expand our business across the globe.

Net contract gains were 5.1%, driven by new unit openings and high levels of contract retention. The high level of net gains was driven by strong performances in North America and in the Rest of the World. These large and growing markets (where we still have a relatively small share), provide attractive expansion opportunities and the pipeline of new contracts is encouraging.

In addition to our recent entry into the large and growing Indian market, we have now secured a foothold into the Brazilian air market with contracts in Rio de Janeiro International and Sao Paulo Guarulhos International Airports, to be operated through our joint venture with Duty Free Americas.

Our new business growth is underpinned by our ability to deliver attractive and effective food solutions at travel locations internationally. An important element of this is the brand line up we can offer. Our brands include both international brands which we franchise, such as Burger King and Starbucks, and also our own proprietary brands such as Upper Crust and Ritazza, as well as bespoke concepts and local heroes. We have continued to develop our own brands, this year launching the first Urban Express, a new food and retailing offer in the UK, including partnerships with 'Berry Bros. & Rudd' for wines, 'Cook' for ready meals and 'Foyle's' for books. We have also continued to expand with our own brands, for example opening Ritazza, Cabin Bar and Nippon Ramen outlets at Mactan-Cebu Airport in the Philippines, a Camden food co. at Chicago Midway Airport, and a Ritazza at Mumbai Airport. We have further extended our relationships with high profile chefs, for example developing fine dining concepts with Michelin starred chefs, including the Hermanos Torres at Barcelona Airport, and Michel Rostang at Le Train Bleu at Gare de Lyon in Paris. We have developed a new partnership with Crussh, the London healthy food and juice chain, and we have extended our relationship with Leon, opening a new unit at London Victoria station. We have also extended our Millie's Cookies brand internationally, working with franchise partners in India.

3.    Optimising gross margins and leveraging scale benefits

Gross margin increased by 90 bps in the year at constant currency. Approximately 50 bps of this improvement was due to higher growth in the air sector, which typically has higher gross margins but higher concession fees than the rail sector.

The roll out of gross margin initiatives is progressing well across our regions. Key areas of focus include range and recipe rationalisation, procurement disciplines and the management of waste and losses. We continue to make good progress introducing equipment that automates food preparation processes in our sites which helps to improve the product consistency, and reduce waste. This year we have also invested in a central loss prevention team who are using data analytics to help us to better understand and reduce waste and loss.

4.    Running an efficient and effective business

We have a multi-year programme of initiatives to improve operating efficiency, which is important to the Group given the backdrop of on-going labour cost inflation. Labour efficiencies contributed a 20 bps improvement to our operating margin.

We continue to develop systems to better align labour to sales, allowing us to optimise service levels and labour costs. We have developed a more standardised and systematised approach to labour forecasting and scheduling through our Better Service Planning programme. The greater use of automated equipment in kitchens can also help drive efficiency and we are also trialling self-ordering and self-scan checkout technology at a number of units, both of which can contribute to labour efficiency and improved customer experience.

5.    Optimising investment using best practice and shared resource

We have maintained our focus on generating efficiencies to optimise our investments, drive returns and use best practice and shared resources. We are continuing to look at how shared back office services can reduce cost and drive simpler, more efficient processes. We have two outsourced shared service centres in Pune in India and Lodz in Poland which are used by a number of SSP's countries for financial transaction processing and data analytics support. We continue to look for further opportunities to outsource administrative and financial processes.

Energy efficiency is an important priority for the Group, and this year we have invested in a specialist team who have already identified energy saving opportunities in units, for example in the areas of lighting and kitchen equipment.

Summary and outlook

The Group delivered a strong financial performance in the year with good like-for-like sales growth, strong net gains and a further improvement in operating margin. The new financial year has started in line with our expectations and the pipeline of new contracts is encouraging, although it is always difficult to predict the precise timing of the opening of these new units. Looking forward to 2019, with the current level of general economic uncertainty, we anticipate like-for-like revenue growth to remain in the range of 2% to 3% next year. The significant structural growth opportunities in our markets and our programme to deliver operational improvements leave us well placed to continue to deliver both for our customers and our shareholders.

Financial review

Group performance

	2018 £m	2017 £m	Change
			Reported	Constant currency	LFL
Revenue	2,564.9	2,379.1	+7.8%	+9.5%	+2.8%
Underlying operating profit	195.2	162.9	+19.8%	+22.7%
Underlying operating margin	7.6%	6.8%	+80 bps	+80 bps
Operating profit	193.3	161.0	+20.1%
Operating margin	7.5%	6.7%	+80 bps

Revenue

Revenue increased by 9.5% on a constant currency basis, including like-for-like sales growth of 2.8% and net contract gains of 5.1%. The impact of acquisitions contributed a further 1.6% to revenue. At actual exchange rates, total revenue grew by 7.8%, to £2,564.9m.

Like-for-like sales growth was 2.8%. The growth in the air channel has again been strong, driven by increasing passenger numbers in most of our major markets. Performance in the rail sector has been in line with recent trends, impacted by on-going disruption from station redevelopments and closures in the UK, and by strikes in France. Looking forward to 2019, with the current level of economic and geopolitical uncertainty, we continue to plan conservatively, anticipating like-for-like sales growth of 2% to 3%.

Net gains contributed 5.1% to full year revenue growth, driven by strong contributions from North America, which benefitted from the new business opened in the prior year and further gains at Newark, San Francisco, Toronto and LaGuardia, and the Rest of the World, primarily driven by new openings in India, China and Thailand. Looking forward to 2019, we expect net contract gains to be c. 3%.

