TIDMSSPG
RNS Number : 2390B
SSP Group PLC
09 June 2021
LEI:213800QGNIWTXFMENJ24
9(th) June 2021
SSP GROUP PLC
Results for six months period ended 31 March 2021
Resilient performance in a challenging market
SSP Group, a leading operator of food and beverage outlets in
travel locations worldwide, announces its financial results for the
first half of its 2021 financial year, covering the six months
ended 31 March 2021. SSP has delivered a resilient performance in a
very challenging market, materially strengthening its balance sheet
and continuing to demonstrate tight control over its operating
costs and cash usage, and is in a strong position to benefit from
the expected recovery of the travel market over the medium
term.
Financial overview:
-- Revenue of GBP256.7m: down 78.8% at constant currency(1) ;
down 78.9% at actual exchange rates.
-- Like-for-like sales(2) down 79.0%: heavily impacted by
Covid-19, with material reductions in passenger numbers seen across
all travel markets.
-- Operating loss of GBP219.9m on a reported basis under IFRS
16, including credit for non-underlying items of GBP6.7m (2020:
GBP6.7m operating loss including charge for non-underlying items of
GBP0.9m). On a pre-IFRS 16 basis(3) , the underlying operating
loss(4) was GBP160.7m (2020: GBP1.3m profit).
-- Loss before tax of GBP299.7m on a reported basis under IFRS
16 (2020: GBP34.3m loss). On a pre-IFRS 16 basis(3) , the
underlying loss before tax(4) was GBP182.0m (2020: GBP10.7m
loss).
-- Basic loss per share of 48.6 pence on a reported basis under
IFRS 16 (2020: Basic loss per share of 8.0 pence). On a pre-IFRS 16
basis(3) , underlying basic loss per share(4) of 30.0 pence (2020:
underlying basic loss per share of 4.0 pence).
-- Net debt was GBP2,033.9m, which includes lease liabilities of
GBP1,194.8m. On a pre-IFRS 16 basis(3) , net debt was GBP839.6m, up
from GBP692.0m at 30 September 2020. Including the net proceeds of
the recently completed Rights Issue, pro forma net debt would have
been GBP388.8m, on a pre-IFRS 16 basis at the end of March
2021.
-- Financial position now strengthened significantly following
the Rights Issue in April 2021, alongside the extension of our main
bank facilities until January 2024 and the waiver and amendment of
covenants for both the main bank facilities and US private
placement notes.
-- Liquidity position strong, with cash and undrawn committed
facilities of approximately GBP854m on a pro-forma(6) basis at the
end of March 2021, following the completion of the Rights Issue in
April.
-- Medium term outlook unchanged, with like-for-like revenues
expected to return to around pre-Covid levels by 2024.
Business highlights:
-- Resilient first half performance, despite H1 sales down 79% versus 2019.
-- Underlying pre-IFRS 16 operating profit conversion c. 22% on
the reduced sales compared to 2019, better than previously
indicated expectations of c. 25%.
-- Free cash outflow of GBP140.9m, averaging around GBP23m per
month, below the previously indicated range of GBP25m - GBP30m.
-- Gradual recovery of passenger numbers and demand, led by
domestic and leisure travel, notably in the UK and USA. In the
first week of June, sales were down 70% versus 2019.
-- A further 250 units re-opened since end of H1 taking total of
trading outlets to c. 1,150 currently. If current trends continue,
we expect to have 1,200-1,500 units open over the summer, in line
with the recovery in demand.
-- Significant amount of business development activity, in
addition to our substantial pipeline of contracts won but not yet
opened.
Recent Trading and Outlook:
As we announced in March, passenger numbers remained low during
the first quarter of the financial year, with revenues down
approximately 79% year-on-year and 78% relative to the equivalent
period in the 2019 financial year (i.e. prior to the impact of
Covid-19). With increases in infection levels in key markets, new
variants of the Coronavirus and new government restrictions on
travel implemented towards the end of December, revenues during the
second quarter continued at similarly low levels, approximately 81%
below the equivalent quarter in 2019.
Since the end of March when sales were down approximately 78%
compared to 2019, we have seen some improvement in trading. This
has been driven by the gradual easing of lockdown restrictions in
the UK in recent weeks, coupled with improving passenger numbers,
particularly in North America, driven by the successful roll-out of
the vaccination programmes. However, we have seen the impact of
renewed travel restrictions in our Rest of the World division, most
notably in India and Thailand. Currently, sales are down
approximately 70% against 2019 and for the third quarter as a
whole, we expect them to be down approximately 75% against
2019.
Whilst the short-term outlook remains highly uncertain, we
remain positive about a further upturn in both domestic and leisure
travel across the remainder of the current financial year. We
anticipate that the profit conversion on the lower sales, compared
with pre-Covid levels, will continue to be in the region of 25%
during the second half of the financial year.
SSP has an important role to play in providing food and beverage
services to the travelling public, and we will continue to re-open
units rapidly in response to demand, maximising the profitability
of the re-opening programme and rigorously controlling costs and
cash. Looking further out, we firmly believe that demand for travel
will return and that the actions we have taken, the strength of our
balance sheet, our long-standing client relationships and deep
understanding of the industry, together with the evolving market
backdrop, will enable us to continue to take advantage of new
growth opportunities as the market recovers.
Commenting on the results, Simon Smith, CEO of SSP Group,
said:
"Despite the challenging trading conditions SSP has continued to
deliver strong operational and cash control. Our teams have
continued to give their utmost during this period, and I would like
to thank them for their commitment and dedication.
The recovery in domestic and leisure travel has now begun in a
number of our territories, and our teams are busy re-opening units
in line with passenger demand.
Over the past year we've strengthened our competitive advantages
and created a more flexible operating model. We have a strong
balance sheet and can see many opportunities to accelerate growth
as the market recovers and to deliver sustainable growth for the
benefit of all our stakeholders".
Financial highlights:
IFRS 16 IFRS 16
H1 2021 H1 2020
GBPm GBPm
Revenue 256.7 1,214.6
Like-for-like sales fall(2) (79.0)% (8.4)%
Underlying operating loss(4) (226.6) (5.8)
Underlying loss before
tax(4) (260.9) (32.4)
Underlying loss per share
(p)(4) (41.3) (7.5)
Net debt(5) (2,033.9) (1,934.2)
Pre-IFRS Pre-IFRS
16 (3) 16 (3)
H1 2021 H1 2020
GBPm GBPm
Underlying operating (loss)
/ profit(4) (160.7) 1.3
Underlying loss before
tax(4) (182.0) (10.7)
Underlying loss per share
(p)(4) (30.0) (4.0)
Net debt(5) (839.6) (457.7)
Statutory reported results:
The table below summarises the Group's statutory reported
results (where the financial highlights above are adjusted).
As reported As reported
under IFRS under IFRS 16
16 H1 2020
H1 2021 GBPm
GBPm
Revenue 256.7 1,214.6
Operating loss (219.9) (6.7)
Loss before tax (299.7) (34.3)
Loss per share (p) (48.6) (8.0)
Net debt(5) (2,033.9) (1,934.2)
(1) Constant currency is based on average 2020 exchange rates
weighted over the financial year by 2020 results.
(2) Like-for-like sales represent revenues generated in an
equivalent period in each financial period in outlets which have
been open for a minimum of 12 months. Units temporarily closed as a
result of Covid-19 have not been excluded for the purposes of the
like-for-like calculation. Like-for-like sales are presented on a
constant currency basis.
(3) The Group adopted IFRS 16 'Leases' on 1 October 2019 using
the modified retrospective approach to transition. Following the
year of transition, we have decided to maintain the reporting of
our profit and other key KPIs like net-debt on a pre-IFRS 16 basis
(note that pre-IFRS 16 basis was referred to as 'Pro forma IAS 17'
in the Annual Report and Accounts 2020). Pre-IFRS 16 profit numbers
exclude the impact of IFRS 16 by removing the depreciation on
Right-of-use (ROU) assets and interest arising on unwinding of
discount on lease liabilities, offset by the impact of adding back
in charges for fixed rent. This is further explained in the section
on Alternative Performance Measures (APMs) on pages 19-22.
(4) Stated on an underlying basis, which excludes non-underlying
items as further explained in the section on Alternative
Performance Measures (APMs) on pages 19-22.
(5) Net debt reported under IFRS 16 includes leases liabilities
whereas on a Pre-IFRS 16 basis lease liabilities are excluded.
Refer to 'Net debt' section of the 'Financial review' for
reconciliation of net debt.
6 Pro forma liquidity at 31 March 2021 has been computed as
GBP853.8m, comprising cash and cash equivalents of GBP240.1m,
undrawn revolving credit facility of GBP150.0m, net proceeds of
Rights Issue in April 2021 of GBP450.8m and other local government
backed facilities of GBP12.9m.
A live webcast will be held at 8.30 a.m (UKT) today, and details
of how to join can be accessed at
https://webcasts.foodtravelexperts.com/event/default1.php?eventid=2219&media=
CONTACTS:
Investor and analyst enquiries
Sarah John, Corporate Affairs Director, SSP Group plc
On 9 June 2021: +44 (0) 7736 089218
Thereafter: +44 (0) 203 714 5251
E-mail: sarah.john@ssp-intl.com
Media enquiries
Peter Ogden / Lisa Kavanagh
Powerscourt
+44 (0) 207 250 1446
E-mail: ssp@powerscourt-group.com
NOTES TO EDITORS
About SSP
SSP is a leading operator of food and beverage concessions in
travel locations, operating restaurants, bars, cafés, food courts,
lounges and convenience stores in airports, train stations,
motorway service stations and other leisure locations. Prior to the
onset of Covid-19, we served around one and a half million
customers every day at approximately 180 airports and 300 rail
stations in 35 countries around the world and operated more than
550 international, national and local brands.
www.foodtravelexperts.com
Business Review
Financial results
Revenue decreased by 78.8% on a constant currency basis,
comprising a like-for-like sales reduction of 79.0% offset by net
contract gains of 0.2%. At actual exchange rates, total revenue
fell by 78.9%, to GBP256.7m.
Covid-19 continued to have a significant impact on the Group's
trading performance throughout the first half of the financial
year. During the first quarter, like-for-like sales fell by 79.6%
compared to the prior year, with new government restrictions on
travel during the autumn of 2020 resulting in passenger numbers
remaining depressed in both the Air and Rail sectors. These trends
continued into the second quarter, and while the fall in
like-for-like sales of 78.3% represented a slight improvement
compared to the first quarter, this was entirely due to the impact
of easier comparatives as a result of the initial impact of
Covid-19 occurring during March 2020.
The underlying operating loss for the first half was GBP226.6m.
On a reported basis, the operating loss was GBP219.9m, including a
net credit for non-underlying items of GBP6.7m. Further details of
those non-underlying items have been set out in the section on
Alternative Performance Measures on pages 19 to 22. On a pre-IFRS
16 basis, the Group reported an underlying operating loss of
GBP160.7m.
The Group's free cash outflow during the first half of the
financial year was GBP140.9m (2020: GBP176.9m) reflecting the
continued tight management of operating costs and cash flow, and
representing an average monthly cash burn of around GBP23m, which
was below the c. GBP25m - GBP30m per month guidance previously
provided. Furthermore, this free cash outflow included GBP10.6m of
exceptional costs, largely related to the costs of further
redundancy programmes completed during the period. Capital
expenditure was GBP25.2m, a significant reduction of GBP94.3m
compared to the prior year. Further details of the Group's free
cash flow are provided in the table on page 16.
