SSP Group Regulatory News (SSPG)

Latest time and date for receipt of Forms of Proxy and CREST proxy instructions for the Annual General Meeting

11.00 a.m. on 23 February 2018

Annual General Meeting

11.00 a.m. on 27 February 2018

Ex-dividend date for the Final Dividend

15 March 2018

Record date for Final Dividend

6.00 p.m. on 16 March 2018

Payment date for Final Dividend

29 March 2018

Latest time of dealings in Existing Ordinary Shares

4.30 p.m. on 13 April 2018

Record Time for Special Dividend and Share Consolidation

6.00 p.m. on 13 April 2018

Effective time and date of the Share Consolidation

8.00 a.m. on 16 April 2018

Admission of New Ordinary Shares to the Official List and to trading on the Main Market and commencement of dealings in New Ordinary Shares

8.00 a.m. on 16 April 2018

CREST accounts credited with New Ordinary Shares

By or as soon as practicable after 8.00 a.m. on 16 April 2018

Dispatch (where applicable) of share certificates in respect of New Ordinary Shares

26 April 2018

Payment date for Special Dividend

27 April 2018

Risk/Risk Priority

Risk Description

Mitigating Factors

1. Business environment

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The Group operates in the travel environment where external factors such as the general economic and geopolitical climate, levels of disposable income, weather, changing demographics and travel patterns could all impact both passenger numbers and consumer spending. There is a risk that the Group is unable to, or poorly placed to, respond to these external events.

The travel environment is vulnerable to acts of terrorism or war, an outbreak of pandemic disease, or a major and extreme weather event or natural disaster which could reduce the number of passengers in travel locations.

The Group monitors the performance of individual business units and markets regularly. The Executive Directors review detailed weekly and monthly information covering a range of KPIs, and monitors progress on key strategic projects with local senior management. Specific short and medium-term actions are taken to address any trading performance issues which are monitored on an ongoing basis.

The Group also conducts extensive research to understand current levels of customer satisfaction and gathers feedback on changing requirements.

The Group has business continuity plans in place including liaison with authorities and clients in key locations to ensure that contingency plans are comprehensive and complete.

2. Retention of existing client relationships

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The Group's operations are dependent on the terms of airport and railway station concession agreements. Growth is dependent on the Group's ability to retain existing concession contracts and win new contracts from either new or existing clients. The Group's clients may turn to alternative operators, cease operations, terminate contracts with the Group or increase cost pressure on the Group.

The Group's local management structures in all its major geographies allow it to maintain strong relationships with its clients and monitor performance in close partnership with its clients' management teams. 

The Group has an established contact strategy with key clients to establish and/or maintain ongoing relationships.

The Group also has an annual online and interview-based client survey to ensure any concerns are being addressed. Furthermore, the Group proactively seeks to invest in, extend and enhance its offers in key locations, working in

conjunction with clients.

3. Poor execution and mobilisation of new contracts

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There is a risk that the Group may not be successful in mobilising new contracts and operating them successfully.

The Group, regional and country senior management teams review mobilisation plans to ensure that new openings are delivered on time and in line with the specific agreement or contract. 

The Group has strengthened the management teams in the high-growth regions of Asia Pacific, and India, especially in finance and operations.

4. Labour laws and unions

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Approximately 46% of the Group's employees are subject to collective bargaining agreements. These are principally in France, Germany, Spain, Denmark, Finland, Norway, Sweden and the United States.

The Group is also subject to minimum wage requirements and mandatory healthcare subsidisation in some of the jurisdictions in which it operates, notably North America, the United Kingdom and China.

The Group works proactively with all of its unions to ensure that the various collective bargaining agreements are appropriate for the Group and minimise commercial risks.

The Group is reviewing the impact of changes in remuneration structures, including the introduction of the National Living Wage and Apprenticeship Levy in the United Kingdom and the healthcare bill in the United States and developing mitigating strategies across the Group. 

5. Implementation of efficiency programmes

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The Group is continuously seeking new programmes to improve efficiency. These change programmes could fail to deliver the desired benefits e.g. labour efficiency and improvements in waste and loss.

The Group has completed detailed evaluation, planning and partial implementation of its major change programmes, adapting and responding to feedback on an ongoing basis.

Where required to aid these programmes, the Group continues to utilise specialist expertise in the business, both at a Group and a country level.

The Group provides central support with regional CEOs and CFOs to facilitate appropriate country actions based on key performance indicators linked to margin management.

Group IT also provides support for project management and implementation using agreed standard business processesand controls.