Trading results from outside the UK are converted into sterling at the average exchange rates for the year. The overall translation impact on revenue of the movement of foreign currencies (principally the Euro, US Dollar, Indian Rupee, Swedish Krona and Norwegian Krone) in 2018 compared to the 2017 average was                -1.7%. If the current spot rates were to continue through 2019, we would expect a positive currency impact on revenue of around 1% compared to the average rates used for 2018. This is a translation impact only.

Underlying operating profit

Underlying operating profit increased by 22.7% on a constant currency basis and by 19.8% at actual exchange rates to £195.2m. The underlying operating margin improvement of c. 70 bps, excluding the acquisition impact of TFS, was driven by good like-for-like sales and further encouraging progress on our strategic initiatives. The additional two months of TFS (12 months in 2018 compared to 10 months in 2017, following its acquisition in December 2016), contributed a further 10 bps to the overall operating margin, taking it to 7.6%.

The improvement in operating margin also benefitted from a significant contribution from the new contracts at Chicago Midway, JFK T7 and LaGuardia Airports, in North America, where we have been operating the units ahead of their redevelopment and hence have incurred limited closure periods, pre-opening and depreciation costs. Furthermore, in India, we benefitted from the reversal of the post-acquisition integration costs incurred in the previous year.

Gross margin increased by 90 bps year-on-year, on a constant currency basis of which 50 bps is due to the higher sales growth in air, where gross margins are typically higher than in the rail sector. The underlying improvement reflects the on-going roll-out of our strategic initiatives to optimise gross margin. Key areas of focus during the year included ranging and mix management, food and drink procurement and waste and loss reduction.

Labour costs improved by 20 bps year-on-year, on a constant currency basis, driven by our broadly based labour efficiency programmes. These more than mitigated the on-going labour inflation which has arisen from increases in minimum wage levels and healthcare costs, most notably in the UK and the USA.  Looking forward to 2019, we anticipate further inflationary pressures on labour costs, particularly in the UK and the USA, mainly as a consequence of increasing minimum wage levels and healthcare costs.

Concession fees rose by 70 bps during the year with the stronger growth in sales in the air channel, where concession fees are typically higher relative to rail, contributing 30 bps to the year-on year increase. The underlying increase of 40 basis points is in line with recent historical trends and we would expect this to continue into 2019.

Overheads margin improved by 20 bps during the year, on a constant currency basis, reflecting further good progress in overhead efficiency programmes, particularly with regards to energy costs. We also benefitted from a lower level of pre-opening costs and the reversal of post-acquisition integration costs in TFS from the prior year.

The reduction in the rate of depreciation of 20 basis points was largely attributable to our North America business, where at some of the large new contracts (e.g. Chicago Midway, JFK T7 and LaGuardia Airports), we benefitted from operating units ahead of investing the capital to rebrand the units. Redevelopment has now commenced and as such we expect the rate of depreciation to revert to more normal levels in 2019.

Looking forward to 2019, we expect the year-on-year operating margin growth across the group to be nearer to 20 basis points, driven by like-for-like sales growth and on-going operational improvements, but net of closure periods, pre opening costs and  higher depreciation as we rebrand units at Chicago Midway, JFK T7 and LaGuardia Airports in North America and mobilise some of the significant contract wins in Continental Europe.

Operating profit

Operating profit was £193.3m (2017: £161.0m), reflecting an adjustment for the amortisation of acquisition-related intangible assets of £1.9m (2017: £1.9m).
 

Regional performance

The following shows the Group's segmental performance. For full details of our key reporting segments, refer to note 2.

UK (including Republic of Ireland)

	2018 £m	2017 £m	Change
			Reported	Constant currency	LFL
Revenue	798.1	787.7	+1.3%	+1.3%	+0.8%
Underlying operating profit	89.5	82.1	+9.0%	+9.0%
Underlying operating margin	11.2%	10.4%	+80 bps	+80 bps

Note - Statutory reported operating profit was £88.0m (2017: £80.6m) and operating margin was 11.0% (2017: 10.2%) reflecting an adjustment for the amortisation of acquisition related intangible assets of £1.5m (2017: £1.5m).

Revenue increased by 1.3% on a constant currency basis, comprising like-for-like growth of 0.8% and net contract gains of 0.5%. Like-for-like growth in the air sector was affected by the collapse of Monarch Airlines and capacity reductions at Ryanair. Like-for-like sales in the rail sector have remained softer and were impacted byrailway station redevelopments and closures across the network, most notably in London.

Underlying operating profit for the UK increased by 9.0% on a constant currency basis, and underlying operating margin increased by 80 bps to 11.2%, driven by the continued roll out of our operational efficiency initiatives, which helped to mitigate the inflationary cost pressures from increases in the National Minimum Wage and National Living Wage and higher business rates.

Continental Europe

	2018 £m	2017 £m	Change
			Reported	Constant currency	LFL
Revenue	971.7	910.3	+6.7%	+6.9%	+1.4%
Underlying operating profit	79.5	77.8	+2.2%	+3.9%
Underlying operating margin	8.2%	8.5%	-30 bps	-20 bps

Note - Statutory reported operating profit was £79.1m (2017: £77.4m) and operating margin was 8.1% (2017: 8.5%) reflecting an adjustment for the amortisation of acquisition related intangible assets of £0.4m (2017: £0.4m).