Following the completion of the Rights Issue in late April 2021,
the Group's financial position has been significantly strengthened.
Linked to the completion of the Rights Issue, the Group's existing
main bank facilities were extended by 18 months, to January 2024.
Furthermore, covenant waivers were extended on both the US private
placement notes and the main bank facilities. Incorporating the net
Rights Issue proceeds of GBP450.8m, pro forma net debt on a
pre-IFRS 16 basis at the end of March was GBP388.8m. The Group now
has significant available liquidity, with cash and undrawn
available facilities of GBP843.3m at the end of April. Our current
monthly cash burn is around GBP20m - GBP25m, whilst sales remain
down between 70% and 80% compared with pre-Covid levels.
Strategy Overview
Our vision is to be the leading provider of food and beverage in
travel locations worldwide, delivering for all our stakeholders
(our customers, clients, brand partners, investors and,
importantly, our colleagues) in a way that ensures long term
sustainable growth. We continue to believe that the markets in
which we operate are fundamentally attractive. The air and rail
travel markets are expected to deliver long-term growth, albeit
from a lower base, as global GDP recovers and an increasing
proportion of the world's population are willing and able to travel
again.
Before the outbreak of Covid-19, the markets in which we operate
had benefitted from several structural long-term growth drivers,
the most significant being:
-- growth in global GDP and disposable income, which had led to
an increasing propensity to travel and had driven higher passenger
volumes and expenditure on food and beverage products;
-- a trend towards increased eating-out, including eating "on the move"; and
-- investment in travel infrastructure and capacity expansion,
supported by both government policy and infrastructure owners
increasingly focusing on retail revenue streams.
Though Covid-19 has impacted these trends in the short term, we
believe that these growth drivers will return in the medium-term
once the effects of the pandemic diminish. While some uncertainty
remains about the longer-term impact of working from home on
business and commuter travel, we anticipate a full recovery in
leisure travel, which drives the majority of our business.
Structural advantages
SSP has a number of structural advantages that we believe put us
in a strong position to capitalise on the recovery of the travel
sector over the medium-term:
1. Leading market positions: We have leading positions in some
of the most attractive sectors of the travel food and beverage
market, underpinned by our extensive brand portfolio (comprising
our own brands and bespoke concepts as well as franchised local and
global brands) and established management and operational teams
across the 35 countries in which we operate.
2. Food travel expertise: We provide a compelling proposition
for both clients and customers based on our food travel expertise.
This includes a deep understanding of what our customers are
looking for, an extensive offering of concepts to meet these needs
and a knowledge of how to operate in complex travel environments
which are logistically demanding. Our deep understanding of travel
F&B has enabled us to adapt our operating model so that we can
operate our units at lower passenger levels whilst still ensuring a
great customer experience.
3. Long-term client relationships: Our principal clients are the
owners and operators of airports and railway stations, but we also
have a small presence in motorway service areas, hospitals and
shopping centres. We have excellent, long-standing relationships
with many of our clients and have maintained high success rates in
retaining our contracts.
4. Local insight and international scale: We have a deep
knowledge of the individual markets in which we operate, alongside
significant international scale and expertise. A strong local
presence enables us to understand our customers' tastes and needs,
as well as allowing us to maintain close relationships with clients
and brand partners and to create a 'sense of place' in the
locations which we operate.
5. Experienced colleague base: We have highly experienced
colleagues with a broad range of experience across the food and
beverage, travel and retail industries. In all our key markets, we
employ dedicated teams of senior managers focused on business
development, sales, marketing and operations, who work closely with
our clients to ensure their requirements are met. They are
supported by experienced, locally-based teams who have a track
record of delivering operational excellence and great customer
service.
In the medium-term the Group expects to see the gradual return
of passenger travel to more normalised levels. The actions the
Group is taking to rebuild the business will enable it to emerge
better positioned to flexibly re-open units in line with local
market demands.
Delivering long term sustainable growth
Since the onset of the Covid-19 pandemic, SSP's focus has been
to protect our people and the business. We acted quickly and
decisively, keeping our teams safe, creating the liquidity needed,
whilst at the same time, removing significant cost and creating a
more flexible operating model which enables us to break even at
lower levels of sales. With the recovery in domestic travel now
commencing, our focus will now evolve towards the recovery and
driving sustainable growth.
Our immediate focus is to re-open our units safely and drive
profitable sales. Our approach to re-opening is data driven, the
lead indicator being passenger numbers through our sites. We seek
to open the right combination of units at sites to enable us to
capture the sales opportunity, whilst optimising efficiency and
controlling cash.
Our strategy for delivering long term sustainable growth for the
benefit of all our stakeholders focuses on five key priorities to
drive growth. These comprise:
1. Optimising our existing estate and driving like-for-like
revenue growth: as we re-open units we are seeking to optimise our
existing space through a range of opportunities from unit location
to customer proposition. The scale of the business gives us access
to a wealth of consumer insight, and we will seek to use this to
deliver the right proposition, investing in product innovation and
digital technology, with the objective of giving us the best
platform from which to drive participation and spend.
2. Business development: Prior to Covid-19, we had a strong
track record of winning new business and had delivered an average
of 4% net space growth per annum in the five years since IPO, with
strong growth in North America and the Rest of the World divisions.
Once the market recovers, we expect these opportunities to
re-emerge at existing and new sites, as well as in new geographies
where the returns are attractive. Our immediate priority is to
renew and extend contracts on preferential terms, where possible,
benefitting from the reduced rental expectations from clients at
current low levels of travel activity. We are also looking to
reinforce our position in existing sites where competitor units are
not expected to re-open, and to review opportunities to secure
additional space. We believe that our track record and a robust
balance sheet, as well as our client and brand partner
relationships, which have been strengthened during the crisis, will
provide many new opportunities, and we are already seeing the
reactivation of business development in all our markets.
3. Efficient conversion: Running efficient operations is a core
competency for SSP and deeply embedded into our culture. Building
on the operational leverage inherent in the business, we continue
to remove unproductive costs and to simplify and automate processes
to drive efficiencies and mitigate input cost inflation. We have
made significant progress in reducing our cost base and making it
more variable during the crisis. Our aim is to retain the benefit
of these learnings and as we re-open units to continue to focus on
keeping our cost base efficient.
4. Investment: Capital investment is an important part of our
model as it drives contract renewals as well as new contract
growth. We typically achieve discounted cash flow paybacks of three
to four years on the capital we invest in our concession contracts.
The challenges of Covid-19 may also present selective acquisition
opportunities, and we will be alert to these where they fit with
our strategy and deliver the required returns. We will also
continue to invest in the business to drive competitiveness,
including in technology and our consumer proposition.
5. Returns to shareholders: Creating shareholder value is
extremely important to SSP, and prior to Covid-19, we had a long
track record of delivering upper quartile total shareholder
returns. Once the travel market recovers, the business is expected
to be, once again, highly cash generative allowing us to de-lever
the balance sheet over time and return to our medium-term leverage
targets, in line with our historical performance.
Underpinning these priorities are our People and Corporate
Responsibility strategies which we have redeveloped and reinforced
this year. Our colleagues are at the heart of our business success,
and we will be further investing in our teams by focusing on
retention, engagement and development, embedding the Group's values
within the organisation and incentivising our critical talent.
We've developed a new Corporate Responsibility strategy in line
with our stakeholders' priorities and will be increasing our focus
on the wellbeing of our people and supporting our local
communities, ensuring the products we serve are healthy and
ethically sourced and minimising our impact on the planet.
Financial review
Group performance
IFRS 16 IFRS 16
H1 2021 H1 2020 Year-on-year
GBPm GBPm change (%)
Revenue 256.7 1,214.6 (78.9)%
--------- --------- ---------------
Underlying operating
loss (226.6) (5.8) (3,806.9)%
--------- --------- ---------------
Operating loss (219.9) (6.7) (3,182.1)%
--------- --------- ---------------
Underlying operating loss was GBP160.7m (2020: GBP1.3m profit)
on a pre-IFRS 16 basis.
Revenue decreased by 78.8% on a constant currency basis,
comprising a like-for-like sales reduction of 79.0% offset by net
contract gains of 0.2%. At actual exchange rates, total revenue
fell by 78.9%, to GBP256.7m.
Covid-19 continued to have a significant impact on the Group's
trading performance throughout the first half of the financial
year. During the first quarter, like-for-like sales fell by 79.6%
compared to the prior year, with increased infection levels in key
markets and new government restrictions on travel resulting in
passenger numbers remaining depressed in both Air and Rail. These
trends continued into the second quarter, and while the fall in
like-for-like sales of 78.3% represented a slight improvement
compared to the first quarter, this was entirely due to the impact
of easier comparatives as a result of the initial impact of
Covid-19 in March 2020. Against the equivalent period in 2019,
second quarter like-for-like sales fell by 81.3%, reflecting the
stringent lockdowns imposed from late December 2020 across many
markets, notably in the UK and Continental Europe.
We have seen some improvements in trading during the third
quarter as compared to the second quarter run-rate. This is mainly
due to the gradual easing of lockdown restrictions in the UK during
April and May, coupled with improving passenger numbers in North
America, driven by the successful roll-out of the vaccination
programmes. However, we have seen the impact of renewed travel
restrictions in our Rest of the World division, most notably in
India and Thailand. In the first week of June, sales decreased by
approximately 70% compared to 2019, and we expect sales for the
third quarter as a whole to be down approximately 75% against 2019.
While the short-term outlook remains highly uncertain, we remain
optimistic that we will see a further upturn in both domestic and
leisure travel across the remainder of the current financial
year.
Operating loss
On a reported basis, the operating loss was GBP219.9m,
reflecting a net credit of GBP6.7m for the non-underlying operating
items.
The underlying operating loss for the first half was GBP226.6m,
compared to an equivalent loss of GBP5.8m in the prior year. On a
pre-IFRS 16 basis, the Group reported an underlying operating loss
of GBP160.7m.
The impact on the operating loss from the significantly lower
sales following the pandemic continues to be mitigated by the
extent of our operating cost reductions, the extension of
government furlough and other support measures and our ongoing
success in negotiating rent concessions, principally via waivers of
minimum guaranteed rents. Compared to the first half of the 2019
financial year, the Group has made savings of c. GBP480m in its
labour, rent and overhead operating cost base. Reflecting this, the
underlying pre-IFRS 16 operating profit conversion was c. 22% on
the reduced sales (compared to the first half of the 2019 financial
year), which was slightly better than the 25% previously indicated.
We anticipate that the profit conversion on the lower sales,
compared with pre-Covid levels, will continue to be in the region
of 25% during the second half of the financial year.
Non-underlying operating items
Items which are not considered reflective of the normal trading
performance of the business, and are exceptional because of their
size, nature or incidence, are treated as non-underlying operating
items and disclosed separately.
The non-underlying operating items included in the net credit of
GBP6.7m are summarised below:
- Impairment of goodwill : as a result of past acquisitions, and
in particular the acquisition of the SSP business by EQT in 2006,
the Group holds a significant amount of goodwill on its
consolidated balance sheet. This is allocated to, and performance
is monitored on, a country level. Goodwill impairment testing is
carried out annually, or more frequently if indicators of
impairments have been identified, by comparing the value relating
to each country with the net present value of that country's
expected future cash flows. As a result of Covid-19, goodwill
impairments totalling GBP3.1m were identified, comprising write
downs in Switzerland and Germany.
