SSP Group Regulatory News (SSPG)

LEI:213800QGNIWTXFMENJ24

16 May 2018

SSP GROUP PLC

Results for six months period ended 31 March 2018

SSP Group, a leading operator of food and beverage outlets in travel locations worldwide, announces its financial results for the first half of its 2018 financial year, covering the six months ended 31 March 2018.

Highlights:

· Underlying operating profit1 of £55.2m: up 32.6% at constant currency2, and 29.0% at actual exchange rates

· Revenue of £1,177.8m: up 11.9% at constant currency; 9.8% at actual exchange rates

· Like-for-like sales3 up 2.8%: driven by air passenger travel and retail initiatives

· Net gains4 of 7.1%: strong performances in North America and the Rest of the World

· Acquisitions5 of TFS in India and Stockheim in Germany added 2.0% to revenue

· Underlying operating margin1 (excluding the acquisition impact of TFS) up 50 basis points at constant currency, strategic initiatives delivering well. Including the impact of acquisitions, the combined group underlying operating margin increased a further 20 bps to 4.7%

· Underlying profit before tax1 of £48.7m: up 40.3%. Reported profit before tax of £48.4m

· Underlying earnings per share1 of 5.6 pence: up 33.3%. Reported earnings per share of 5.6 pence

· Interim dividend of 4.8 pence per share, up 50.0%. This follows the completion of the c.£100m special dividend and share consolidation, in April 2018

· Encouraging pipeline of new contracts

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

"SSP has delivered another strong performance in the first half of 2018. Operating profit was up 32.6% at constant currency, driven by good like-for-like sales growth, significant new contract openings and further operational improvements. We have continued to grow our presence across the world, particularly in North America and Asia and our new business in India is performing well.

Looking forward, the second half has started in line with our expectations and whilst a degree of uncertainty always exists around passenger numbers in the short term, we continue to be well placed to benefit from the structural growth opportunities in our markets and our programme of operational improvements."

Financial highlights:

Statutory reported results:

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

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

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

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

5 Acquisition impact represents the revenue impact from acquired outlets owned for less than 12 months. Acquisition impact is presented on a constant currency basis. Once the acquisition annualises revenue is included in like-for-like sales or net contract gains where appropriate.

6 Stated on an underlying basis1 after capital expenditure, net cash flows to/from associates and non-controlling interests, acquisitions and tax.

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

CONTACTS:

Investor and analyst enquiries

Sarah John, Director of Investor Relations, SSP Group plc

On 16 May 2018: +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

SSP Group plc's Interim Results 2018 are available at www.foodtravelexperts.com.

NOTES TO EDITORS

About SSP

SSP is a leading operator of food and beverage concessions in travel locations, operating restaurants, bars, cafés, food courts, lounges and convenience stores in airports, train stations, motorway service stations and other leisure locations. With over 50 years of experience, today we have around 37,000 employees, serving approximately one million customers every day. We have business at approximately 140 airports and 280 rail stations, and operate more than 2,500 units in over 30 countries around the world.

SSP operates an extensive portfolio of more than 450 international, national, and local brands. Among these are local heroes such as MASH in Copenhagen, James Martin Kitchen in London, and Hung's Delicacies in Hong Kong. Our range also includes proprietary brands created for the travel sector including Upper Crust, Le Grand Comptoir and Ritazza, as well as international names such as Burger King, Starbucks, Hard Rock Café and YO! Sushi. We also create stunning bespoke concepts such as Five Borough Food Hall in JFK, New York and Walter at Zurich.

www.foodtravelexperts.com 

Business review

Overview

The Group delivered a good performance in the first half of the year, driven by like-for-like sales growth, new contract openings across the world and the ongoing implementation of our programme of operational improvements. We are continuing to invest in the growth and development of the business and to bring new brands and concepts to our clients and customers. We have made further good progress in the development of the business in North America and Asia Pacific, and the performance of TFS, our joint venture in India, has been encouraging. Margin growth has been driven by good like-for-like growth and the ongoing roll out of our strategic initiatives. Cash flows have been strong and the seasonal cash outflow reduced. We are recommending an ordinary dividend of 4.8 pence per share, anticipating a full year pay-out ratio of 40%. This, together with the payment of a c. £100m special dividend in April 2018, reflects our confidence in the business and our commitment to maintaining an efficient balance sheet.

Financial results

The financial performance of the Group is presented on an underlying basis, for which the statutory reported results are adjusted to take account the amortisation of intangible assets created on the acquisition of the SSP business in 2006 and the revaluation of the obligation to acquire an additional share of TFS by the end of calendar year 2018. The statutory reported performance of the Group is explained in the financial review, with a detailed reconciliation between statutory and underlying performance provided on page 15.