Revenue increased by 6.9% on a constant currency basis, comprising like-for-like growth of 1.4%, net contract gains of 2.8% and the impact of the acquisition of Stockheim in Germany of 2.7%. Like-for-like sales growth in air was stronger than in rail, which was affected by strike action in France over the spring and early summer, and left like-for-like sales growth for the region weaker in the second half.

Underlying operating profit increased by 3.9% on a constant currency basis, driven by the higher sales and the roll out of strategic initiatives. The 20 bps reduction in operating margin, on a constant currency basis, reflected the pre-opening costs relating to the new contracts at Marseille and Oslo Airports, and the impact of the strike action in France.

North America

	2018 £m	2017 £m	Change
			Reported	Constant currency	LFL
Revenue	436.3	372.9	+17.0%	+23.1%	+4.2%
Underlying operating profit	27.7	14.3	+93.7%	+102.8%
Underlying operating margin	6.3%	3.8%	+250 bps	+250 bps

Note - There are no adjustments between underlying operating profit and statutory reported operating profit.

North America had a very good year with revenue increasing by 23.1% on a constant currency basis, comprising like-for-like growth of 4.2% and net contract gains of 18.9%. Like-for-like growth benefited from positive trends in airport passenger numbers in the North American market, although growth in the first half was impacted by a reduction in passengers and new competition at a small number of our airports, most notably at Houston Airport. Contract gains included the full year effect of the major contracts that opened in the second half of the prior year, in particular at Chicago Midway and JFK T7. We have also opened new business in Newark, Seattle, LaGuardia, San Francisco and Toronto airports.

Underlying operating profit increased by £13.4m to £27.7m, an increase of 102.8% at constant currency, with a corresponding increase in the operating margin of 250 bps at constant currency. This exceptionally strong result was driven by good like-for-like sales growth, further good progress on operating efficiencies, and also benefitted from a good performance from our new units at Chicago Midway Airport, JFK T7 and LaGuardia Airport where we've been operating the units ahead of their redevelopment and hence have incurred limited closure periods, pre-opening and depreciation costs. As these redevelopments have now commenced, in 2019 we expect to see higher preopening costs and anticipate that the rate of depreciation will revert to more normal levels.

Rest of the World

	2018 £m	2017 £m	Change
			Reported	Constant currency	LFL
Revenue	358.8	308.2	+16.4%	+21.7%	+10.1%
Underlying operating profit	35.7	21.2	+68.4%	+77.0%
Underlying operating margin	9.9%	6.9%	+300 bps	+310 bps

Note - There are no adjustments between underlying operating profit and statutory reported operating profit.

Revenue increased by 21.7% on a constant currency basis, with an increase in like-for-like sales of 10.1% and net contract gains of 7.0%. The very strong like-for-like sales were driven by passenger growth across the region, particularly in India, and were also helped by the temporary closures of some competitor units for redevelopment in Hong Kong, and a further recovery of our business in Egypt which had been severely impacted by terrorism in 2016. Net gains came primarily from new units at airports in India at Delhi, Kolkata and Goa, in China at Shenyang, in Thailand at Phuket, and in Hong Kong.

Underlying operating profit for the Rest of the World was £35.7m, an increase of 77.0% on a constant currency basis. This exceptional increase in profit reflected the unusually high like-for-like sales growth and was also helped by a very strong performance from India, which benefitted from the inclusion of a full year of trading, compared to 10 months in the prior year, and the reversal of the post-acquisition integration costs incurred in the prior year.

Share of profit of associates

The Group's share of profit from associates was £4.8m (2017: £3.4m), reflecting strong performance from our joint venture operations in the Rest of the World.

Net finance costs

Underlying net finance costs decreased by £2.0m year-on-year to £15.6m, primarily due to the reduction in interest rates following an 'Amend and Extend' of the Group's debt facilities in October 2017. Reported net finance costs were £15.2m, £4.4m lower year-on-year due to the lower interest rates and the revaluation of the financial liability to acquire the remaining 16% interest in TFS (£2.0m reduction compared to the prior year).

Looking forward to 2019, net debt will reflect the payment of the proposed c. £150m special dividend and the final tranche of the consideration for the acquisition of the remaining 16% stake in TFS in India of approximately £21m. Correspondingly, the net finance cost is expected to increase to c. £18m.

Taxation

The Group's underlying tax charge for the year was £40.5m (2017: £33.8m), equivalent to an effective tax rate of 22.0% (2017: 22.7%) of the underlying profit before tax. On a reported basis the tax charge for the year was £40.2m (2017: £33.6m).

Non-controlling interests

The non-controlling interests increased year-on-year by £7.1m to £25.5m. The increase reflects the strong performances of our joint ventures in North America and the Rest of the World, notably TFS in India.

Looking forward to 2019, non-controlling interests are expected to increase by approximately £2m - £3m , a reflection of the growth in our joint ventures, net of the reduction in non-controlling interests due to the increase in our stake in TFS in India to 49%.

Earnings per share

Underlying basic earnings per share increased by 23.6% to 25.1 pence per share (2017: 20.3 pence per share). Reported basic earnings per share was 24.9 pence per share (2017: 19.5 pence per share).

Dividends

In line with the Group's stated priorities for the uses of cash and after careful review of its medium term investment requirements, the Board is proposing to maintain the dividend payout ratio for this year at 40%, the top end of the range stated in the IPO prospectus. This will equate to a final dividend of 5.4 pence per share (2017: 4.9 pence per share), which is subject to shareholder approval at the Annual General Meeting. If approved, this will result in a total dividend per share for the year of 10.2 pence (2017: 8.1 pence), an increase of 25.9%.