- Impairment of property, plant and equipment and right of use
assets: the impact of Covid-19 on the Group's operations is
expected to continue during the current year and beyond. As a
result, the Group has carried out further reviews for potential
impairment across the entire site portfolio. This impairment review
compared the value-in-use of individual cash-generating units,
based on management's current assumptions regarding future trading
performance (taking into account the effect of Covid-19) to the
carrying values of the associated assets. Following this review, a
charge of GBP26.6m has been recognised, which includes an
impairment of right of use assets of GBP16.8m.
- IFRS 16 rent credit: as part of its response to Covid-19, the
Group has renegotiated rent agreements with its clients, including
a significant number of temporary waivers for the period up to the
end of June 2022 totalling GBP53.3m. In respect of these waivers,
the Group has applied the practical expedient issued by the
International Accounting Standards Board as a part of the Amendment
to IFRS 16 to record this as a reduction in rent expense (rather
than a modification of a right of use asset) and as a
non-underlying item within the consolidated income statement.
- Restructuring costs: as a result of the impact of Covid-19,
the Group has recognised a charge of GBP9.8m relating to its
restructuring programmes carried out across the group during the
first half of the financial year. The charge primarily relates to
redundancy costs.
- Fees related to extension of bank facilities and associated
covenant waivers: with effect from completion of the Rights Issue,
the Group's main bank facilities were extended from 15 July 2022 to
15 January 2024. In addition, the Group secured agreement to
waivers or amendments on its principal covenants under both its
main bank facilities and US private placement notes until 2024. In
consideration for these extensions and amendments, the Group
incurred fees totalling GBP5.4m, and this cost has been recognised
as a non-underlying expense in the period.
- Other non-underlying expenses: these items totalling GBP1.7m
included a recurring adjustment for the amortisation of
acquisition-related intangible assets of GBP0.9m (2020 GBP0.9m), as
well as other non-recurring costs amounting to GBP0.8m.
Regional performance
This section summarises the Group's performance across its four
operating segments. For full details of our key reporting segments,
please refer to note 2 on page 34.
UK (including Republic of Ireland)
IFRS 16 IFRS 16
H1 2021 H1 2020 Year-on-year
GBPm GBPm change
Revenue 45.6 372.6 (87.8)%
--------- --------- -------------
Underlying operating
(loss)/profit (37.8) 23.1 (263.6)%
--------- --------- -------------
Operating (loss)
/ profit (30.2) 22.4 (234.8)%
--------- --------- -------------
Underlying operating loss was GBP24.9m (2020: GBP23.8m profit)
on a pre-IFRS 16 basis.
Our UK business has continued to be impacted by a significant
decline in passenger numbers as a result of travel restrictions
throughout the first half of the financial year. Revenue decreased
by 87.8% on a constant currency basis, comprising a like-for-like
reduction of 87.1% and net contract losses of 0.7%. At actual
exchange rates, revenue also declined by 87.8% to GBP45.6m.
With lockdown restrictions and quarantine measures in place for
most of the first half of the financial year, UK sales have
remained at very depressed levels throughout this period. During
the third quarter however, as the UK government's roadmap out of
lockdown has developed, we have seen a steady improvement in
trading, principally in our rail business, where customers are
gradually returning to trains both for leisure purposes and also as
they return to working in offices. Consequently, sales are
currently (in the first week of June) running at approximately 75%
below 2019 levels. While we await further government guidance on
air travel, we remain optimistic that we will see further
improvements in both the air and rail sectors across the remainder
of the current financial year.
The underlying operating loss for the first half of the
financial year for the UK was GBP37.8m compared to an equivalent
profit of GBP23.1m in the prior year, and the reported operating
loss was GBP30.2m. Non-underlying operating items comprised an
impairment charge of GBP2.2m, exceptional restructuring costs of
GBP0.5m and an adjustment for the amortisation of
acquisition-related intangible assets of GBP0.7m. These were offset
by IFRS 16 rent credits of GBP11.0m. On a pre-IFRS 16 basis, the
underlying operating loss was GBP24.9m, which compared to an
underlying operating profit of GBP23.8m last year.
Continental Europe
IFRS 16 IFRS 16
H1 2021 H1 2020 Year-on-year
GBPm GBPm change (%)
Revenue 118.0 424.3 (72.2)%
--------- ---------- -------------
Underlying operating
loss (99.9) (23.8) (319.7)%
--------- ---------- -------------
Operating loss (100.0) (24.0) (316.7)%
--------- ---------- -------------
Underlying operating loss was GBP71.1m (2020: GBP20.1m loss) on
a pre-IFRS 16 basis.
Revenue in Continental Europe decreased by 73.1% on a constant
currency basis, comprising a like-for-like reduction of 73.3% and
net contract gains of 0.2%. At actual exchange rates, revenue
declined by 72.2% to GBP118.0m.
During the first quarter, like-for-like sales in Continental
Europe were slightly stronger than in the other regions, with rail
passenger numbers in Germany and France more resilient than in the
UK, and trading in the motorway sector in these countries less
impacted by the pandemic than in other channels. From January
however, the impact of renewed government restrictions, in response
to rising infection rates meant that sales trends deteriorated
compared to those prior to Christmas, and remained at low levels
throughout the second quarter.
Overall trading in this region remained very subdued during the
early weeks of the third quarter, with further travel restrictions
imposed in a number of markets in April. However, during recent
weeks, we have seen a gradual easing of restrictions across most of
our European markets, and in the first week of June sales were
running at approximately 71% below 2019 levels. As in the UK, we
remain optimistic that we will see further improvements in both
domestic rail and short haul air travel across the remainder of the
current financial year.
The underlying operating loss for the period was GBP99.9m
compared to an equivalent loss of GBP23.8m in the prior year, and
the reported operating loss was GBP100.0m. Non-underlying operating
items comprised an impairment charge of GBP15.1m, exceptional
restructuring costs of GBP6.6m and an adjustment for the
amortisation of acquisition-related intangible assets of GBP0.2m.
These were offset by IFRS 16 rent credits and other one-off income
totalling GBP21.8m. On a pre-IFRS 16 basis, the underlying
operating loss was GBP71.1m, which compared to an underlying
operating loss of GBP20.1m last year.
North America
IFRS 16 IFRS 16
H1 2021 H1 2020 Year-on-year
GBPm GBPm change (%)
Revenue 55.1 246.5 (77.6)%
--------- --------- -------------
Underlying operating
(loss) / profit (37.5) 7.4 (606.8)%
--------- --------- -------------
Operating (loss)
/ profit (34.9) 7.4 (571.6)%
--------- --------- -------------
Underlying operating loss was GBP27.2m (2020: GBP7.8m profit) on
a pre-IFRS 16 basis.
Revenue decreased by 76.5% on a constant currency basis,
comprising a like-for-like decrease of 79.0% offset by net contract
gains of 2.5%. At actual exchange rates, revenue declined by 77.6%
to GBP55.1m.
While like-for-like sales trends remained broadly stable, and in
line with the Group average for the majority of the half, we have
seen a sustained improvement in domestic passenger numbers in the
United States from early March onwards. This trend, which has
coincided with the successful roll out of the vaccination programme
across the United States, has continued throughout the third
quarter, and we are now seeing a faster recovery in this market
compared to our other regions. However, passenger numbers remain
very subdued in Canada, where strict restrictions on travel remain
in place. In the first week of June, sales were running at
approximately 47% below 2019 levels, and we anticipate further
progress over the remainder of the year.
The underlying operating loss for the period was GBP37.5m,
compared to an equivalent profit of GBP7.4m in the prior year, and
the reported operating loss was GBP34.9m. Non-underlying operating
items comprised of an impairment charge of GBP6.0m and exceptional
restructuring costs of GBP1.7m, offset by IFRS 16 rent credits of
GBP10.3m. On a pre-IFRS 16 basis, the underlying operating loss was
GBP27.2m, which compared to an underlying operating profit of
GBP7.8m last year.
Rest of the World
IFRS 16 IFRS 16
H1 2021 H1 2020 Year-on-year
GBPm GBPm change (%)
Revenue 38.0 171.2 (77.8)%
--------- --------- -------------
Underlying operating
(loss) / profit (29.3) 6.3 (565.1)%
--------- --------- -------------
Operating (loss)
/ profit (21.5) 6.3 (441.3)%
--------- --------- -------------
Underlying operating loss was GBP15.5m (2020: GBP8.6m profit) on
a pre-IFRS 16 basis.
Revenue decreased by 77.1% on a constant currency basis,
comprising a like-for-like fall of 76.7% and net contract losses of
0.4%. At actual exchange rates, revenue declined by 77.8% to
GBP38.0m.
As was the case with North America, the overall sales trends for
the Rest of the World region remained broadly stable and in line
with the Group average for the majority of the first half. However,
we saw a marked improvement towards the end of the second quarter,
with like-for-like sales improving to 70.0% below 2019 by the end
of March, driven by improving domestic passenger numbers in India,
Australia and China. The third quarter has been impacted by the
worsening situation in India and Thailand, with sales running at
approximately 83% below 2019 levels in the first week of June, and
the short-term outlook for the region remains uncertain.
The underlying operating loss for the period was GBP29.3m,
compared to an equivalent profit of GBP6.3m in the prior year, and
the reported operating loss was GBP21.5m. Non-underlying operating
items comprised an impairment charge of GBP6.4m and exceptional
restructuring costs of GBP1.0m, offset by IFRS 16 rent credits of
GBP15.2m. On a pre-IFRS 16 basis, the underlying operating loss was
GBP15.5m, which compared to an underlying operating profit of
GBP8.6m last year.
Share of profit / (loss) from associates
The Group's share of profits from associates was GBP0.5m (2020:
GBP0.2m profit). On a pre-IFRS 16 basis, the Group's share of
losses from associates was GBP0.1m (2020: GBP0.4m profit).
Net finance costs
The underlying net finance expense for the first half of the
financial year was GBP34.8m, which includes interest on lease
liabilities of GBP13.5m. The reported net finance expense was
GBP80.3m which includes an adjustment of GBP45.5m primarily
relating to non-cash charges arising from the adoption of the debt
modification rules under IFRS 9. This adjustment reflects the
revised agreements with our lending group of banks and US private
placement noteholders, following the amendments signed in December
2020 and the amendment and extension of our existing main bank
facilities agreed in March 2021, which became effective on 22 April
2021.
On a pre-IFRS 16 basis, underlying net finance costs increased
year-on-year to GBP21.2m (2020: GBP12.4m), primarily due to the
higher borrowing costs under the Group's US private placement notes
following the covenant amendments in December 2020.
Taxation
The Group's underlying tax credit for the period was GBP24.5m
(H1 2020: GBP2.3m), representing an effective tax rate of 9.4%
(2020: 7.1%) of underlying loss before tax. On a reported basis,
the tax credit for the period was GBP31.5m (2020: GBP1.6m)
representing an effective tax rate of 10.5% (2020: 4.7%).