The Group delivered a good financial performance in the first half of 2018. Underlying operating profit increased to £55.2m, an increase of 32.6% on a constant currency basis. Total revenue increased by 11.9%, on a constant currency basis, including like-for-like sales growth of 2.8%, net contract gains of 7.1% and revenue from acquisitions of 2.0%.

In the first half of the year like-for-like sales growth was 2.8%, benefiting slightly from the earlier timing of Easter this year. Like-for-like sales in the air sector grew more strongly than in rail driven by the continued growth in air passenger numbers. Trading in the rail sector remained softer. Looking forward to the rest of the year, with the current level of economic and geopolitical uncertainty, we anticipate like-for-like sales to remain in the region of 2% to 3%.

Net contract gains were 7.1% with strong contributions from North America (+31.1%) and the Rest of the World (+9.5%). In North America, net gains included the benefit of the full year effect of the major contracts that started in the second half of last year, in particular at Chicago Midway and at JFK T7. We have also opened a number of new outlets during the first half, including at Newark, San Francisco and Toronto. In the Rest of the World, net gains were driven by the Asia Pacific region, including new contracts at airports in Shenyang in China, Phuket in Thailand and Delhi in India. We continue to focus on retaining profitable contracts and our contract renewal rate in the first half of 2018 was in line with our historical trends.

We are encouraged by the pipeline of new contracts. In the first half we won a number of significant new airport contracts including in North America, at Phoenix, Seattle and San Francisco, and in the Rest of the World, at Sheremetyevo airport in Moscow and across India. We expect to begin operating these contracts progressively over the next two years.

Looking forward to the second half of the year, we will meet the anniversary of the opening of many of the new units last year, when net gains were around 8%, and hence net gains are expected to return to a more normal level of around 2% in the second half of 2018. Net gains for the full year would therefore equate to around 4%, with acquisitions expected to add a further c.1.5% to revenue.

Underlying operating profit increased to £55.2m, a 32.6% increase on a constant currency basis. The underlying operating margin (excluding the acquisition impact of TFS) increased by 50bps, on a constant currency basis, driven by the ongoing roll out of our strategic initiatives. Including the impact of acquisitions, the combined group underlying operating margin increased a further 20 bps to 4.7%. Looking forward to the second half of the year, we expect to see similar trends in operating margin growth, excluding the acquisition impact of TFS.

The underlying free cash outflow was £6.5m, after completing the acquisition of Stockheim for net consideration of £18.8m. Capital expenditure was £61.5m, consistent with the first half of 2017. We expect a slightly higher level of capital expenditure in the second half of the year, taking the full year to c.£130m - £140m, reflecting the start of major redevelopments at Chicago Midway and JFK T7, as well as the ongoing development of new units.

Net debt increased by £27.9m during the first half of 2018 to £290.1m, reflecting our normal seasonal cash cycle, and was £88.7m lower than last year, with leverage reducing from 1.7 times to 1.1 times EBITDA.

Strategy

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

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

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

Like-for-like sales growth in the period was driven by the ongoing roll out of our retailing programmes which are delivering well. We have also made further good progress on optimising our product ranges and have developed a number of premium products to provide customers with additional choice. In addition to our owned brands, we are increasingly working with our brand partners. For example, in conjunction with Starbucks, we are launching a new premium range with products specifically designed for the travelling customer.

2. Growing profitable new space

The travel food and beverage market in airports and railway stations is valued at approximately £14bn and is characterised by long-term structural growth. It offers excellent opportunities for us to expand our business across the globe.

Net contract gains in the first half were 7.1%, driven by new unit openings and high levels of contract retention. The higher level of net gains was driven by strong performances in North America and in the Rest of the World. These large and growing markets (where we still have a relatively small share), provide attractive expansion opportunities and the pipeline of new contracts is encouraging. We have strong disciplines around the contract tendering process which enables us to deliver attractive returns from new business investment.

Our new business growth is underpinned by our ability to deliver attractive and effective food solutions at travel locations internationally. An important element of this is the brand line up we can offer. Our brands include both international brands which we franchise, such as Burger King and Starbucks, and our own proprietary brands such as Upper Crust and Ritazza, as well as bespoke concepts and local heroes. We have recently signed a new partnership agreement with Crussh, the London-based healthy food and juice chain, to take the brand into rail and airport locations in the UK and Europe and we have further expanded our relationships with high profile chefs, including the renowned French chef Michel Roth, to open Terroirs de Lorraine at Gare de Metz station.