In addition to this, the Board proposes a special dividend of c. £150m alongside a share consolidation on the record date of the special dividend. Both of these will contribute to maintaining balance sheet efficiency and reflect our confidence in the business.

The final dividend will be paid, subject to shareholder approval, on 29 March 2019 to shareholders on the register on 1 March 2019. The ex-dividend date will be 28 February 2019. The special dividend is expected to be paid in April 2019.

The special dividend and share consolidation will be subject to shareholder approval at the Annual General Meeting of the Company to be held in February 2019. Further details of the special dividend and share consolidation (including the final amount to be paid, the record date and proposed payment date for the special dividend) will be set out in the notice of Annual General Meeting that will be sent to shareholders in January 2019.

Cash flow

The table below presents a summary of the Group's cash flow for 2018:

	2018 £m	2017 £m
Underlying operating profit1	195.2	162.9
Depreciation and amortisation	97.7	95.5
Working capital	12.8	18.3
Net tax	(37.2)	(33.3)
Other	11.7	11.9
Underlying net cash flow from operating activities	280.2	255.3
Capital expenditure2	(144.2)	(115.0)
Disposal of associate	-	7.3
Acquisitions in the year	(19.0)	(35.0)
Net cash flows to/from non-controlling interests/associates	(22.5)	(9.1)
Other	(4.3)	-
Underlying operating cash flow	90.2	103.5
Net finance costs	(11.6)	(14.5)
Underlying free cash flow	78.6	89.0
Dividends paid	(145.8)	(29.0)
Underlying net cash flow	(67.2)	60.0

¹ Presented on an underlying basis (refer to page 15 for details).

² Capital expenditure is net of capital contributions from non-controlling interests of £12.4m (2017: £8.4m).

The Group's cash flow remained strong, generating net cash flow from operating activities of £280.2m (2017: £255.3m), which was an increase of £24.9m year-on-year, and underlying free cash flow of £78.6m (2017: £89.0).

Capital expenditure increased by £29.2m to £144.2m, reflecting the strength of the recent contract opening programme, in particular in North America and the Rest of the World, and ongoing investment in the equipment and technology that is helping to drive operational efficiencies. Capital expenditure in 2019 is expected to be at a broadly similar level to 2018, as a result of the continuation of higher levels of net gains and the ongoing investment in our efficiency programmes. 

Working capital generated £12.8m of cash flow during the year, helped by the new openings and continued good cash management disciplines.  

The payment for the acquisition of the Group's investment in the Stockheim business in Germany was £19.0m, net of cash acquired.

Net finance costs paid of £11.6m were lower than in 2017, primarily due to lower interest costs in the year as a result of the 'Amend and Extend' of the Group's debt facilities in October 2017.

The dividends paid of £145.8m reflected the cost of the 2017 final dividend of 4.9 pence per share, the 2018 interim dividend of 4.8 pence per share and the special dividend of £100.1m.

Overall, the Group used net cash of £67.2m during the year.

Balance sheet and net debt

The Group's balance sheet remains in a strong position with the net debt of £334.7m (2017: £262.2m) and net assets of £458.3m (2017: £465.0m).

	£m
Opening net debt (1 October 2017)	(262.2)
Net cash flow	(67.2)
Impact of foreign exchange rates	(1.0)
Other	(4.3)
Closing net debt (30 September 2018)	(334.7)

The increase in net debt of £72.5m was primarily a result of the dividend payments of £145.8m, including the Special Dividend of £100.1m paid in April 2018.

Net Debt:EBITDA leverage at the year end was at 1.1x, compared with 1.0x at the end of the prior year. With leverage remaining well below our target range of 1.5x - 2x Net Debt:EBITDA and having reviewed our medium term capital requirements, we are planning to return cash to shareholders through another special dividend of c. £150m, which we propose to pay next April alongside a share consolidation. In addition we plan to maintain the ordinary dividend at 40% of net income.

We will continue to keep the balance sheet under review, with the intention of maintaining leverage broadly within the 1.5x - 2.0x Net Debt:EBITDA range over the medium term.

Post balance sheet events

In August 2018, the Group successfully signed an agreement to issue US Private Placement notes ('Notes') of US$175m. The Notes were issued by a wholly-owned subsidiary of SSP Group plc and guaranteed by SSP Group plc and two other wholly-owned Group subsidiaries.

The Notes represent SSP's inaugural issue in the US Debt Private Placement market and carry a fixed rate of interest, were issued in October 2018 in five series: US$40m at 4.35%, maturing in October 2025; US$40m at 4.50%, maturing in October 2028, US$40m at 4.60%, maturing in October 2030, £21m at 2.85% maturing in October 2025 and £21m at 3.06% maturing in October 2028.

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.  

Revenue growth

As the Group operates in 33 countries, it is exposed to translation risk on fluctuations in foreign exchange rates, and as such the Group's reported revenue and operating profit will be impacted by movements in actual exchange rates.  The Group 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 growth, like-for-like sales growth, net contract gains / (losses), and the impact of acquisitions.