In the UK Spring Budget, the Chancellor announced a significant
change to the main rate of UK Corporation Tax, proposing an
increase from 19% to 25% from April 2023. This change was
substantially enacted on 24 May 2021 (thus after the balance sheet
date), meaning that UK deferred tax assets in respect of losses and
other taxable temporary differences will need to be re-measured at
the higher rate for the full year, resulting in an increase to the
tax credit for the year.
Looking forward, we therefore expect the underlying tax rate to
be around 12% for the full year.
The Group's tax rate is sensitive to the geographic mix of
profits and losses and reflects a combination of higher rates in
certain jurisdictions, as well as the impact of losses in some
countries for which no deferred tax asset is recognised. The impact
of Covid-19 has led to a significant change in the Group's
geographic mix of profits and losses compared to prior years when
the effective tax rate for the Group had remained consistent around
22%.
Non-controlling interests
The loss attributable to non-controlling interests was GBP6.7m
(2020: GBP3.4m attributable profit). On a pre-IFRS 16 basis the
loss attributable to non-controlling interests was GBP3.7m (2020:
GBP7.9m attributable profit), with the year-on-year change largely
reflecting the impact of Covid-19 on our joint venture operations
in North America and in the Rest of the World.
Loss per share
The Group's underlying loss per share was 41.3 pence per share,
and its reported loss per share was 48.6 pence per share. On a
pre-IFRS 16 basis the underlying loss per share was 30.0 pence per
share (2020: 4.0 pence per share).
Dividends
Under the terms of the amended financing arrangements with the
Group's lending group of banks and US private placement note
holders, the Company is currently restricted from declaring or
paying dividends until the expiry of certain restrictions that
apply during the covenant waiver and amendment period. As such, the
Directors will not be declaring an interim dividend (2020: GBPnil).
No final dividend was recommended for the year ended September 2020
(final dividend for year ended 30 September 2019: GBP26.8m) and
therefore no dividend was paid in the period.
When the existing restrictions are lifted and conditions
improve, the Board will consider the best way to restart the return
of capital to shareholders, recognising the importance of dividends
and capital returns to shareholders.
Free Cash flow
The table below presents a summary of the Group's free cash flow
for the first half of 2021:
H1 2021 H1 2020
GBPm GBPm
Underlying operating (loss) / profit(1) (160.7) 1.3
Depreciation and amortisation 50.4 54.9
Exceptional restructuring and other costs(3) (10.6) -
Working capital 22.1 (45.1)
Net tax (0.4) (20.1)
Other 1.0 2.9
Capital expenditure(2) (25.2) (119.5)
Acquisition of subsidiaries, adjusted for net debt acquired - (26.9)
Net dividends to non-controlling interests and from associates (1.4) (15.3)
Net finance costs (16.1) (9.1)
-------- --------
Free cash flow (140.9) (176.9)
-------- --------
(1) Presented on an underlying pre-IFRS 16 basis (refer to pages
19 - 22 for details)
(2) Capital expenditure is net of cash capital contributions
received from non-controlling interests of GBP0.6m (2020:
GBP3.1m)
(3) Refer to the APMs section on pages 19-22 for further
details.
The Group's free cash outflow during the first half year of
GBP140.9m (2020: GBP176.9m) reflected its continued tight
management of operating costs and cash flow and represented an
average monthly cash burn of around GBP23m, which was below the c.
GBP25m - GBP30m per month guidance previously provided.
Furthermore, this free cash outflow included GBP10.6m of
exceptional costs, largely related to the costs of further
redundancy programmes completed during the period.
The working capital inflow during the period of GBP22.1m (2020:
GBP45.1m outflow) was better than anticipated at our preliminary
results in December and reflected further success in agreeing rent
reductions and deferrals with our clients while sales remained at
very low levels. We are also continuing to take advantage of
government-approved payment deferral schemes around the world,
particularly in relation to payroll taxes and VAT. We expect these
payment deferrals to unwind in due course, broadly in line with the
recovery in sales.
Corporation tax payments were materially lower at GBP0.4m
compared to GBP20.1m in 2020. The reduction reflects considerably
lower or no preliminary payments being due in most countries, owing
to losses being forecast for the year.
Capital expenditure was GBP25.2m, a significant reduction of
GBP94.3m compared to the prior year. Following the Covid-19
escalation during 2020, we placed our capital programme on hold,
pending a recovery in the travel sector. The creation of additional
liquidity following the Rights Issue will, under our base case
scenario, provide significant investment capacity to drive business
growth in the future, but in the near term we will continue to
exercise caution and continue to work with our clients to defer
capital programmes until passenger numbers and sales show material
signs of recovery.
Net finance costs paid of GBP16.1m were GBP7.0m higher than the
prior year, mainly reflecting increased interest costs on the
Group's US private placement notes.
Net debt
Overall net debt increased by GBP147.6m to GBP839.6m on a
pre-IFRS 16 basis, largely reflecting the free cash outflow in the
year of GBP140.9m as detailed above. On a pro forma basis
incorporating the GBP450.8m net proceeds of the Rights Issue
following its successful completion in April, post the half year
balance sheet date, net debt would have been GBP388.8. On a
reported basis under IFRS 16, net debt was GBP2,033.9m.
The table below highlights the movements in net debt in the
period on a pre-IFRS 16 basis.
GBPm
Net debt excluding lease liabilities at 1 October
2020 (Pre-IFRS 16 basis) (692.0)
Free cash flow (140.9)
Impact of foreign exchange rates 26.8
Other non-cash changes(1) (33.5)
----------
Net debt excluding lease liabilities at 31 March
2021 (Pre-IFRS 16 basis) (839.6)
Lease liabilities (1,194.8)
Other 0.5
----------
Net debt including lease liabilities at 31 March
2021 (IFRS 16 basis) (2,033.9)
----------
(1) Other non-cash changes represent GBP51.9m of losses
recognised on debt modifications and revised estimated future cash
flows, offset by an effective interest rate gain of GBP7.8m,
capitalised debt modification transaction costs of GBP1.4m and a
mark-to-market interest rate adjustment of GBP9.2m on
government-backed below-market interest rate loans received.
Actions taken to strengthen liquidity and to secure covenant
waivers
Since the start of the pandemic, the Group has taken rapid and
decisive action to protect its people and the business, generating
significant liquidity, reducing costs and minimising cash usage.
Nevertheless, against a backdrop on ongoing uncertainty around the
short and medium term trading outlook for the Group, and having
considered a number of different scenarios and financing
alternatives, the Board took proactive action, announcing in March
2021 that it was to strengthen the Group's balance sheet by way of
a Rights Issue to raise gross proceeds of approximately GBP475m.
Alongside and conditional upon the Rights Issue, the Group secured
the extension to January 2024 of its bank facilities that were
previously due to mature in July 2022, and secured waivers and
modifications of the existing covenants under those bank facilities
and its US private placement notes.
Incorporating the GBP450.8m net proceeds of the Rights Issue
following its successful completion in April , the Group had pro
forma liquidity at 31 March 2021 of GBP853.8m. This includes
GBP300m in respect of the Bank of England's Covid Corporate
Financing Facility ("CCFF"), which is due to be repaid in February
2022, but even excluding this we now have over GBP550m of available
liquidity. At the current low level of sales (down c.70% - 80%
compared to 2019) our current monthly cash burn is in the region of
GBP20m - GBP25m.
Taking into account the current level of cash and available
facilities and the monthly cash burn as described above, we are
confident that we are now in a very strong position to trade
through even our most pessimistic scenario.
Despite ongoing volatility in the near term, our expectation is
for passenger numbers in the travel sector to recover to near
pre-pandemic levels in the medium term, with like-for-like sales
recovering to 2019 levels by 2024 in our base case scenario. In
addition to this, our current pipeline, together with the full year
contribution from units opened during 2019 and the first half of
2020 prior to the onset of Covid-19, should deliver an additional
10-15% of net gains over this period. We also expect EBITDA margins
to return to 2019 levels in the medium term.
As we indicated in March, we believe that the Group is
strategically well-positioned to benefit from the recovery in the
travel sector. In addition, our strategy for medium term leverage
remains unchanged, i.e. on a pre-IFRS 16 basis, for leverage to be
between 1.5x and 2.0x Net Debt to EBITDA. Under our base case
scenario, this would give us the financial capacity for an
additional GBP350m - 400m capex to drive further business growth
and capitalize on the recovery of the travel sector as it
evolves.
Principal risks
The principal risks facing the Group for the remainder of the
year are unchanged from those reported in the Annual Report and
Accounts 2020.
These risks, together with the Group's risk management process,
are detailed on pages 33 to 41 of the Annual Report and Accounts
2020, and relate to the following areas: liquidity and funding,
impact of Covid-19, business environment and geopolitical
uncertainty; retention of existing contracts; impact of Brexit;
senior management capability and retention; regulatory compliance;
food safety and product compliance; labour laws and unionisation;
information security and stability; benefits realisation from
efficiency programmes; changing client behaviours; outsourcing
programmes; tax strategy; maintenance /development of brand
portfolio; and expansion into new markets.
Post balance sheet events
On 17 March 2021 the Company announced a fully underwritten
rights issue (the "Rights Issue") to raise gross proceeds of
approximately GBP475 million. At the same time the Company
announced certain amendments to the terms of the Group's main
credit facilities agreement (the "Facilities Agreement") and its US
private placement notes which, whilst signed on 12 March 2021, came
into effect following completion of the Rights Issue on 22 April
2021 (the "Debt Amendments").
The Rights Issue has further strengthened the Group's balance
sheet by allowing the Group to materially reduce its net
indebtedness and allowing the Group to cover liquidity headroom
under a reasonable worst case scenario. The Rights Issue also
facilitated the Debt Amendments which have resulted in an extension
to the maturity date of the Facilities Agreement to January 2024
and allowed the Group to secure further covenant waivers and
amendments from the Group's lenders. Under these amendments, the
6-month covenant tests introduced in the December 2020 amendments
were removed, the original leverage and interest cover covenant
tests were further waived and amended up to and including the
testing period ending on 31 March 2023 (in respect of the interest
cover test) and 30 September 2023 (in respect of the leverage test)
and the monthly liquidity and adjusted net debt covenant tests were
amended and extended until such time as the Group shows compliance
with the original covenants at or prior to the March 2024 testing
date.
As the completion of the Rights Issue occurred after 31 March
2021, the proceeds were recognised in equity on 22 April 2021.
Directly attributable transaction fees incurred were accounted for
as prepayments as of 31 March 2021 and were subsequently offset
against the Rights Issue proceeds in equity on 22 April 2021. The
impact of the Debt Amendments has, however, been accounted for in
the current period in line with the requirements of IFRS 9 as their
occurrence was considered highly likely at the balance sheet date.
Please refer to notes 4 and 5 for further details. Disclosure of
the impact of the Rights Issue and the Debt Amendments on the
financial statements for the 12 months ending 30 September 2021
will be included in the Annual Report and Accounts 2021.
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 measures
As the Group operates in over 30 countries, it is exposed to
translation risk on fluctuations in foreign exchange rates, and as
such the Group's reported revenue and operating profit / loss 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,
like-for-like sales, net contract gains/(losses) and the impact of
acquisitions where appropriate.