6. Changing client behaviours

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Changing client requirements, such as splitting tenders across two or more providers, partnering with operators in joint ventures, developing third party purchasing models and favouring local brand operators or partnering directly with brand owners, may adversely affect the Group's business.

The Group has in place a clear 'SSP Value Proposition' that it presents to the client to address this risk.

The Group Director of Strategic Partnerships and the Group Chief Commercial Officer work closely with country management teams to enhance and clarify the Group's proposition to its clients.

The Group's contact strategy with key stakeholders and clients helps to mitigate this risk. This is informed by its annual client survey, which is carried out by an independent party.

7. Expansion into new markets

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The Group's strategy involves expanding its business in developing markets, including Asia Pacific, India, Eastern Europe and the Middle East.

Political, economic and legal systems and conditions in these countries are generally less predictable than in countries with more developed institutional structures, subjecting the Group to additional commercial, reputational, legal and compliance risks.

The Group has strengthened the management team in Asia Pacific, and India, especially in finance and operations where this risk is high and the Group is growing. 

In addition, the Group adopts a joint venture model in certain new territories to provide access to existing local infrastructure and expertise as well as to help mitigate the risk inherent on entering new territories.

The Group has clearly defined authorisation procedures for all contract investment to ensure that it is consistent with the objectives set by the Board, and fully considers and evaluates the risks inherent in expansion into new locations and territories.

The Group works with in-house and external advisors to ensure the risks of doing business in developing markets are identified and, where possible, mitigated before entering those markets.This includes appropriate due diligence of potential joint venture and other local partners.

The Group legal team works closely with country legal and operational teams to support business development activities and ensure compliance with local requirements.

The risk of working in developing markets is also monitored by the Risk Committee and the Audit Committee.

8. Senior management capability and retention

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The performance of the Group depends on its ability to attract, motivate and retain key employees. The skills developed in our business are highly attractive to other companies, which regularly target our staff for recruitment.

The Group may not have sufficient management capability at a senior level, such as country leadership, to execute the planned operational efficiency programmes and support the growth and development of the business.

The Group may not have sufficient resources such as in legal, finance and IT, to meet the changing and complex needs of an international and growing business.

The Group continues to review key roles and succession plans in country and at a Group level. Senior resources have been strengthened in a number of strategically important and growing businesses. 

The Remuneration Committee monitors the levels of remuneration for senior management and seeks to ensure that they are designed to attract, retain and motivate the key personnel required to run the Group effectively.

The Group carries out an annual talent mapping exercise to identify candidates for future roles and continues to invest in additional resource to support change initiatives and business development programmes.

9. Intensified competition

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Competition intensifies as the Group's competitors become more sophisticated and direct more resources to the preparation of tenders and take a more aggressive position on commercial terms when tendering for contracts. This could put pressure on the Group's profitability and reduce the availability and attractiveness of contracts.

The Group has developed high-quality 'business-to-business' marketing collateral to clearly lay out the benefits of working with SSP, which it shares with the clients to help them better understand the Group's proposition from both quantitative and qualitative aspects.

The Group's strengthened business development team utilises the feedback from regular client satisfaction surveys when developing new tenders to ensure they remain competitive to clients. 

The Group has clear internal benchmarking and investment appraisal processes to evaluate tender proposals and to ensure that the Group is able to make a competitive offer, as well as meet its investment criteria. 

The Group continues to extend its brand portfolio, including via partnerships with celebrity chefs, to provide breadth and depth as part of a tender process.

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10. Impact of Brexit

NEW RISK

There may be a potential impact from Brexit on consumer spending, cost inflation and the mobility of EU labour in the UK.

The Group carefully monitors the ongoing negotiations of the UK's exit from the EU and as further impacts of Brexit develop and crystallise, the Executive Directors and senior management will consider and implement additional mitigating actions.

The Group maintains a global portfolio and regularly monitors the impact of foreign exchange fluctuations on its cash flows, mitigating the impact from exchange risk.

The Group's pricing and range initiatives are driven by continuous monitoring of consumer spend benchmarks.

Various gross margin initiatives including recipe re-engineering and procurement rationalisation continue to be pursued, in order to mitigate the impact of cost inflation.

The Group continues to develop its UK recruitment strategy to ensure SSP is positioned as an attractive employer in the UK.

11. Insufficient business development capability and investment

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The Group may not be successful in winning new contracts on commercially acceptable terms.

The Group may not have the capability to enter new markets and capitalise on the business development opportunities these provide.

The Group prioritises its investment in new contracts as part of the ongoing review of its global pipeline, and the prioritisation of its capital investment and resources.

The Group has strengthened the management team in Asia Pacific and India, especially in finance and operations.