	UK	Continental Europe	North America	RoW	Total
2018 Revenue at actual rates by segment (£m)	798.1	971.7	436.3	358.8	2,564.9
Impact of foreign exchange (£m)	0.0	1.0	22.8	16.4	40.2
2018 Revenue at constant currency 1 (£m)	798.1	972.7	459.1	375.2	2,605.1
2017 Revenue at actual rates (£m)	787.7	910.3	372.9	308.2	2,379.1
Constant currency sales growth	1.3%	6.9%	23.1%	21.7%	9.5%
Which is made up of:
Like-for-like sales growth 2	0.8%	1.4%	4.2%	10.1%	2.8%
Net contact gains / (losses) 3	0.5%	2.8%	18.9%	7.0%	5.1%
Acquisitions 4	-	2.7%	-	4.6%	1.6%
Total constant currency sales growth	1.3%	6.9%	23.1%	21.7%	9.5%

¹ Constant currency is based on average 2017 exchange rates weighted over the financial year by 2017 results.

² Like-for-like sales represent revenues generated in an equivalent period in each financial year in outlets which have been open for a minimum of 12 months. Like-for-like sales are presented on a constant currency basis.

³ Revenue in outlets which have been open for less than 12 months and prior period revenues in respect of closed outlets are excluded from like-for-like sales and classified as contract gains. Net contract gains/(losses) are presented on a constant currency basis.

⁴ The acquisition impact of TFS and Stockheim has been presented separately from net contract gains/(losses) from existing SSP business for the current year only.

Underlying profit measures

The Group presents underlying profit measures, including operating profit, profit before tax and earnings per share, which exclude amortisation of intangible assets arising on the acquisition of the SSP business in 2006 and the revaluation of the obligation to acquire an additional 16% ownership share of TFS. A reconciliation from the underlying to the statutory reported basis is presented below.

	2018			2017
	Underlying	Adjustments	Total	Underlying	Adjustments	Total
Operating profit (£m)	195.2	(1.9)	193.3	162.9	(1.9)	161.0
Operating margin	7.6%	(0.1)%	7.5%	6.8%	(0.1)%	6.7%
Profit before tax (£m)	184.4	(1.5)	182.9	148.7	(3.9)	144.8
Earnings per share (p)	25.1	(0.2)	24.9	20.3	(0.8)	19.5

 

Consolidated income statement

for the year ended 30 September 2018

		2018			2017
	Notes	Underlying*	Adjustment	Total	Underlying*	Adjustment	Total
		£m	£m	£m	£m	£m	£m
Revenue	2	2,564.9	-	2,564.9	2,379.1	-	2,379.1
Operating costs	4	(2,369.7)	(1.9)	(2,371.6)	(2,216.2)	(1.9)	(2,218.1)
Operating profit		195.2	(1.9)	193.3	162.9	(1.9)	161.0
Share of profit of associates		4.8	-	4.8	3.4	-	3.4
Finance income	5	1.9	0.9	2.8	0.9	-	0.9
Finance expense	5	(17.5)	(0.5)	(18.0)	(18.5)	(2.0)	(20.5)
Profit before tax		184.4	(1.5)	182.9	148.7	(3.9)	144.8
Taxation		(40.5)	0.3	(40.2)	(33.8)	0.2	(33.6)
Profit for the year		143.9	(1.2)	142.7	114.9	(3.7)	111.2
Profit attributable to:
Equity holders of the parent		118.4	(1.2)	117.2	96.5	(3.7)	92.8
Non-controlling interests		25.5	-	25.5	18.4	-	18.4
Profit  for the year		143.9	(1.2)	142.7	114.9	(3.7)	111.2
Earnings per share (p):
-          Basic	3	25.1		24.9	20.3		19.5
-          Diluted	3	24.8		24.5	20.0		19.2

*Presented on an underlying basis, refer to page 15 for details 

 

Consolidated statement of other comprehensive income

for the year ended 30 September 2018

		2018	2017
		£m	£m
Other comprehensive income/(expense)
Items that will never be reclassified to the income statement
Remeasurements on defined benefit pension schemes		0.1	6.1
Tax charge relating to items that will not be reclassified		(0.5)	(0.9)
Items that are or may be reclassified subsequently to the income statement
Net loss on hedge of net investment in foreign operations		(1.0)	(1.5)
Other foreign exchange translation differences		(6.8)	(20.1)
Effective portion of changes in fair value of cash flow hedges		1.3	1.2
Cash flow hedges - reclassified to the income statement		4.5	4.0
Tax charge relating to items that are or may be reclassified		(0.2)	(0.4)
Other comprehensive expense for the year		(2.6)	(11.6)
Profit for the year		142.7	111.2
Total comprehensive income for the year		140.1	99.6
Total comprehensive income attributable to:
Equity shareholders		115.8	83.9
Non-controlling interests		24.3	15.7
Total comprehensive income for the year		140.1	99.6

 

Consolidated balance sheet

as at 30 September 2018

	Notes	2018	2017
		£m	£m
Non-current assets
Property, plant and equipment		371.4	304.5
Goodwill and intangible assets		731.2	714.2
Investments in associates		10.6	6.8
Deferred tax assets		23.7	21.3
Other receivables		49.2	40.5
Other financial assets	8	5.1	10.3
		1,191.2	1,097.6
Current assets
Inventories		35.1	32.6
Tax receivable		2.0	0.1
Trade and other receivables		178.0	135.4
Cash and cash equivalents	8	147.8	178.1
		362.9	346.2
Total assets		1,554.1	1,443.8
Current liabilities
Short term borrowings	8	(31.5)	(31.4)
Trade and other payables		(499.7)	(419.9)
Tax payable		(25.5)	(22.1)
Provisions		(3.4)	(3.7)
Obligation to acquire additional share of subsidiary undertaking		(20.5)	-
		(580.6)	(477.1)
Non-current liabilities
Long term borrowings	8	(456.1)	(419.2)
Post employment benefit obligations		(13.0)	(13.9)
Other payables		(2.5)	-
Provisions		(28.0)	(26.4)
Derivative financial liabilities	8	(3.2)	(9.0)
Deferred tax liabilities		(12.4)	(12.3)
Obligation to acquire additional share of subsidiary undertaking		-	(20.9)
		(515.2)	(501.7)
Total liabilities		(1,095.8)	(978.8)
Net assets		458.3	465.0
Equity
Share capital		4.8	4.7
Share premium		461.2	461.2
Capital redemption reserve		1.2	1.2
Other reserves		(13.0)	(11.5)
Retained earnings		(77.7)	(55.3)
Total equity shareholders' funds		376.5	400.3
Non-controlling interests		81.8	64.7
Total equity		458.3	465.0