(GBPm) UK Continental North RoW Total
Europe America
H1 2021 Revenue at actual rates by segment 45.6 118.0 55.1 38.0 256.7
Impact of foreign exchange - (2.7) 2.8 1.2 1.3
-------- ------------ --------- -------- --------
H1 2021 Revenue at constant currency(1) 45.6 115.3 57.9 39.2 258.0
-------- ------------ --------- -------- --------
H1 2020 Revenue at constant currency 372.6 428.6 246.5 171.3 1,219.0
Constant currency sales fall (87.8)% (73.1)% (76.5)% (77.1)% (78.8)%
Which is made up of:
Like-for-like sales fall(2) (87.1)% (73.3)% (79.0)% (76.7)% (79.0)%
Net contract gains/(losses)(3) (0.7)% 0.2% 2.5% (0.4)% 0.2%
(87.8)% (73.1)% (76.5)% (77.1)% (78.8)%
-------- ------------ --------- -------- --------
(1) Constant currency is based on average 2020 exchange rates
weighted over the financial year by 2020 results.
(2) Like-for-like sales represent revenues generated in an
equivalent period in each financial period in outlets which have
been open for a minimum of 12 months. Units temporarily closed as a
result of Covid-19 have not been excluded for the purposes of the
like-for-like calculation. Like-for-like sales are presented on a
constant currency basis.
(3) Net contract gains / (losses) represent the net year-on-year
revenue impact from new outlets opened and existing units
permanently closed in the past 12 months. Net contract
gains/(losses) are presented on a constant currency basis.
Underlying profit measures
The Group presents underlying profit / (loss) measures,
including operating profit / (loss), profit / (loss) before tax,
and earnings / (loss) per share, which exclude a number of items
which are not considered reflective of the normal trading
performance of the business, and are considered exceptional because
of their size, nature or incidence. The table below provides a
breakdown of the non-underlying items in both the current year and
the prior year.
Non-underlying items
IFRS 16 IFRS 16
H1 2021 H1 2020
GBPm GBPm
Operating costs
Impairment of goodwill (3.1) -
Impairment of property, plant and equipment (9.8) -
Impairment of right-of-use assets (16.8) -
IFRS 16 rent credit 53.3 -
Restructuring expenses (9.8) -
Facilities Agreement and USPP amendment (5.4) -
and extension fees associated with the
April Rights Issue
Amortisation of intangible assets arising
on acquisition (0.9) (0.9)
Other non-underlying costs (0.8) -
--------------------- --------------------
6.7 (0.9)
--------------------- --------------------
Finance expenses
Debt modification loss and effective interest
rate (44.1) (1.0)
Retrospective USPP interest charge (1.4) -
(45.5) (1.0)
--------------------- --------------------
Taxation
Tax credit / (charge) on non-underlying
items 7.0 (0.7)
--------------------- --------------------
Total non-underlying items (31.8) (2.6)
--------------------- --------------------
Further details of the non-underlying operating items have been
provided in the Financial Review section on page 11. Furthermore, a
reconciliation from the underlying to the statutory reported basis
is presented below:
H1 2021 (IFRS 16) H1 2020 (IFRS 16)
Non-underlying Non-underlying
Underlying Items Total Underlying Items Total
Operating (loss)
/ profit (GBPm) (226.6) 6.7 (219.9) (5.8) (0.9) (6.7)
Operating margin (88.3)% - (85.7)% (0.5)% - (0.6)%
Loss before tax
(GBPm) (260.9) (38.8) (299.7) (32.4) (1.9) (34.3)
Loss per share
(p) (41.3) (7.3) (48.6) (7.5) (0.5) (8.0)
Pre-IFRS 16 basis
The Group adopted IFRS 16 'Leases' on 1 October 2019 using the
modified retrospective approach to transition. Following the year
of transition, we have decided to maintain the reporting of our
profit and other key KPIs like net-debt on a pre-IFRS 16 basis
(note that pre-IFRS 16 basis was referred to as 'Pro forma IAS 17'
in the Annual Report and Accounts 2020). This is because the
pre-IFRS 16 profit is consistent with the financial information
used to inform business decisions and investment appraisals. It is
our view that presenting the information on a pre-IFRS 16 basis
will provide a useful and necessary basis for understanding the
Group's results. As such, commentary has also been included in the
Business Review, Financial Review and other sections with reference
to underlying profit measures computed on a pre-IFRS 16 basis.
A reconciliation of key underlying profit measures to 'Pre-IFRS
16' numbers is presented below:
Six months ended Six months ended
31 March 2021 31 March 2020
Underlying Underlying Impact Underlying
Impact of Pre-IFRS IFRS 16 of Pre-IFRS
Underlying IFRS 16 IFRS 16 16 GBPm IFRS 16 16
Notes GBPm GBPm GBPm GBPm GBPm
Revenue 2 256.7 - 256.7 1,214.6 - 1,214.6
Operating costs 4 (483.3) 65.9 (417.4) (1,220.4) 7.1 (1,213.3)
Operating (loss)
/ profit (226.6) 65.9 (160.7) (5.8) 7.1 1.3
Share of (loss)
/ profit of
associates 0.5 (0.6) (0.1) 0.2 0.2 0.4
Finance income 5 1.1 - 1.1 1.1 - 1.1
Finance expense 5 (35.9) 13.6 (22.3) (27.9) 14.4 (13.5)
Loss before tax (260.9) 78.9 (182.0) (32.4) 21.7 (10.7)
Taxation 24.5 (7.4) 17.1 2.3 (1.5) 0.8
Loss for the
period (236.4) 71.5 (164.9) (30.1) 20.2 (9.9)
------------------------ ---------- ----------- ------------- ---------- -------------
Loss
attributable
to:
Equity holders
of the parent (222.2) 61.0 (161.2) (33.5) 15.7 (17.8)
Non-controlling
interests (14.2) 10.5 (3.7) 3.4 4.5 7.9
Loss for the
period (236.4) 71.5 (164.9) (30.1) 20.2 (9.9)
------------------------ ---------- ----------- ------------- ---------- -------------
Loss per share
(pence):
- Basic 3 (41.3) (30.0) (7.5) (4.0)
- Diluted 3 (41.3) (30.0) (7.5) (4.0)
IFRS 16 increases the underlying operating loss, whereby the
depreciation of the right-of-use assets of GBP133.9m is offset
primarily by the reduced lease expense of GBP56.8m and a gain on
lease disposals of GBP11.2m, resulting in a net charge to
underlying operating loss of GBP65.9m. The interest charge on the
lease liabilities of GBP13.5m and foreign exchange losses of
GBP0.1m further increases the loss, though this is slightly offset
by the gain from associates of GBP0.6m, giving the underlying loss
before tax impact of GBP78.9m. The impact of IFRS 16 on net debt is
primarily the recognition of the lease liability balance.
A reconciliation from pre-IFRS 16 underlying loss for the period
to the statutory loss for the period is as follows:
Six months Six months
ended ended
31 March 2021 31 March 2020
GBPm GBPm
Pre-IFRS 16 underlying operating (loss) /
profit for the period (160.7) 1.3
Depreciation of Right-of-use assets (133.9) (148.4)
Fixed rent on leases 56.8 141.3
Gain on lease disposal 11.2 -
Non-underlying operating gain / (expense)
(note 4) 6.7 (0.9)
Share of profit from associates 0.5 0.2
Finance expense (34.8) (26.8)
Non-underlying finance expense (note 5) (45.5) (1.0)
Taxation 31.5 1.6
--------------- ---------------
Loss after tax (268.2) (32.7)
--------------- ---------------
Liquidity
Liquidity remains a key KPI for the Group. Pro forma liquidity
at 31 March 2021 has been computed as GBP853.8m, comprising cash
and cash equivalents of GBP240.1m, undrawn revolving credit
facility of GBP150.0m, net proceeds of Rights Issue in April 2021
of GBP450.8m and other local government backed facilities of
GBP12.9m.
Responsibility statement of the directors in respect of the
half-yearly financial report
We confirm that to the best of our knowledge:
- the condensed set of financial statements has been prepared in
accordance with IAS 34 Interim Financial Reporting adopted pursuant
to Regulation (EC) No 1606/2002 as it applies in the European
Union;
- the interim management report includes a fair review of the information required by:
-- DTR 4.2.7R of the Disclosure Guidance and Transparency Rules,
being an indication of important events that have occurred during
the first six months of the financial year and their impact on the
condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
-- DTR 4.2.8R of the Disclosure Guidance and Transparency Rules,
being related party transactions that have taken place in the first
six months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
On behalf of the Board
Simon Smith Jonathan Davies
Chief Executive Officer Chief Financial Officer
09 June 2021 09 June 2021
INDEPENT REVIEW REPORT TO SSP GROUP PLC
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 31 March 2021 which comprises the condensed
consolidated balance sheet, income statement, statement of other
comprehensive income, statement of changes in equity and cash flow
statement, and the related explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 31
March 2021 is not prepared, in all material respects, in accordance
with IAS 34 Interim Financial Reporting adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union
and the Disclosure Guidance and Transparency Rules ("the DTR") of
the UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
As disclosed in note 1, the latest annual financial statements
of the group were prepared in accordance with International
Financial Reporting Standards as adopted by the EU and the next
annual financial statements will be prepared in accordance with
International Financial Reporting Standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union
and in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006. The
directors are responsible for preparing the condensed set of
financial statements included in the half-yearly financial report
in accordance with IAS 34 adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company for our
review work, for this report, or for the conclusions we have
reached.
Nicholas Frost
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London, E14 5GL
9 June 2021
Condensed consolidated income statement
for the six months ended 31 March 2021
Six months ended 31 March Six months ended 31 March
2021 2020
Non-underlying Underlying Non-underlying
Notes Underlying(1) items Total (1) items Total
GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 256.7 - 256.7 1,214.6 - 1,214.6
Operating costs 4 (483.3) 6.7 (476.6) (1,220.4) (0.9) (1,221.3)
Operating loss (226.6) 6.7 (219.9) (5.8) (0.9) (6.7)
Share of profit
of associates 0.5 - 0.5 0.2 - 0.2
Finance income 5 1.1 - 1.1 1.1 - 1.1
Finance expense 5 (35.9) (45.5) (81.4) (27.9) (1.0) (28.9)
Loss before tax (260.9) (38.8) (299.7) (32.4) (1.9) (34.3)
Taxation 24.5 7.0 31.5 2.3 (0.7) 1.6
Loss for the period (236.4) (31.8) (268.2) (30.1) (2.6) (32.7)
-------------- --------------- -------- ----------- --------------- ----------
Loss attributable to:
Equity holders
of the parent (222.2) (39.3) (261.5) (33.5) (2.6) (36.1)
Non-controlling
interests (14.2) 7.5 (6.7) 3.4 - 3.4
Loss for the period (236.4) (31.8) (268.2) (30.1) (2.6) (32.7)
-------------- --------------- -------- ----------- --------------- ----------
Loss per share (p):
- Basic 3 (48.6) (8.0)
- Diluted 3 (48.6) (8.0)
(1) Stated on an underlying basis, which excludes non-underlying
items as further explained in the section on Alternative
Performance Measures (APMs) on pages 19 - 22.