A significant development for us has been our entry into India. India is the world's second most populous country, with over one billion inhabitants, and has seen sustained strong passenger growth in recent years, which is forecast to continue. Infrastructure growth is expected to support this and the government is expected to invest US$120bn in airport infrastructure over the next decade. We acquired 33% of TFS in India in December 2016 and will acquire a further 16% interest by the end of calendar year 2018. TFS operates over 200 units, with operations in six of the main airports in India including Delhi and Mumbai, as well as in railway stations. TFS has delivered a strong financial performance since its acquisition.

On 1 December 2017, we also announced the acquisition of part of the Stockheim group, a travel concessions business based in Germany. The business operates 25 food and beverage outlets in airports and railway stations, including at Düsseldorf and Cologne. The acquisition will further strengthen our presence in travel locations across Germany.  

3. Optimising gross margins

Gross margin increased by 100 bps in the period at constant currency. The higher growth in the air sector in the period, which typically has higher gross margins but higher concession fees than the rail sector, contributed approximately 50 bps of this improvement.

This performance is encouraging given the ongoing pressure from food cost inflation, and has been driven by the roll out of gross margin initiatives across our regions which are progressing well. Key areas of focus include procurement disciplines, range and recipe rationalisation and the management of waste and losses. We are making good progress in the introduction of equipment that automates food preparation processes in our sites. This helps to improve the product consistency and reduce waste, as well as driving labour efficiency. To support these initiatives, we continue to invest in both central and local resources.

4. Running an efficient and effective organisation

We have a multi-year programme of initiatives to improve operating efficiency, which is important to the Group given the backdrop of ongoing labour cost inflation. Labour efficiencies contributed 30 bps improvement to our operating margin.

We continue to develop systems to better align labour to sales, allowing us to optimise service levels and labour costs. We have developed a more standardised, systematised approach to labour forecasting and scheduling through a programme called Better Service Planning. The roll out of the new system has been completed in the UK and is progressing well in Sweden and Norway, with encouraging initial results. We are now undertaking further pilot studies across a number of other countries. We continue to trial self-scan and self-serve checkouts at a number of units, both of which can contribute to improving the customer experience as well as driving greater efficiency.

5. Optimising investment utilising best practice and shared resource

We have maintained our focus on generating efficiencies to optimise our investments, drive returns and use best practice and shared resources. We are continuing to look at how shared back office services can reduce cost and drive simpler, more efficient processes. We have now established two outsourced shared service centres in Pune in India and Lodz in Poland which are used by a number of SSP's countries for financial transaction processing. We continue to look for further opportunities to outsource administration and financial processes. In addition to this, we have made good progress in driving energy efficiencies and have introduced a number of programmes which have helped to reduce overall energy usage.

Summary and outlook

The Group delivered a good financial performance in the first half of the year with solid like-for-like sales growth, strong net gains and a further improvement in operating margin. The second half has started in line with our expectations and the pipeline of new contracts is encouraging. Looking forward, with the current level of general economic and geopolitical uncertainty, we continue to plan cautiously, anticipating like-for-like sales to remain in the region of 2% - 3% and expect to see ongoing increases in food and labour cost inflation. However, the significant structural growth opportunities in the travel sector and our programme to deliver operational improvements leave us well placed to continue to deliver both for our customers and our shareholders.

Financial review

Group performance

Revenue

First half revenue increased by 11.9%, on a constant currency basis, comprising like-for-like sales growth of 2.8%, net contract gains of 7.1% and the impact of acquisitions of 2.0%. At actual exchange rates, total revenue grew by 9.8%, to £1,177.8m. Revenue in the first half of the Group's financial year is typically lower than in the second half, as a significant part of our business serves the leisure sector of the travel industry, which is particularly active during the summer in the northern hemisphere.

In the first half of the year like-for-like sales growth was 2.8%, benefiting slightly from the earlier timing of Easter this year. Like-for-like growth in the air sector was strong across most regions, while like-for-like growth in the rail sector remains softer. Looking forward to the rest of the year, with the current level of economic and geopolitical uncertainty, we anticipate like-for-like sales to remain in the region of 2% to 3%.

Net contract gains increased revenue by 7.1%, helped by strong contributions from North America, which benefited from the new business opened last year but also further gains at Newark, San Francisco and Toronto. The Rest of the World also had strong net contract gains of 9.5%, primarily driven by new openings in China, Thailand and India. We expect the contribution from net gains in the second half to be around 2% and around 4% for the full year.