 

Consolidated statement of changes in equity

for the year ended 30 September 2018

	Share capital	Share premium	Capital redemption reserve	Other reserves	Retained earnings	Total parent equity	NCI	Total equity
	£m	£m	£m	£m	£m	£m	£m	£m
At 1 October 2016	4.7	461.2	1.2	21.5	(138.0)	350.6	32.1	382.7
Profit for the year	-	-	-	-	92.8	92.8	18.4	111.2
Other comprehensive income / (expense) for the year	-	-	-	(14.1)	5.2	(8.9)	(2.7)	(11.6)
NCI arising on acquisition	-	-	-	-	-	-	21.4	21.4
Obligation to acquire non-controlling interest	-	-	-	(18.9)	-	(18.9)	-	(18.9)
Capital contributions from NCI	-	-	-	-	-	-	8.4	8.4
Dividends paid to equity shareholders	-	-	-	-	(29.0)	(29.0)	-	(29.0)
Dividends paid to NCI	-	-	-	-	-	-	(12.9)	(12.9)
Share-based payments	-	-	-	-	11.9	11.9	-	11.9
Tax on share schemes	-	-	-	-	1.8	1.8	-	1.8
At 30 September 2017	4.7	461.2	1.2	(11.5)	(55.3)	400.3	64.7	465.0
Profit for the year	-	-	-	-	117.2	117.2	25.5	142.7
Other comprehensive expense for the year	-	-	-	(1.0)	(0.4)	(1.4)	(1.2)	(2.6)
Increase in NCI equity	-	-	-	(0.5)	-	(0.5)	2.0	1.5
Issue of shares	0.1	-	-	-	-	0.1	-	0.1
Capital contributions from NCI	-	-	-	-	-	-	12.4	12.4
Dividends paid to equity shareholders	-	-	-	-	(145.8)	(145.8)	-	(145.8)
Dividends paid to NCI	-	-	-	-	-	-	(21.6)	(21.6)
Share-based payments	-	-	-	-	4.6	4.6	-	4.6
Tax on share schemes	-	-	-	-	2.0	2.0	-	2.0
At 30 September 2018	4.8	461.2	1.2	(13.0)	(77.7)	376.5	81.8	458.3

 

Consolidated cash flow statement

for the year ended 30 September 2018

	Notes	2018	2017
		£m	£m
Cash flows from operating activities
Cash flow from operations	6	310.1	280.2
Tax paid		(37.2)	(33.3)
Net cash flows from operating activities		272.9	246.9
Cash flows from investing activities
Dividends received from associates, net of increase in investment		1.3	3.8
Interest received		1.9	0.9
Purchase of property, plant and equipment		(146.6)	(107.4)
Purchase of other intangible assets		(10.0)	(7.6)
Acquisitions in the year, net of cash and cash equivalents acquired		(19.0)	(27.5)
Disposal of associate		-	7.3
Net cash flows from investing activities		(172.4)	(130.5)
Cash flows from financing activities
Repayment of borrowings		(31.5)	(31.6)
Drawdown on revolving credit facility		70.0	-
Repayment of finance leases and other loans		(1.7)	(1.7)
Realisation / (investment) in financial assets		5.2	(9.5)
Refinancing fee paid		(2.0)	-
Interest paid		(13.5)	(15.4)
Dividends paid to equity shareholders		(145.8)	(29.0)
Dividends paid to non-controlling interests, net of equity issued to them		(19.6)	(12.9)
Loan to associate		(4.2)	-
Capital contribution from non-controlling interests		12.4	8.4
Net cash flows from financing activities		(130.7)	(91.7)
Net (decrease)/increase in cash and cash equivalents		(30.2)	24.7
Cash and cash equivalents at beginning of the year		178.1	155.8
Effect of exchange rate fluctuations on cash and cash equivalents		(0.1)	(2.4)
Cash and cash equivalents at end of the year		147.8	178.1
Reconciliation of net cash flow to movement in net debt
Net (decrease)/ increase in cash in the year		(30.2)	24.7
Cash (inflow) / outflow from movement in debt and finance leases		(36.8)	33.3
Cash (inflow) / outflow from movement in other financial assets		(5.2)	9.5
Change in net debt resulting from cash flows		(72.2)	67.5
Translation differences		(1.0)	(3.4)
Other non-cash changes		0.7	(1.4)
Loans and other financial assets acquired through business combination		-	(7.5)
(Increase)/decrease in net debt in the year		(72.5)	55.2
Net debt at beginning of the year		(262.2)	(317.4)
Net debt at end of the year		(334.7)	(262.2)

 

Notes

1       Preparation

Basis of preparation and statement of compliance

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 Financial Reporting Standards (IFRS) as adopted by the EU and the Companies Act 2006 applicable to companies reporting under IFRS.