Condensed consolidated statement of other comprehensive
income
for the six months ended 31 March 2021
Six months
ended
Six months ended 31 March
31 March 2021 2020
GBPm GBPm
Other comprehensive income / (expense)
Items that will never be reclassified to the income statement
Remeasurements on defined benefit pension schemes 2.1 5.3
Tax charge relating to items that will not be reclassified (0.4) (1.0)
Items that are or may be reclassified subsequently to the
income statement
Net gain on hedge of net investment in foreign operations 31.1 2.1
Other foreign exchange translation differences (29.9) (28.5)
Effective portion of changes in fair value of cash flow
hedges 0.4 (0.7)
Cash flow hedges - reclassified to income statement 1.3 0.6
Tax credit relating to items that are or may be reclassified 5.7 2.4
Other comprehensive income / (expense) for the period 10.3 (19.8)
Loss for the period (268.2) (32.7)
Total comprehensive expense for the period (257.9) (52.5)
-------------------------- --------------------------
Total comprehensive expense attributable to:
Equity shareholders (247.1) (50.8)
Non-controlling interests (10.8) (1.7)
Total comprehensive expense for the period (257.9) (52.5)
-------------------------- --------------------------
Condensed consolidated balance sheet
as at 31 March 2021
31 March 2021 30 September
Notes 2020
GBPm GBPm
Non-current assets
Property, plant and equipment 387.0 437.2
Goodwill and intangible assets 701.8 731.2
Right-of-use assets 1,079.3 1,271.2
Investments in associates 11.8 12.2
Deferred tax assets 87.3 49.8
Other receivables 69.1 73.8
2,336.3 2,575.4
Current assets
Inventories 18.0 23.5
Tax receivable 0.8 10.1
Trade and other receivables 116.3 125.3
Cash and cash equivalents 8 240.1 185.0
375.2 343.9
Total assets 2,711.5 2,919.3
--------------- ---------------
Current liabilities
Short-term borrowings 8 (297.8) (158.2)
Trade and other payables (411.9) (399.0)
Tax payable (11.5) (20.9)
Lease liabilities (263.6) (289.1)
Provisions (14.0) (12.3)
(998.8) (879.5)
Non-current liabilities
Long-term borrowings 8 (781.4) (718.1)
Post-employment benefit obligations (15.6) (18.6)
Lease liabilities (931.2) (1,060.2)
Other payables (6.7) (4.0)
Provisions (18.6) (21.4)
Derivative financial liabilities 8 (3.5) (5.1)
Deferred tax liabilities (11.0) (10.4)
(1,768.0) (1,837.8)
Total liabilities (2,766.8) (2,717.3)
--------------- ---------------
Net (liabilities) / assets (55.3) 202.0
--------------- ---------------
Equity
Share capital 5.8 5.8
Share premium 472.7 472.7
Capital redemption reserve 1.2 1.2
Merger relief reserve 206.9 206.9
Other reserves 15.8 3.1
Retained losses (818.4) (559.6)
Total equity shareholders' funds (116.0) 130.1
Non-controlling interests 60.7 71.9
Total equity (55.3) 202.0
--------------- ---------------
Condensed consolidated statement of changes in equity
for the six months ended 31 March 2021
Share Share Capital Merger Other Retained Total NCI Total
capital premium redemption relief reserves(2) losses parent equity
reserve reserve(1) equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 October
2019 4.8 461.2 1.2 - 12.9 (152.1) 328.0 87.6 415.6
Profit/(loss)
for the period - - - - - (36.1) (36.1) 3.4 (32.7)
Other
comprehensive
(expense)
/ income for
the period - - - - (19.0) 4.3 (14.7) (5.1) (19.8)
Equity issue(1) 1.0 0.8 - 206.9 - - 208.7 - 208.7
Share buyback - - - - - (1.7) (1.7) - (1.7)
Dividends
payable to
equity
shareholders - - - - - (26.8) (26.8) - (26.8)
Capital
contributions
from NCI - - - - - - - 3.1 3.1
Dividends
paid to NCI - - - - - - - (18.8) (18.8)
Purchase of
NCI
shareholding - - - - (4.2) - (4.2) (0.7) (4.9)
Other movements - - - - - (0.2) (0.2) - (0.2)
Share-based
payments - - - - - 2.9 2.9 - 2.9
Tax on
share-based
payments - - - - - (0.7) (0.7) - (0.7)
-------- --------- ----------- ----------- ------------ --------- -------- ------- --------
At 31 March
2020 5.8 462.0 1.2 206.9 (10.3) (210.4) 455.2 69.5 524.7
-------- --------- ----------- ----------- ------------ --------- -------- ------- --------
At 1 October
2020 5.8 472.7 1.2 206.9 3.1 (559.6) 130.1 71.9 202.0
Change in
accounting
policy - - - - - 0.2 0.2 - 0.2
Loss for the
period - - - - - (261.5) (261.5) (6.7) (268.2)
Other
comprehensive
income /
(expense)
for the period - - - - 12.7 1.7 14.4 (4.1) 10.3
Capital
contributions
from
non-controlling
interests - - - - - - - 1.0 1.0
Purchase of
NCI
shareholding - - - - - - - (0.4) (0.4)
Dividends
paid to NCI - - - - - - - (1.0) (1.0)
Share-based
payments - - - - - 1.0 1.0 - 1.0
Tax on share
based payments - - - - - (0.2) (0.2) - (0.2)
At 31 March
2021 5.8 472.7 1.2 206.9 15.8 (818.4) (116.0) 60.7 (55.3)
-------- --------- ----------- ----------- ------------ --------- -------- ------- --------
(1) The merger relief reserve arose following an equity
placement by the Company in March 2020. The excess of the gross
proceeds raised over the nominal value of the shares issued and
fees incurred is recorded in the merger relief reserve, in
accordance with Section 612 of the Companies Act 2006.
(2) At 31 March 2020 and 31 March 2021, the other reserves
include the translation reserve and cash flow hedging reserve.
Condensed consolidated cash flow statement
for the six months ended 31 March 2021
Notes Six months
ended Six months ended
31 March 2021 31 March 2020
GBPm GBPm
Cash flows from operating activities
Cash flow from operations 6 (50.6) 157.4
Tax paid (0.4) (20.1)
Net cash flows from operating
activities (51.0) 137.3
Cash flows from investing activities
Dividends received from associates - 3.5
Interest received 1.0 1.3
Purchase of property, plant
and equipment (24.7) (107.3)
Purchase of other intangible
assets (1.1) (15.3)
Acquisitions, net of cash and
cash equivalents acquired (0.4) (26.9)
Net cash flows from investing
activities (25.2) (144.7)
Cash flows from financing activities
Share buyback - (1.7)
Equity issue net of fees paid - 209.2
Drawdown of Covid Corporate 175.0 -
Financing Facility (CCFF)
Net drawdown on revolving credit
facility - 20.0
Net drawdown of other bank facilities 28.7 -
Receipt of cash from USPP debt - 102.1
Payment of lease liabilities
- principal (33.6) (129.0)
Payment of lease liabilities
- interest (13.8) (14.4)
Interest paid excluding interest
on lease liabilities (17.1) (10.4)
Dividends paid to non-controlling
interests (1.0) (18.8)
Capital contribution from non-controlling
interests 0.6 3.1
Net cash flows from financing
activities 138.8 160.1
Net increase in cash and cash
equivalents 62.6 152.7
Cash and cash equivalents at
beginning of the period 185.0 233.3
Effect of exchange rate fluctuations
on cash and cash equivalents (7.5) (5.2)
Cash and cash equivalents at
end of the period 240.1 380.8
--------------- -----------------
Reconciliation of net cash flow
to movement in net debt
Net increase in cash in the
period 62.6 152.7
Cash inflow from drawdown of
USPP debt - (101.8)
Cash inflow from CCFF (175.0) -
Cash inflow from other changes
in debt (28.7) (20.3)
Change in net debt resulting
from cash flows, excluding lease
liabilities (141.1) 30.6
Translation differences 26.8 (3.1)
Other non-cash changes (33.5) (1.8)
(Increase) / decrease in net
debt excluding lease liabilities
in the period (147.8) 25.7
Net debt at beginning of the
period (691.3) (483.4)
--------------- -----------------
Net debt excluding lease liabilities
at end of the period (839.1) (457.7)
Lease liabilities at end of
the period (1,194.8) (1,476.5)
--------------- -----------------
Net debt including lease liabilities
at end of the period (2,033.9) (1,934.2)
--------------- -----------------
Notes
1 Basis of preparation and accounting policies
1.1 Basis of preparation
This condensed set of financial statements has been prepared in
accordance with IAS 34 Interim Financial Reporting adopted pursuant
to Regulation (EC) No 1606/2002 as it applies in the European
Union.
The annual financial statements of the Group for the year ending
30 September 2021 will be prepared in accordance with International
Financial Reporting Standards (IFRSs) adopted pursuant to
Regulation (EC) No 1606/2002 as they apply in the European Union
and in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006.
As required by the Disclosure Guidance and Transparency Rules of
the Financial Conduct Authority, the condensed set of financial
statements has been prepared applying the accounting policies and
presentation that were applied in the preparation of the Group's
published consolidated financial statements for the year ended 30
September 2020, which were prepared in accordance with IFRSs as
adopted by the EU. Those accounts were reported upon by the Group's
auditors and delivered to the Registrar of Companies. The report of
the auditors was unqualified, however, it noted that there was a
material uncertainty that may cast significant doubt on the Group's
and the parent Company's ability to continue as a going concern.
The report did not contain statements under Section 498 (2) or (3)
of the Companies Act 2006. The comparative figures for the six
months ended 31 March 2020 are not the Group's statutory accounts
for that financial year.
These financial statements are presented in Sterling and, unless
stated otherwise, rounded to the nearest GBP0.1 million. The
financial statements are prepared on the historical cost basis
except for the derivative financial instruments which are stated at
their fair value.
Except as described below, the accounting policies adopted in
the preparation of these condensed consolidated half-yearly
financial statements to 31 March 2021 are consistent with the
accounting policies applied by the Group in its consolidated
financial statements as at, and for the year ended, 30 September
2020 as required by the Disclosure and Transparency Rules of the
UK's Financial Conduct Authority.
1.2 Going concern
These financial statements are prepared on a going concern
basis.
The Board has reviewed the Group's trading forecasts,
incorporating the impact on SSP of Covid-19, as part of the Group's
adoption of the going concern basis, in which context the Directors
have reviewed cash flow forecasts prepared for a period of 16
months from the date of approval of these financial statements,
with a number of different scenarios considered. Having carefully
reviewed these forecasts, the Directors have concluded that it is
appropriate to adopt the going concern basis of accounting in
preparing these financial statements for the reasons set out
below.
Since the start of the pandemic, the Group has taken rapid and
decisive action to protect its people and the business, generating
significant liquidity, reducing costs and minimising cash usage.
Nevertheless, against a backdrop on ongoing uncertainty around the
short and medium term trading outlook for the Group, and having
considered a number of different scenarios and financing
alternatives, the Board took proactive action in March 2021 to
strengthen the Group's balance sheet, announcing a Rights Issue to
raise gross proceeds of approximately GBP475m. Alongside and
conditional upon the Rights Issue, the Group secured the extension
to January 2024 of its main bank facilities that were previously
due to mature in July 2022, and secured waivers and modifications
of the existing covenants under those bank facilities and its US
private placement notes.