The acquisitions of TFS and Stockheim, which added 2.0% to first half revenues and are expected to add a further c.1.5% to revenue for the full year.

Trading results from outside the UK are converted into Sterling at the average exchange rates for the period. The overall impact of the movement of foreign currencies on revenue (principally the Euro, US Dollar and pegged currencies, Norwegian Krone and Indian Rupee) during the first half of 2018 compared to the 2017 average was negative 2.1%. If the current spot rates were to continue through to the end of 2018, we would expect a negative currency impact on revenue in the full year of around 2% compared to the average rates used for 2017. This is however a translation impact only.

Underlying operating profit

Underlying operating profit increased to £55.2m, an increase of 32.6% on a constant currency basis. The underlying operating margin (excluding the acquisition impact of TFS) increased by 50bps, on a constant currency basis, driven by the ongoing roll out of our strategic initiatives. Including the impact of acquisitions, the combined group underlying operating margin increased a further 20 bps to 4.7%.

Gross margin increased by 100 bps year-on-year, on a constant currency basis. The sales mix in the first half, with weaker sales in the rail sector relative to the air sector, contributed approximately 50 bps of this improvement. The strong underlying performance was driven by the continued roll out of our strategic initiatives, including improved ranging and mix management, food procurement, and waste and loss reduction.

Labour costs improved by 30 bps year-on-year, on a constant currency basis, driven by our broadly based programmes to optimise service levels and labour costs.

Concession fees rose by 70 bps, with the stronger growth in air sales contributing approximately 40 bps to the year-on-year increase. We expect this rate of increase to continue into the second half of the year.

Looking forward to the second half, we anticipate ongoing inflationary pressure on food and labour costs. However, with our broad range of strategic initiatives, we are well placed to mitigate these costs and hence we expect to see similar trends in operating margin growth (excluding the acquisition impact of TFS), to those seen in the first half of the year.

Operating profit

Operating profit was £54.2m, on a reported basis (H1 2017: £41.8m), reflecting an adjustment for the amortisation of acquisition-related intangible assets of £1.0m (H1 2017: £1.0m).

Regional performance

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

UK (including Republic of Ireland)

Note - Statutory reported operating profit was £32.7m (H1 2017: £29.0m) and operating margin was 8.8% (H1 2017: 7.9%) reflecting an adjustment for the amortisation of acquisition related intangible assets of £0.7m (H1 2017: £0.7m).

Revenue increased by 1.2% on a constant currency basis, comprising like-for-like growth of 0.7% and net contract gains of 0.5%. Like-for-like growth in the air sector was stronger than in the rail sector which remains soft. Like-for-like growth in the air sector was driven by increasing passenger numbers. We saw some impact in the first half from the closure of Monarch and reduced schedules from Ryanair. In the rail sector, the underlying trends remained unchanged in the first half albeit we saw some impact from the adverse weather conditions at the end of the period.

Underlying operating profit for the UK increased by 12.5%, on a constant currency basis, to £33.4m, with underlying operating margin increasing by 90 bps, on a constant currency basis, to 9.1%. This represented a good performance, with our operating efficiency programmes and lower depreciation more than mitigating the impact of lower like for like sales and inflationary pressures on food and labour.

Continental Europe

Note - Statutory reported operating profit was £21.5m (H1 2017: £19.9m) and operating margin was 4.9% (H1 2017: 4.9%) reflecting an adjustment for the amortisation of acquisition related intangible assets of £0.3m (H1 2017: £0.3m).

Revenue increased by 6.8% on a constant currency basis, comprising like-for-like growth of 2.2%, net contract gains of 2.9%, and the acquisition of Stockheim adding a further 1.7%. As with the UK, like-for-like sales were stronger in air than in rail, with good growth in the air businesses particularly in France, Germany, Switzerland and Spain, which continues to benefit from tourists switching from the Middle East.

Underlying operating profit increased to £21.8m, an increase of 9.0% on a constant currency basis. This growth was helped by the improved like-for-like sales and our operating efficiency initiatives, but was impacted by food and labour cost inflation, pre-opening costs at Marseille and integration costs at the new acquisition, Stockheim, in Germany.

North America

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

Revenue increased by 34.2% on a constant currency basis, comprising like-for-like growth of 3.1% and net contract gains of 31.1%. Like-for-like growth benefited from positive trends in airport passenger numbers in the North American market, but continued to be adversely impacted by changes in airline route scheduling and passenger flows at a small number of our airports.