12. Compliance Risk

NEW RISK

The laws and regulations governing the Group's industry have become increasingly complex across a number of jurisdictions and a wide variety of areas, including, among others, food safety, labour, employment, immigration, security and safety, health and safety, competition and antitrust, consumer protection (including data protection), environment, licensing requirements and related compliance.

With a UK parent company, the Group is required to comply with the provisions of the UK Bribery Act and the new legislation aimed at preventing the facilitation of tax evasion, as well as the local equivalent laws in the territories in which the Group operates.

The Group is required to comply with current data privacy laws, in many of the jurisdictions in which it operates. In the EU, the Company will be subject to the new General Data Protection Regulation (GDPR) from May 2018. This requires the adoption of stricter data management processes in order to address greater rights for individuals, mandatory breach reporting and more rigorous compliance obligations. 

There is a risk that the Group fails to comply with the new rules or to implement adequate processes to safeguard personal data. This could give rise to larger fines, penalties and civil action from individuals.

The preparation of food and maintenance of the Group's supply chain require a base level of hygiene, temperature maintenance and traceability, and expose the Group to possible food safety liability claims and issues.

The Group has processes in place to ensure compliance with local laws and regulations. The Group may obtain external advice to supplement the in-house legal and compliance team.

The Group has a Code of Conduct and Anti-Bribery and Anti-Corruption Policy and training has been rolled out internationally. 

The Group's procedures under the policy include regular reporting by the businesses into the Risk Committee. Compliance is monitored by Internal Audit and the Risk Committee on an ongoing basis and all alleged breaches of the Code of Conduct and policy are investigated.

The Group has conducted a risk assessment regarding the new UK tax legislation and is reviewing its policies and procedures in this regard.

The Group has established a GDPR working group with representatives from each key division to assess and ensure the Group is able to manage GDPR compliance risk. Local champions have been identified and the Group is making progress to ensure it is compliant with the new rules.

The Group has food safety controls and procedures in place that are embedded in the Group's operations. These are monitored by country management teams on a regular basis and appropriate action is taken if any issues are identified. Training sessions are also held in country to ensure compliance with these procedures.

13. Execution of outsourcing programmes

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The Group fails to execute outsourcing projects effectively resulting in the business as usual being disrupted and the introduction of new third party risks.

The Group continues to utilise specialist resources in the business to manage implementation and transition projects and to use external advisors to provide input into the management of risks on such projects. Performance feedback is reported to the Executive Committee on a regular basis and the Risk Committee periodically. The Group has included the outsourcing centres in its Internal Audit review scope. 

The outsourcing partners are highly reputable and were selected after a rigorous tender process and extensive due diligence.

14. Maintenance/development of brand portfolio

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The Group's success is largely dependent upon its ability to maintain its portfolio of proprietary brands as well as the brands of its franchisors, and the appeal of those brands for clients and customers. The loss of any significant partner brands, the inability to obtain rights to new brands over time or the diminution in the appeal of partner brands or the Group's proprietary brands could impair the Group's ability to compete effectively in tender processes and ultimately have a material adverse effect on the Group's business.

The Group carries out extensive customer research into passengers' needs and continually analyses market trends in order to enhance its brand and concept portfolio on an ongoing basis.

The Group continues to strengthen its dedicated brands team to work closely with its partner brands and to enable greater capacity to attract and manage a broader portfolio of external brands. 

15. Cyber threats

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The Group becomes exposed to information security and cyber threats e.g. Payment Card Industry Data Security Standards (PCIDSS).

The Group continually reviews its business continuity plans for its supply chain, IT disaster recovery, and information security policies and practices to ensure that these meet the changing landscape.

The Group's segmental business model and IT systems structure help to ensure that potential cyber attacks are likely to remain isolated locally rather than impacting the whole Group.

16. Tax strategy

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Risk that reputation is damaged if customers, clients and/or suppliers believe that the Group is engaged in aggressive or abusive tax avoidance.

The Group has a tax management policy which is based on Board guidance to adopt a low risk tax strategy.

2017£m

2016£m

Purchases from related parties1

(5.4)

(4.8)

Management fee income

2.5

1.6

Other income 

1.5

0.9

Other expenses2

(6.5)

(0.2)

Amounts owed by related parties at the end of the year

4.2

0.7

Amounts owed to related parties at the end of the year

(0.8)

(4.9)

2017£m

2016£m

Short-term employee benefits

(4.1)

(4.0)

Post-employment benefits

(0.4)

(0.4)

Share-based payments

(2.3)

(1.3)

(6.8)

(5.7)