The financial statements are presented in Sterling, which is the Company's functional currency. All information is given to the nearest £0.1m.

The financial statements are prepared on the historical cost basis, except in respect of the derivative financial instruments that are stated at their fair value.

Changes in accounting policy and disclosures

The accounting policies adopted are consistent with those of the previous year.

The following standards, issued by the IASB and endorsed by the EU, have not yet been adopted and unless otherwise stated are not expected to have a material impact on the Group:

IFRS 9 'Financial Instruments' replaces IAS 39 'Financial instruments - Recognition and Measurement'. The standard (effective for the year ending 30 September 2019) covers the classification, measurement, impairment and de-recognition of financial assets and liabilities and provides new hedge accounting requirements. The Group continues to assess the impact this standard, but based on a preliminary assessment, the Group believes that IFRS9 is not likely to have a material impact on the Group's financial statements.

IFRS 15 'Revenue from Contracts with Customers' (effective for the year ending 30 September 2019) is based on the principle that revenue is recognised when control of goods or services is transferred to the customer. The standard provides a single, principles-based five-step model to be applied to all contracts with customers to determine whether, how much and when revenue is recognised. IFRS 15 replaces the separate models for goods, services and construction contracts under IAS 11 'Construction Contracts' and IAS 18 'Revenue'. The Group continues to assess the impact of the new standard, but based on a preliminary assessment, the Group believes that IFRS 15 will not have a material impact on the timing and recognition of revenue.

IFRS 16 'Leases' (effective for the year ending 30 September 2020), requires lessees to recognise operating leases on the Group's balance sheet, unless the lease term is less than 12 months or the underlying asset has a low value. The standard, which replaces IAS 17 'Leases', will give rise to the recognition of an asset representing the right-of-use of the leased item and a related liability, being the present value of the future lease payment obligations. Therefore, costs currently classified as operating lease costs will be reclassified and split between the depreciation of the asset on a straight-line basis, and interest on the lease liability. This reclassification will increase EBITDA, with corresponding increases in the depreciation charge and interest expense.

IFRS 16 can either be applied on a fully retrospective basis, which will require the restatement of comparative prior periods, or the cumulative retrospective impact can be applied as an adjustment to equity on the date of adoption of the standard. The Group is currently working on an implementation plan and on an adoption approach. The Group expects IFRS 16 to have a material impact on the Group's consolidated results, with an associated impact on both assets and liabilities.

2       Segmental reporting

SSP operates in the food and beverage travel sector, mainly at airports and railway stations.

Management monitors the performance and strategic priorities of the business from a geographic perspective, and in this regard has identified the following four key 'reportable segments': the UK, Continental Europe, North America and the 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, France, Belgium, the Netherlands, Luxembourg, Germany, Switzerland, Austria and Spain; 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. Revenue is measured in a manner consistent with that in the income statement.

2018	UK	Continental Europe	North America	RoW	Non-attributable	Total
	£m	£m	£m	£m	£m	£m
Revenue	798.1	971.7	436.3	358.8	-	2,564.9
Underlying operating profit/(loss)	89.5	79.5	27.7	35.7	(37.2)	195.2
2017
Revenue	787.7	910.3	372.9	308.2	-	2,379.1
Underlying operating profit/(loss)	82.1	77.8	14.3	21.2	(32.5)	162.9
The following amounts are included in underlying operating profit:
	UK	Continental Europe	North America	RoW	Non-attributable	Total
	£m	£m	£m	£m	£m	£m
2018
Depreciation and amortisation*	(12.9)	(34.5)	(28.0)	(17.0)	(5.3)	(97.7)
2017
Depreciation and amortisation*	(12.2)	(32.4)	(28.5)	(17.4)	(5.0)	(95.5)

* Excludes amortisation of acquisition related intangible assets.

 

A reconciliation of underlying operating profit to profit before and after tax is provided as follows:

	2018 £m	2017 £m
Underlying operating profit	195.2	162.9
Adjustments to operating costs	(1.9)	(1.9)
Share of profit from associates	4.8	3.4
Finance income	2.8	0.9
Finance expense	(18.0)	(20.5)
Profit before tax	182.9	144.8
Taxation	(40.2)	(33.6)
Profit after tax	142.7	111.2

3       Earnings per share

Basic earnings per share is calculated by dividing the result for the year attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share is calculated by dividing the result for the year attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year adjusted by potentially dilutive outstanding share options. Underlying earnings per share is calculated the same way except that the result for the year attributable to ordinary shareholders is adjusted for specific items as detailed in the below table.

On 27 April 2018 the Group paid a special dividend of £100.1m to shareholders. In order to maintain the comparability of the Company's share price before and after the special dividend, a share consolidation was undertaken on 16 April 2018, with shareholders receiving 30 new ordinary shares in exchange for every 31 existing ordinary shares. The weighted average number of ordinary shares outstanding for the period was adjusted for the share consolidation from the date the special dividend was paid.