Net contract gains of 31.1% included the benefit of the full year effect of the major contracts that started in the second half of last year, in particular at Chicago Midway and at JFK T7. We have also opened a number of new outlets during the first half, including at Newark, San Francisco and Toronto. Looking forward to the second half of the year, the pipeline is encouraging, however we will meet the anniversary of many of the new units which opened in the second half of last year. We also expect to see the closure of the temporary units and redevelopment of new units at Chicago Midway and JFK T7.

Underlying operating profit increased to £6.4m, an increase of 20.0% on a constant currency basis. Underlying operating margins have decreased slightly due to a significant increase in depreciation year-on-year, which was due to an impairment charge at Houston airport, which has been adversely impacted by significant changes in airline flight schedules and passenger flows. Excluding depreciation, the EBITDA margin improved by 40bps, reflecting continued progress on operating efficiencies.

Rest of the World

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

Revenue increased by 30.4% on a constant currency basis, with an increase in like-for-like sales of 10.3%, net contract gains of 9.5%, and the additional two months relating to the acquisition of TFS in India contributing a further 10.6%. Like-for-like sales were driven by the strong trading performance in India but also ongoing passenger growth in Hong Kong and Egypt, which continues its recovery from the terrorist incidents a few years ago. Net gains came from new units in China at Shenyang, in Thailand at Phuket, and in India where we opened new units in Delhi and Kolkata airports, and in Vijayawada and Agra railway stations.

Underlying operating profit for the Rest of the World was £13.6m, an increase of 202.1% on a constant currency basis, in part due to the inclusion of 6 months trading from TFS in India, compared to 4 months in the first half of last year, but also strong year-on-year growth in the Indian business and strong profit performance in Asia Pacific and the Middle East.

Share of profit of associates

The Group's share of profit from associates was £0.2m (H1 2017: £0.7m) with our joint venture operations in the Rest of the World delivering strong performances. The reduction year-on-year is mainly driven by the disposal of our investment in Avecra in the second half of 2017.

Net finance costs

Underlying net finance costs decreased year-on-year to £6.7m (H1 2017: £8.8m), primarily due to the reduction in interest rates negotiated through an amend and extend of the Group's debt facility in October 2017 and lower net debt. Reported net finance costs were £6.0m (H1 2017: £9.5m), the additional £0.7m income being the unwind of the discount and revaluation of the financial liability to acquire the remaining 16% interest in TFS. Underlying net finance costs are expected to rise in the second half as a result of the special dividend paid in April 2018, and therefore for the full year are expected to be approximately £15m - £16m.

Taxation

The Group's underlying tax charge for the period was £10.7m (H1 2017: £7.6m), equivalent to an effective tax rate of 22.0% (H1 2017: 22.0%) of underlying profit before tax. On a reported basis the tax charge for the period was £10.5m (H1 2017: £7.4m). Looking forward we expect the underlying tax rate to remain at around 22% for the full year.

Non-controlling interests

The non-controlling interests increased year-on-year by £3.8m to £11.1m. The increase largely reflects the performance of TFS and the growth in our joint venture businesses (accounted for as subsidiaries), most of which are in North America and the Rest of the World. For the full year, we expect our non-controlling interests to be approximately £24m - £25m.

Earnings per share

Underlying earnings per share was 5.6 pence per share (H1 2017: 4.2 pence per share), an increase of 33.3% year-on-year. Reported earnings per share was 5.6 pence per share (H1 2017: 3.8 pence per share).

Dividends

The Board has declared an interim dividend of 4.8 pence per share (H1 2017: 3.2 pence), with a view to maintaining the pay-out ratio for the full year at 40%, consistent with the Group's stated priorities for the uses of cash and after careful review of the capital expenditure requirements for the coming years. The dividend will be paid on 29 June 2018 to shareholders registered on 1 June 2018. The ex-dividend date will be 31 May 2018.

Post balance sheet events

On 16 April 2018, the Company completed a share consolidation to maintain the comparability of the Company's share price before and after the special dividend. Each shareholder received 30 new ordinary shares in substitution for every 31 existing ordinary shares held at the record date. Following this, on 27 April 2018, the special dividend of 20.9 pence per share was paid to shareholders.

Cash flow

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

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

2 Capital expenditure is net of capital contributions from non-controlling interests of £2.6m (H1 2017: £1.6m)

3 Current period amount relates to the acquisition of Stockheim and comprises consideration (£19.3m) less cash and cash equivalents acquired (£0.5m). Prior period amount relates to the acquisition of TFS and comprises consideration of £42.7m adjusted for cash and cash equivalents acquired (£15.2m), other financial assets acquired (£0.8m) and long and short term borrowings acquired (£8.3m).