As at 30 April 2021, following the successful completion of its
Rights Issue, the Group had GBP1,065.1 million outstanding under
its borrowing arrangements, including: (i) US private placement
notes of GBP324.1 million with maturities between October 2025 and
July 2031; (ii) a facilities agreement with a maturity of 15
January 2024 comprising (a) two term facilities totalling GBP376.0
million, both of which are fully drawn and (b) an undrawn
syndicated bank revolving credit facility of GBP150.0 million, and;
(iii) various government backed facilities comprising (a) a
facility from the UK Covid Corporate Financing Facility ("CCFF"), a
joint Bank of England and HM Treasury lending facility, under which
it has drawn GBP300.0 million, available until February 2022, and
(b) a number of smaller local government backed facilities
amounting to GBP65.0 million. At 30 April 2021, the Group had
available liquidity of GBP843.3 million , including cash of
GBP683.8 million and the aforementioned committed undrawn revolving
credit facility of GBP150.0 million , as well as smaller undrawn
local government-backed facilities totalling GBP9.5 million.
In making the going concern assessment, the Directors have
considered forecast cash flows and the liquidity available over the
period to 30 September 2022. In doing so they assessed a number of
scenarios, including a base case scenario and a severe but
plausible downside scenario. The base case scenario reflects an
expectation of extended travel restrictions and ongoing very
challenging trading conditions during the third quarter of the 2021
financial year, before a slow but steady recovery in passenger
numbers in most of the Group's key markets during the final
quarter. This gradual recovery is assumed to continue during the
2022 financial year, with Group sales during the second half of
that financial year reaching approximately 90% of 2019 levels.
In light of the considerable uncertainty surrounding the ongoing
impact of Covid-19, a downside scenario has also been modelled,
applying severe but plausible assumptions to the base case. This
downside scenario reflects a pessimistic view of the travel markets
for the remainder of the current financial year, assuming
significant restrictions on non-essential travel throughout the
third quarter, followed by a modest recovery in domestic travel and
no recovery in international travel during the final quarter, with
overall Group sales reaching 29% of 2019 levels by September 2021.
The downside scenario then assumes a gradual recovery during the
2022 financial year, but at a much slower pace than envisaged in
the base case, with Group sales reaching approximately half of 2019
levels by March 2022 and approximately 75% by September 2022.
Following the successful completion of the Rights Issue, the
Group must comply with two financial covenants during the next 16
months ending September 2022, each tested monthly, with the first
of these based on the Group demonstrating a minimum level of
liquidity and the second based on the Group not exceeding a maximum
level of net debt. In both its base case and the downside scenario,
the Group would have headroom against each of these covenant tests
at all testing dates during the next 16 months.
The ongoing impact of the Covid-19 pandemic cannot be accurately
predicted, and it is not possible to assess all possible future
implications for the Group. Nevertheless, based on the scenarios
modelled, as well as the additional sensitivity analysis outlined
above, the Directors are confident that the Group will have
sufficient funds to continue to meet its liabilities as they fall
due for a period of at least 16 months from the date of approval of
the financial statements. The Directors have therefore deemed it
appropriate to prepare the financial statements for the six months
ended 31 March 2021 on a going concern basis. The financial
statements do not contain any adjustments that would be necessary
if that basis were inappropriate.
1.3 Changes in accounting policies and disclosures
The following amended standards and interpretations have been
adopted by the Group in the current period:
-- Amendments to references to the conceptual framework in IFRS standards
-- Definition of a Business (Amendments to IFRS 3)
-- Definition of material (Amendments to IAS 1 and IAS 8)
There is no significant impact of adopting these new standards
on the Group's consolidated financial statements.
The Group has adopted Covid-19-Related Rent Concessions beyond
30 June 2021 (Amendments to IFRS 16) in the period. The Amendment
extends the date a lessee is permitted to apply the practical
expedient by a year, from payments due on or before 30 June 2021 to
payments due on or before 30 June 2022. The amendment has been
applied retrospectively, resulting in a GBP0.2m credit to retained
earnings. The effect of adopting the amendment in the period is an
increase in reported profit of GBP2.5m, an increase in right-of-use
assets of GBP11.7m and an increase in lease liabilities of
GBP9.2m.
1.4 New accounting standards not yet adopted by the Group
The following amended standards and interpretations are not
expected to have a significant impact on the Group's consolidated
financial statements:
-- Onerous Contracts - Cost of fulfilling a Contract (Amendments to IAS 37)
-- Property, Plant and Equipment - Proceeds before Intended Use (Amendments to IAS 16)
-- Reference to the Conceptual Framework (Amendments to IFRS 3)
-- Annual Improvements to IFRS Standards 2018-2020
-- Classification of liabilities as current or non-current (Amendments to IAS 1)
-- IFRS 17 'Insurance Contracts'
-- Disclosure of Accounting Policy (Amendments to IAS 1 and IFRS Practice Statement 2)
-- Definition of Accounting Estimate (Amendments to IAS 8)
-- Sale of Contribution of Assets between an investor and its
Associate or Joint Venture (amendments to IFRS 10 and IAS 28)
The Group has also considered the impact of IBOR reform on its
hedge accounting. Please refer to note 8 for the details of the
impact on the Group condensed consolidated financial
statements.
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, India and South America. These segments comprise countries
which are at similar stages of development and demonstrate similar
economic characteristics.
The Group's management assesses the performance of the operating
segments based on revenue and underlying operating profit. Interest
income and expenditure are not allocated to segments, as they are
managed by a central treasury function, which oversees the debt and
liquidity position of the Group. The non-attributable segment
comprises costs associated with the Group's head office function
and depreciation of central assets.
UK Continental North RoW Non-attributable Total
Europe America
GBPm GBPm GBPm GBPm GBPm GBPm
Six months ended
31 March 2021
------- ------------ --------- ------- ----------------- --------
Revenue 45.6 118.0 55.1 38.0 - 256.7
------- ------------ --------- ------- ----------------- --------
Underlying operating
loss (37.8) (99.9) (37.5) (29.3) (22.1) (226.6)
------- ------------ --------- ------- ----------------- --------
Non-underlying operating
profit / (costs) 7.6 (0.1) 2.6 7.8 (11.2) 6.7
------- ------------ --------- ------- ----------------- --------
Operating loss (30.2) (100.0) (34.9) (21.5) (33.3) (219.9)
------- ------------ --------- ------- ----------------- --------
Six months ended 31
March 2020
--------------------- --------- -------------------------- --------
Revenue 372.6 424.3 246.5 171.2 - 1,214.6
------- ------------ --------- ------- ----------------- --------
Underlying operating
profit / (loss) 23.1 (23.8) 7.4 6.3 (18.8) (5.8)
------- ------------ --------- ------- ----------------- --------
Non-underlying operating
costs (0.7) (0.2) - - - (0.9)
------- ------------ --------- ------- ----------------- --------
Operating profit /
(loss) 22.4 (24.0) 7.4 6.3 (18.8) (6.7)
------- ------------ --------- ------- ----------------- --------
The following amounts are included in underlying operating
loss:
UK Continental North America RoW Non-attributable Total
Europe
GBPm GBPm GBPm GBPm GBPm GBPm
Six months ended 31
March 2021
------- ------------ -------------- ------- ----------------- --------
Depreciation and amortisation (30.7) (88.9) (30.9) (30.2) (3.6) (184.3)
------- ------------ -------------- ------- ----------------- --------
Six months ended
31 March 2020
------- ------------ -------------- ------- ----------------- --------
Depreciation and amortisation (40.1) (85.8) (37.1) (37.1) (3.2) (203.3)
------- ------------ -------------- ------- ----------------- --------
A reconciliation of underlying operating loss to loss before and
after tax is provided as follows:
Six months Six months
ended ended
31 March 2021 31 March 2020
GBPm GBPm
Underlying operating loss (226.6) (5.8)
Non-underlying operating profit / (costs)
(note 4) 6.7 (0.9)
Share of profit from associates 0.5 0.2
Finance income 1.1 1.1
Finance expense (35.9) (27.9)
Non-underlying finance expense (note 5) (45.5) (1.0)
--------------- ---------------
Loss before tax (299.7) (34.3)
Taxation 31.5 1.6
--------------- ---------------
Loss after tax (268.2) (32.7)
--------------- ---------------
3 Loss per share
Basic loss 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 loss 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.
Underlying loss 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 Six months
ended ended
31 March 2021 31 March 2020
GBPm GBPm
Loss attributable to ordinary shareholders (261.5) (36.1)
Adjustments:
Non-underlying operating costs (6.7) 0.9
Non-underlying costs attributable to non-controlling 7.5 -
interests
Non-underlying finance costs 45.5 1.0
Tax effect of adjustments (7.0) 0.7
Underlying loss attributable to ordinary
shareholders (222.2) (33.5)
---------------- -----------------
Basic weighted average number of shares 537,626,089 448,922,547
Dilutive potential ordinary shares - -
---------------- -----------------
Diluted weighted average number of shares 537,626,089 448,922,547
---------------- -----------------
Loss per share (p):
- Basic (48.6) (8.0)
- Diluted (48.6) (8.0)
Underlying loss per share (p):
- Basic (41.3) (7.5)
- Diluted (41.3) (7.5)
The number of ordinary shares in issue as at 31 March 2021 was
537,659,932 which excludes treasury shares (31 March 2020:
533,856,044). The Company also holds 263,499 ordinary shares in
treasury (31 March 2020: 263,499).
Potential ordinary shares can only be treated as dilutive when
their conversion to ordinary shares would decrease earnings per
share or increase loss per share. As the Group has recognised a
loss for the period none of the potential ordinary shares are
considered to be dilutive.
4 Operating costs
Six months Six months
ended ended
31 March 31 March
2021 2020
GBPm GBPm
Cost of food and materials:
Cost of inventories consumed in the period (71.2) (358.4)
Labour cost:
Employee remuneration (146.6) (387.8)
Overheads:
Depreciation of property, plant and equipment (45.7) (51.8)
Depreciation of right-of-use assets (133.9) (148.4)
Amortisation of intangible assets (4.7) (3.1)
Non-underlying operating costs 6.7 (0.9)
Profit on lease disposal 11.2 -
Rentals payable under leases (28.2) (112.9)
Other overheads (64.2) (158.0)
(476.6) (1,221.3)
----------- -----------
Non-underlying operating costs
The non-underlying operating costs in the six months ended 31
March 2021 are shown below.
Six months Six months
ended ended
31 March 2021 31 March 2020
GBPm GBPm
Impairment of goodwill (3.1) -
Impairment of property, plant and equipment (9.8) -
Impairment of right-of-use assets (16.8) -
IFRS 16 rent credit 53.3 -
Restructuring expenses (9.8) -
Facilities Agreement and USPP amendment and (5.4) -
extension fees associated with the April
Rights Issue
Amortisation of intangible assets arising
on acquisition (0.9) (0.9)
Other non-underlying costs (0.8) -
Total non-underlying operating costs 6.7 (0.9)
--------------- ---------------
Impairment of goodwill
Goodwill is not amortised but is tested annually for impairment,
by calculating the value in use of groups of cash-generating units
('CGUs') to determine the recoverable amount. Due to the slower
recovery in the travel sector compared to our expectations in
September 2020, and its impact on our forecasts for the value in
use for each CGU, goodwill impairments of GBP3.1m have been
recognised during the period.
Impairment of property, plant and equipment and right-of-use
assets
The impact of Covid-19, and various national restrictions
imposed in response to the pandemic, continue to be considered as
an impairment trigger. As a result, the impact on the recoverable
amounts of all CGUs have been calculated and reviewed against the
carrying value of assets held. This has resulted in impairments of
GBP9.8m for property, plant and equipment and GBP16.8m for
right-of-use assets during the period.