	2018	2017
	£m	£m
Profit attributable to ordinary shareholders	117.2	92.8
Adjustments:
Amortisation of acquisition-related intangibles	1.9	1.9
Net revaluation of obligation to acquire shareholding from non-controlling interest (note 5)	(0.4)	2.0
Tax effect of adjustments	(0.3)	(0.2)
Underlying profit attributable to ordinary shareholders	118.4	96.5
Basic weighted average number of shares	471,499,626	475,214,310
Dilutive potential ordinary shares	6,515,410	7,487,883
Diluted weighted average number of shares	478,015,036	482,702,193
The number of ordinary shares in issue as at 30 September 2018 was 464,008,266 (2017: 475,226,453).
	2018	2017
Earnings per share (p):
-          Basic	24.9	19.5
-          Diluted	24.5	19.2
Underlying earnings per share (p):
-          Basic	25.1	20.3
-          Diluted	24.8	20.0

4       Operating costs

		2018	2017
		£m	£m
Cost of food and materials:
Cost of inventories consumed in the year		(763.5)	(727.0)
Labour cost:
Employee remuneration		(736.3)	(687.2)
Overheads:
Depreciation of property, plant and equipment		(90.3)	(89.3)
Amortisation of intangible assets		(9.3)	(8.1)
Rentals payable under operating leases		(489.6)	(438.0)
Other overheads		(282.6)	(268.5)
		(2,371.6)	(2,218.1)
Adjustments to operating costs
Amortisation of intangible assets arising on acquisition		(1.9)	(1.9)
		(1.9)	(1.9)

5       Finance income and expense

	2018	2017
	£m	£m
Finance income
Interest income	1.9	0.9
Foreign exchange gains on revaluation of obligation to acquire additional share of subsidiary undertaking	0.9	-
Total finance income	2.8	0.9
Finance expense
Total interest expense on financial liabilities measured at amortised cost	(9.4)	(11.2)
Net change in fair value of cash flow hedges utilised in the year	(4.5)	(4.0)
Unwind of discount on provisions	(0.6)	(0.5)
Net interest expense on defined benefit pension obligations	(0.3)	(0.3)
Unwind of discount on obligation to acquire additional share of subsidiary undertaking	(0.5)	(2.0)
Other	(1.9)	(2.3)
Net foreign exchange losses	(0.8)	(0.2)
Total finance expense	(18.0)	(20.5)

Adjustments to finance expense

The adjustments to finance expense comprise adjustments to the financial liability recognised in respect of the obligation to acquire an additional 16% ownership share of TFS.

		2018		2017
	£m		£m
Unwind of discount on obligation to acquire additional share of subsidiary undertaking		(0.5)		(0.4)
Foreign exchange gains on revaluation of obligation to acquire additional share of subsidiary undertaking		0.9		0.8
Revaluation of obligation to acquire additional share of subsidiary undertaking		-		(2.4)
		0.4		(2.0)

6       Cash flow from operations

	2018	2017
	£m	£m
Profit for the year	142.7	111.2
Adjustments for:
Depreciation	90.3	89.3
Amortisation	9.3	8.1
Share-based payments	11.7	11.9
Finance income	(2.8)	(0.9)
Finance expense	18.0	20.5
Share of profit of associates	(4.8)	(3.4)
Taxation	40.2	33.6
	304.6	270.3
(Increase)/decrease in trade and other receivables	(54.1)	3.9
Decrease in inventories	(2.5)	(2.4)
Increase in trade and other payables (including provisions)	62.1	8.4
Cash flow from operations	310.1	280.2

7       Dividends

	2018	2017
	£m	£m
Interim dividend paid in the year of 4.8p per share (2017: 3.2p)	(22.2)	(15.2)
Special dividend paid in the year of 20.9p per share	(100.1)	-
Prior year final dividend of 4.9p per share paid in the year (2017: 2.9p)	(23.5)	(13.8)
	(145.8)	(29.0)

The proposed dividend of 5.4 pence per share, amounting to a final dividend of £25.2m, is not included as a liability in these financial statements and, subject to shareholder approval, will be paid on 29 March 2019 to shareholders on the register on 1 March 2019.

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
	2018	2017
	£m	£m
Financial instruments measured at fair value:
Non-current
Derivative financial liabilities	(3.2)	(9.0)
Financial instruments not measured at fair value:
Non-current
Other financial assets	5.1	10.3
Long term borrowings	(456.1)	(419.2)
Current
Cash and cash equivalents	147.8	178.1
Short term borrowings	(31.5)	(31.4)

Financial assets and liabilities in the Group's consolidated balance sheet are either held at fair value, or their carrying value approximates to fair value, with the exception of loans, which are held at amortised cost. The fair value of total borrowings estimated using market prices at 30 September 2018 is £490.4m (30 September 2017: £452.4m).

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       Post balance sheet event

In August 2018, the Group signed an agreement to issue US Private Placement notes ('Notes') of US$175m.

The Notes represent SSP's inaugural issue in the US Debt Private Placement market and carry a fixed rate of interest. The Notes were issued in October 2018 in five series: US$40m at 4.35%, maturing in October 2025; US$40m at 4.50%, maturing in October 2028, US$40m at 4.60%, maturing in October 2030, £21m at 2.85% maturing in October 2025 and £21m at 3.06% maturing in October 2028.

10      Annual General Meeting

The Group's Annual General Meeting will be held on 21 February 2019. 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 2019.

11      Other information

The financial information for the year ended 30 September 2018 contained in this preliminary announcement was approved by the Board on 20 November 2018. This announcement does not constitute the statutory accounts of the Company within the meaning of section 435 of the Companies Act 2006, but is derived from those accounts.

Statutory accounts for the year ended 30 September 2017 have been delivered to the Registrar of Companies. Statutory accounts for the year ended 30 September 2018 will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

The auditor has reported on the 2018 accounts. Their report was not qualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying its report, and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

The Company's Annual Report and Accounts for the year ended 30 September 2018 will be posted and made available to shareholders on the Company's website in January 2019.

12       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", "anticipate", 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 any other document, 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.

 

END

 

 

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