The Group generated net cash flow from operating activities of £91.8m (H1 2017: £56.8m) and underlying free cash flow outflow of £6.5m, a decrease in cash outflow of £46.5m compared to the first half of 2017. This improvement is driven by the growth in operating profit and improved working capital, as well as benefiting from lower acquisition costs for Stockheim compared to TFS in the prior year.

Capital expenditure remained relatively consistent at £61.5m. Looking forward to the full year, capital expenditure is expected to be in the range of £130m - £140m, a reflection of the timing of our investment into new units and the commencement of redevelopment work at Chicago Midway Airport and JKF T7.

Working capital was broadly neutral, compared with our normal first half cash outflow reflecting our normal seasonal working capital cycle. The improvement of £19.1m compared to last year reflected the strong sales growth and the fact that, due to the timing of Easter, some payments at the period end fell into April rather than March.

Net finance costs paid of £6.1m were lower than in the first half of 2018, primarily due to the reduction in interest rates negotiated through an amend and extend of the Group's debt facility in October 2017, and the lower level of net debt.

The dividend paid of £23.5m reflected the cost of the 2017 final dividend of 4.9 pence per share.

Overall, the Group had net cash outflow of £30.0m during the period.

Balance sheet and net debt

Net assets decreased slightly in the first half to £464.8m (30 September 2017: £465.0m), with net debt increasing to £290.1m (30 September 2017: £262.2m) reflecting the normal seasonality of the business ahead of the peak summer trading period.

The increase in net debt of £27.9m was driven by the net cash outflow of £30.0m partially offset by a foreign exchange translation impact of £2.3m arising from the strengthening of Sterling during the period.

Leverage has reduced compared to last half year with net debt:EBITDA at 1.1 times, compared with 1.7 times at the end of 31 March 2017.

Going concern

After making due enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for at least 12 months from the date of approval of this report and, therefore, continue to adopt the going concern basis in preparing the accounts.

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 2017.

These risks, together with the Group's risk management process, are detailed on pages 16 to 21 of the Annual Report and Accounts 2017, and relate to the following areas: business environment; retention of existing client relationships; poor execution and mobilisation of new contracts; labour laws and unions; implementation of efficiency programmes; changing client behaviours; expansion into new markets; senior management capability and retention; intensified competition; impact of Brexit; insufficient business development capability and investment; compliance risk; execution of outsourcing programmes; maintenance/development of brand portfolio; cyber threats; and tax strategy.

Alternative Performance Measures

The Directors use alternative performance measures for analysis as they believe these measures provide additional useful information on the underlying trends, performance and position of the Group. The alternative performance measures are not defined by IFRS and therefore may not be directly comparable with other companies' performance measures and are not intended to be a substitute for IFRS measures.

Revenue growth

As the Group operates in 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 will be impacted by movements in actual exchange rates. The Group presents its financial results on a constant currency basis in order to eliminate the effect of foreign exchange rates and to evaluate the underlying performance of the Group's businesses. The table below reconciles reported revenue to constant currency sales growth, like-for-like sales growth, net contract gains/(losses) and impact of acquisitions where appropriate.

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

2 Like-for-like sales represent revenues generated in an equivalent period in each financial period in outlets which have been open for a minimum of 12 months. 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 closed in the past 12 months. Net contract gains/(losses) are presented on a constant currency basis.

4 Acquisition impact represents the revenue impact from acquired outlets owned for less than 12 months. Acquisition impact is presented on a constant currency basis. Once the acquisition annualises revenue is included in like-for-like sales or net contract gains where appropriate.

Underlying profit measures

The Group presents underlying profit measures, including operating profit, profit before tax and earnings per share, which excludes the amortisation of intangible assets arising on the acquisition of the SSP business in 2006 and the revaluation of the obligation to acquire an additional 16% ownership share of TFS by the end of calendar year 2018. A reconciliation from the underlying to the statutory reported basis is presented below.

Responsibility statement of the Directors in respect of the half-yearly 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 as adopted by the EU;

• The interim management report includes a fair review of the information required by:

- DTR 4.2.7R of the Disclosure 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 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

Kate Swann Jonathan Davies

Chief Executive Officer Chief Financial Officer

15 May 2018 15 May 2018

Independent 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 2018 which comprises the condensed consolidated income statement, the condensed consolidated statement of other comprehensive income, the condensed consolidated balance sheet, the condensed consolidated statement of changes in equity, the condensed consolidated statement of cash flows, 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 2018 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU 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. The annual financial statements of the company are prepared in accordance with International Financial Reporting Standards as adopted by the EU. The directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34 as adopted by the EU.