IFRS 16 rent credit
During the period, the Group successfully negotiated several
rent waivers with clients, totalling GBP53.3m, as part of its
response to the Covid-19 pandemic. The Group applies the practical
expedient issued as a part of the Amendment to IFRS 16 to record
this as a reduction in rent expense and an exceptional item within
the consolidated income statement.
Restructuring expenses
The Group has recognised a charge of GBP9.8m relating to its
restructuring programmes carried out across the group during the
period. The charge primarily relates to redundancy costs arising as
a result of the impact of Covid-19.
Facilities Agreement and USPP amendment and extension fees
associated with the April Rights Issue
On 12 March 2021, the Group agreed amendments to its main bank
Term Loans and Revolving Credit Facility ('RCF'), and to its US
private placement ('USPP') debt. The amendments took effect from 22
April 2021 and extended the Term Loans debt maturity date, the RCF
maturity date and the covenant waiver period (as well as making
certain amendments to the covenant tests). GBP5.4m lender amendment
and extension fees were incurred.
Amortisation of intangible assets
Underlying operating loss excludes non-cash accounting
adjustments relating to the amortisation of intangible assets
arising on acquisition of the SSP business in 2006.
5 Finance income and expense
Six months Six months
ended ended
31 March 2021 31 March 2020
GBPm GBPm
Finance income
Interest income 1.1 1.1
Total finance income 1.1 1.1
--------------- ---------------
Finance expense
Total interest expense on financial liabilities
measured at amortised cost (18.2) (9.6)
Lease interest expense (13.5) (14.4)
Non-underlying finance costs (45.5) (1.0)
Net change in fair value of cash flow hedges
utilised in the period (1.3) (0.6)
Unwind of discount on provisions (0.3) (0.3)
Net interest expense on defined benefit pension
obligations (0.1) (0.1)
Net foreign exchange losses - (0.2)
Other (2.5) (2.7)
Total finance expense (81.4) (28.9)
--------------- ---------------
Non-underlying finance costs
The non-underlying finance costs in the six months ended 31
March 2021 include expenses arising as a result of amendments and
extensions of borrowings under IFRS 9.
Six months ended Six months
31 March 2021 ended
GBPm 31 March 2020
GBPm
Debt modification loss (43.9) -
Change in USPP estimated future cash flows (8.0) -
Effective interest rate gain / (charge) 7.8 (1.0)
Retrospective USPP interest charge (1.4) -
Total non-underlying finance costs (45.5) (1.0)
----------------- ---------------
On 15 December 2020 and 12 March 2021, as part of the Group's
debt refinancing, non-substantial modifications to the bank Term
Loan facilities and USPP debt were agreed which resulted in a
one-off loss of GBP43.9m. In March 2021, a revision to estimated
future interest costs under the USPP resulted in a further one-off
loss of GBP8.0m.
Furthermore, as part of the USPP December modification, margin
rates were increased retrospectively from 7 August 2020 resulting
in additional backdated interest charges of GBP1.4m.
An effective interest rate gain of GBP7.8m was recognised in the
period.
6 Cash flow from operations
Six months
ended Six months
31 March 2021 ended
31 March 2020
GBPm GBPm
Loss for the period (268.2) (32.7)
Adjustments for:
Depreciation of property, plant and equipment 45.7 51.8
Depreciation of right-of-use assets 133.9 148.4
Amortisation of intangible assets 5.6 4.0
Profit on disposal of lease (11.2) -
IFRS 16 rent credit (53.3) -
Impairments 29.7 -
Share-based payments 1.0 2.9
Finance income (1.1) (1.1)
Finance expense 81.4 28.9
Share of profit of associates (0.5) (0.2)
Taxation (31.5) (1.6)
--------------- ----------------
(68.5) 200.4
Decrease in trade and other receivables 14.4 20.3
Decrease in inventories 5.5 3.9
Decrease in trade and other payables including
provisions (2.0) (67.2)
Cash flow from operations (50.6) 157.4
--------------- ----------------
7 Dividends
Six months ended 31 March 2021 Six months ended 31 March 2020
GBPm GBPm
No final dividend for year ended 30 September 2020
has been approved or paid during the period
(30 September 2019: 6.0p per share) - (26.8)
- (26.8)
------------------------------------------------------------------------------------ -------------------------------
No interim dividend for H1 2021 is proposed (H1 2020: no interim
dividend proposed).
8 Fair value measurement
Certain of the Group's financial instruments are held at fair
value.
The fair values of financial instruments held at fair value have
been determined based on available market information at the
balance sheet date, and the valuation methodologies detailed
below:
- the fair values of the Group's borrowings are calculated based
on the present value of future principal and interest cash flows,
discounted at the market rate of interest at the balance sheet
date; and
- the derivative financial liabilities relate to interest rate
swaps. The fair values of interest rate swaps have been determined
using relevant yield curves and exchange rates as at the balance
sheet date.
Carrying value and fair values of certain financial
instruments
The following table shows the carrying value of financial assets
and financial liabilities.
As at As at
31 March 2021 30 September
GBPm 2020
GBPm
Financial assets measured at amortised
cost
Cash and cash equivalents 240.1 185.0
Trade and other receivables 138.5 155.1
----------------------------------------------- --------------- --------------
Total financial assets measured at amortised
cost 378.6 340.1
----------------------------------------------- --------------- --------------
Non-derivative financial liabilities measured
at amortised cost
Bank loans (439.9) (411.3)
Covid Corporate Financing Facility (CCFF) (292.6) (123.9)
US private placement notes (346.7) (341.1)
Lease liabilities (1,194.8) (1,349.3)
Trade and other payables (397.9) (380.0)
----------------------------------------------- --------------- --------------
Total financial liabilities measured at
amortised cost (2,671.9) (2,605.6)
----------------------------------------------- --------------- --------------
Derivative financial liabilities
Interest rate swaps (3.5) (5.1)
----------------------------------------------- --------------- --------------
Total derivative financial liabilities (3.5) (5.1)
----------------------------------------------- --------------- --------------
Financial assets and liabilities in the Group's consolidated
balance sheet are either held at fair value, or their carrying
value approximates to fair value, with the exception of loans,
which are held at amortised cost. The fair value of total
borrowings excluding lease liabilities estimated using market
prices at 31 March 2021 was GBP1,054.7m (30 September 2020:
GBP885.4m).
Financial assets and liabilities are measured at fair value and
are classified as level 2. This uses the fair value hierarchy
whereby inputs, which are used in the valuation of these financial
assets, and liabilities have a significant effect on the fair
value, are observable either directly or indirectly. There were no
transfers during the period.
Interest rate benchmark reform (Amendments to IFRS 9, IAS 39 and
IFRS 7)
Group Treasury is managing the transition to alternative
benchmark rates ('IBOR'). The impact on the group is anticipated to
be immaterial. Wording within the main bank facility to accommodate
IBOR transition was agreed in March 2021 as part of the amendments
to Facilities Agreement. For derivative contracts, the Group
expects to adopt the ISDA 2020 IBOR Fallbacks Protocol in the
second half of this financial year. This protocol amends the
fallback provisions incorporated in the derivative contracts so
that when a particular IBOR rate ceases to exist or to represent
the underlying market, it will be replaced by an applicable
risk-free rate plus a spread. The first quarterly period impacted
by the change for both bank debt and derivatives will be from
January 2022, due to the timing of quarterly rates set. Hedge
accounting relationships will be maintained.
9 Post balance sheet events
On 17 March 2021 the Company announced a fully underwritten
rights issue (the "Rights Issue") to raise gross proceeds of
approximately GBP475 million. At the same time the Company
announced certain amendments to the terms of the Group's facilities
agreement (the "Facilities Agreement") and its US private placement
notes which came into effect following completion of the Rights
Issue on 22 April 2021 (the "Debt Amendments").
The Rights Issue has further strengthened the Group's balance
sheet by allowing the Group to materially reduce its net
indebtedness and allows the Group to cover liquidity headroom under
a reasonable worst-case scenario. The Rights Issue also facilitated
the Debt Amendments which have resulted in an extension to the
maturity date of the Facilities Agreement to January 2024 and
allowed the Group to secure further covenant waivers and amendments
from the Group's lenders. Under these amendments, the 6-month
covenant tests introduced in the December 2020 amendments were
removed, the original leverage and interest cover covenant tests
were further waived and amended up to and including the testing
period ending on 31 March 2023 (in respect of the interest cover
test) and 30 September 2023 (in respect of the leverage test) and
the monthly liquidity and adjusted net debt covenant tests were
amended and extended until such time as the Group shows compliance
with the original covenants as at or prior to March 2024 testing
date.
As the completion of the Rights Issue occurred after 31 March
2021, the proceeds were recognised in equity on 22 April 2021.
Directly attributable transaction fees incurred were accounted for
as prepayments as of 31 March 2021 and were subsequently offset
against the Rights Issue proceeds in equity on 22 April 2021. The
impact of the Debt Amendments has, however, been accounted for in
the current period in line with the requirements of IFRS 9 as their
occurrence was considered highly likely at the balance sheet date.
Please refer to notes 4 and 5 for further details. Disclosure of
the impact of the Rights Issue and the Debt Amendments on the
financial statements for the 12 months ending 30 September 2021
will be included in the Annual Report and Accounts 2021.
10 Related parties
Related party relationships exist with the Group's subsidiaries,
associates, key management personnel, pension schemes and employee
benefit trusts. A full explanation of the Group's related party
relationships is provided on page 147 of the Annual Report and
Accounts 2020.
There are no material 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 month period ended 31 March 2021.
11 Forward looking statement
This announcement 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"; "will";
"plans", "aims", "projects"; "may"; "would"; "could"; "should" or,
in each case, their negative and words of similar meaning are
forward-looking. Forward-looking statements include statements
relating to the following: (i) future capital expenditures,
expenses, revenues, earnings, synergies, economic performance,
indebtedness, financial condition, dividend policy, losses and
future prospects; and (ii) business and management strategies and
the expansion and growth of the Company's operations. By their
nature, forward-looking statements involve risks and uncertainties
that could significantly affect expected results and are based on
certain key assumptions 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, performance, 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 disclosures made by us or on the Group's behalf,
including as a result of the macroeconomic and other impacts of
Covid-19, economic and business cycles, the terms and conditions of
the Group's financing arrangements, foreign currency rate
fluctuations, competition in the Group's principal markets,
acquisitions or disposals of businesses or assets and trends in the
Group's principal industries.
In addition, even if the Group's financial condition, results of
operations and cash flows, and the development of the industry in
which the Group operates are consistent with the forward-looking
statements in this announcement, those results or developments may
not be indicative of results or developments in subsequent periods.
The forward-looking statements contained in this announcement speak
only as of the date of this announcement. Except where required to
do so under applicable law or regulatory obligations, the Company
and its Directors expressly disclaim any undertaking or obligation
to update or publicly revise any forward-looking statements whether
as a result of new information, future events or otherwise.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR DKFBKDBKBCAK
(END) Dow Jones Newswires
June 09, 2021 02:00 ET (06:00 GMT)
Ssp (LSE:SSPG)
Historical Stock Chart
From Mar 2024 to Apr 2024
Ssp (LSE:SSPG)
Historical Stock Chart
From Apr 2023 to Apr 2024