Our responsibilities

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.

John Cain for and on behalf of KPMG LLP

Chartered Accountants - 15 Canada Square, London, E14 5GL

15 May 2018

Condensed consolidated income statement

for the six months ended 31 March 2018

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

Condensed consolidated statement of other comprehensive income

for the six months ended 31 March 2018

Condensed consolidated balance sheet

as at 31 March 2018

Condensed consolidated statement of changes in equity

for the six months ended 31 March 2018

1 The other reserves includes the capital redemption reserve, translation reserve, cash flow hedging reserve and the obligation to acquire an additional share of a joint venture. The decrease of £8.0m in other reserves (H1 2017: decrease of £30.8m) comprises an increase to the translation reserve of £12.5m (H1 2017: decrease of £15.3m), a decrease to the cash flow hedging reserve of £4.5m (H1 2017: increase of £3.4m) and no movement in the obligation to acquire an additional share of a non-controlling interest in TFS (H1 2017: creation of the obligation to acquire an additional share of a non-controlling interest in TFS of £18.9m).

Condensed consolidated cash flow statement

for the six months ended 31 March 2018

Notes

1 Preparation

Basis of preparation and statement of compliance

The condensed consolidated half-yearly financial statements of SSP Group plc (the Group) have been prepared in accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting as adopted by the EU. The annual consolidated financial statements of the Group are prepared in accordance with International Financial Reporting Standards as adopted by the EU (IFRS) and the Companies Act 2006 applicable to companies reporting under IFRS. These condensed consolidated half-yearly financial statements do not comprise statutory accounts within the meaning of Section 435 of the Companies Act 2006, and should be read in conjunction with the Annual Report and Accounts 2017. The comparative figures for the six months ended 31 March 2017 are not the Group's statutory accounts for that financial year. Those accounts were reported upon by the Group's auditors and delivered to the registrar of companies. The report of the auditors was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain statements under Section 498 (2) or (3) of the Companies Act 2006.

These financial statements are presented in Sterling and unless stated otherwise, rounded to the nearest £0.1 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 2018 are consistent with the accounting policies applied by the Group in its consolidated financial statements as at, and for the year ended, 30 September 2017 as required by the Disclosure and Transparency Rules of the UK's Financial Conduct Authority.

Changes in accounting policy and disclosures

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

The following standards, issued by the IASB and endorsed by the EU, have not yet been adopted:

IFRS 9 'Financial Instruments' replaces IAS 39 'Financial instruments - Recognition and Measurement' (effective for the year ending 30 September 2019) - the Group continues to assess the impact this standard would have on its consolidated results and financial position.

IFRS 15 'Revenue from Contracts with Customers' (effective for the year ending 30 September 2019) - the Group continues to assess the impact of the new standard, but based on a preliminary assessment, the Group believes that IFRS 15 will not have a significant impact on the timing and recognition of revenue.

IFRS 16 'Leases' (effective for the year ending 30 September 2020) - the Group is reviewing the standard in more detail to ensure it prepares itself for adoption and expects that IFRS 16 will have a material impact on the Group's consolidated results and an associated impact on both assets and liabilities.

2 Segmental reporting

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

Management monitors the performance and strategic priorities of the business from a geographic perspective, and in this regard has identified the following four key "reportable segments": the UK, Continental Europe, North America and Rest of the World (RoW). The UK includes operations in the United Kingdom and the Republic of Ireland; Continental Europe includes operations in the Nordic countries and in Western and Southern Europe; North America includes operations in the United States and Canada; and RoW includes operations in Eastern Europe, the Middle East, Asia Pacific and India. These segments comprise countries which are at similar stages of development and demonstrate similar economic characteristics.

The Group's management assesses the performance of the operating segments based on revenue and underlying operating profit. Interest income and expenditure are not allocated to segments, as they are managed by a central treasury function, which oversees the debt and liquidity position of the Group. The non-attributable segment comprises costs associated with the Group's head office function and depreciation of central assets.

The following amounts are included in underlying operating profit:

* Excludes amortisation of acquisition related intangible assets.

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

3 Earnings per share

Basic earnings per share is calculated by dividing the result for the period attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share is calculated by dividing the result for the period attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period adjusted by potentially dilutive outstanding share options.

Underlying earnings per share is calculated the same way except that the result for the period attributable to ordinary shareholders is adjusted for specific items as detailed below:

The number of ordinary shares in issue as at 31 March 2018 was 479,392,339 (30 September 2017: 475,226,453).

4 Operating costs

5 Finance income and expense

Adjustments to net finance expense

The adjustments to net finance expense in the period to 31 March 2018 include the revaluation and discount unwind of the obligation to acquire an additional 16% share of TFS in late 2018.

6 Cash flow from operations

7 Dividends

The proposed interim dividend of 4.8 pence per share (H1 2017: 3.2 pence per share), totalling £22.9m (H1 2017: £15.2m), will be paid on 29 June 2018 to shareholders on the register on 1 June 2018.

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. It does not include information for financial assets and financial liabilities not measured at fair value if the carrying value is a reasonable approximation of fair value.

Financial assets and liabilities in the Group's consolidated balance sheet are either held at fair value, or their carrying value approximates to fair value, with the exception of loans, which are held at amortised cost. The fair value of total borrowings estimated using market prices at 31 March 2018 is £447.1m (30 September 2017: £454.2m).

All of the financial assets and liabilities measured at fair value are classified as level 2 using the fair value hierarchy whereby inputs, which are used in the valuation of these financial assets, and liabilities and have a significant effect on the fair value, are observable either directly or indirectly. There were no transfers during the period.

9 Business combinations

Stockheim

The Group acquired part of the Stockheim Group, a travel concession business based in Germany, for EUR 22m (£19.3m), with effect from 1 January 2018. The business operates 25 food and beverage outlets in airports and railway stations, including at Düsseldorf and Cologne and therefore strengthens SSP's presence in travel locations across Germany.

SSP acquired 100% of the shares in Stockheim (Hbf.-Köln) GmbH and Stockheim Systemgastronomie GmbH & Co. KG (together Stockheim). Control was obtained on 1 January 2018, and as a result SSP is consolidating the results from this date. Provisional values for the assets and liabilities have been used to calculate the goodwill balance. Intangible assets are yet to be valued but are not expected to have a material impact on the goodwill calculation.

In total Stockheim contributed approximately £6.9m of revenue and £0.2m of operating loss in the period after significant one-off integration costs.

Travel Food Services

During the year ended 30 September 2017, the Group acquired 33% of the issued share capital of Travel Food Services Private Limited (TFS), a leading operator of food and beverage concessions in travel locations in India. As part of the acquisition the Group agreed to acquire a further 16% shareholding by the end of calendar year 2018, bringing the total ownership to 49%.

The acquisition provided an entry point for the Group into the Indian market and the Group expects to benefit from TFS' established strong local presence. By virtue of the agreement with the other shareholders, the Group has control over TFS' relevant activities including establishing budgets and operating plans, appointment of key management personnel and ongoing review of performance and reporting procedures and as such is consolidating TFS and its group companies.

The consideration payable for the additional 16% is based on a multiple of TFS' 2018 Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) and has been estimated by reference to most recent financial statements and internal budgets and forecasts, discounted with a suitable discount rate and subject to a cap. The discount rate is pre-tax and reflects the current market assessments of the time value of money and a specific risk premium relevant to the TFS business. This discount rate is considered to be equivalent to the rate a market participant would use.

10 Post balance sheet event

On 16 April 2018, the Company completed a share consolidation to maintain the comparability of the Company's share price before and after the special dividend. Each shareholder received 30 new ordinary shares in substitution for every 31 existing ordinary shares held at the record date. Following this, on 27 April 2018, the special dividend of 20.9 pence per share was paid to shareholders.

11 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 pages 97 and 98 of the Annual Report and Accounts 2017.

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 months to 31 March 2018.

12 Forward looking statement

This document contains forward-looking statements. These forward-looking statements include all matters that are not historical facts. Statements containing the words "believe", "expect", "intend", "may", "estimate", "anticipate" or, in each case, their negative and words of similar meaning are forward-looking. By their nature, forward-looking statements involve risks and uncertainties because they relate to events that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that the Group's actual financial condition, results of operations and cash flows, and the development of the industry in which we operate, may differ materially from those made in or suggested by the forward-looking statements contained in this document or other made by us or on the Group's behalf. In addition, even if the Group's financial condition, results of operations and cash flows, and the development of the industry in which we operate are consistent with the forward-looking statements in this document, those results or developments may not be indicative of results or developments in subsequent periods. Except where required to do so under applicable law or regulatory obligations, we undertake no obligation to update any forward looking statements whether as a result of new information, future events or otherwise.