SSP Group plc Annual Report and Accounts 2018 SSP Group plc Annual Report and Accounts 2018 CONTENTS AT A GLANCE Strategic report SSP is a leading operator of food and beverage 01 Highlights outlets in travel locations across 33 countries. 02 Chairman’s statement As ‘The Food Travel Experts’, we have a 03 Chief Executive’s statement deep understanding of the diverse needs 04 Our business of travellers. 06 Our business model 08 Our strategy All of our 2,600+ outlets, from quick service 10 Financial review to fine dining, are developed or tailored to 15 Key performance indicators be run in operationally, high-volume travel 17 Risk management locations, in order to meet the specific and principal risks requirements of our clients and customers. 24 Sustainability report North America UK Corporate governance • c. 30 sites • c. 130 sites • c. 300 units • c. 570 units 28 Board of Directors New York Belfast 30 Corporate Governance report 35 Audit Committee report 39 Statement by the Chairman of the Remuneration Committee 41 Annual report on remuneration 48 Directors’ remuneration policy 55 Directors’ report 60 Statement of Directors’ responsibilities Financial statements 61 Independent auditor’s report 65 Consolidated income statement 66 Consolidated statement of other comprehensive income 67 Consolidated balance sheet 68 Consolidated statement of changes in equity 69 Consolidated cash flow statement 70 Notes to consolidated Dusseldorf Phuket financial statements 101 Company balance sheet and Company statement of changes in equity 102 Notes to the Company financial statements 110 Company information Continental Europe Rest of the World • c. 280 sites • c. 60 sites • c. 960 units • c. 780 units 01 SSP Group plc Annual Report and Accounts 2018 Strategic report Corporate governance Financial statements HIGHLIGHTS Revenue +9.5% £2,564.9m (Year-on-year at constant currency1) Constant currency1 increase +. +. +. +. +. , .m ,.m +. ,.m +. ,.m ,.m +. Flat +. Actual currency Actual Underlying operating profit2 Operating profit +22.7% £195.2m (Year-on-year at constant currency1) £193.3m Constant currency1 increase +20.1% (Year-on-year at actual currency) +. +. +. +. +. .m .m +. +. .m .m .m +. +. +. Actual currency Actual OUR SCALE 33 500+ c. 37,000 countries brands employees 2,600+ c. 500+ c. 1,500,000 units sites customers daily 1 Constant currency is based on weighted average exchange rates during the previous financial year. 2 Stated on an underlying basis which excludes 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. Other notes Like-for-like sales represent revenues generated in an equivalent period in each financial year in outlets which have been open for a minimum of 12 months and are presented on a constant currency basis. 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, which are presented on a constant currency basis. Please refer to page 16 for supporting reconciliations from SSP Group plc’s statutory reported results to these performance measures. 02 SSP Group plc Annual Report and Accounts 2018 CHAIRMAN’S STATEMENT Continued growth in 2018 Once again, I’m pleased to report that the Group has delivered a strong set of annual results, with revenue growing by 7.8% to £2,564.9m, and underlying earnings per share increasing by 23.6% to 25.1 pence per share. We continued to make good progress against our five strategic levers, as detailed on pages 8 and 9. Despite an uncertain backdrop in a number of our key markets, we continued to deliver good like-for-like sales growth and also made strong progress in net contract gains, giving us a stronger foothold in several strategically important markets. Alongside this, we have continued to deliver further operational improvements and margin growth through a number of strategic initiatives. Our success is underpinned by our ability to deliver an attractive brand line-up and innovative bespoke concepts to meet the needs of our customers and the expectations of our clients. We announced a number of important contract wins in the year, further extending our presence in North America and in the Rest of the World, where there are significant structural growth opportunities. Our new Philippines joint venture commenced operations We have delivered a at Mactan-Cebu Airport and we are on track to complete the acquisition of the final tranche of 49% of our Indian joint venture, Travel Food Services. strong set of results In 2018, capital expenditure went up once again to a record £144.2m, as we continued to open new units and invest in new technology, such as self-order kiosks in some of our and have continued to quick-service restaurants. We continue to invest in and develop our people, strengthening central, regional and local invest in the expansion teams around the world. of the business across Dividend As a result of the Group’s strong performance, I am pleased to announce that the Board has all regions. recommended a final dividend of 5.4 pence per share, making a total dividend for the year of 10.2 pence per share, which is at the top end of the dividend payout range we announced at the time of the IPO. The Board has also proposed a special dividend of approximately £150m expected to be paid in April 2019, which will be in addition to the final dividend for the year ended 30 September 2018. This reflects our confidence in the future of the business and our desire to maintain an efficient balance sheet. Both the final and special dividend will be subject to shareholder approval at the Annual General Meeting in February 2019. Sustainability Across our markets, we are committed to operating sustainably and to responsibly managing those environmental and social issues which have been identified as material to our business and communities in which we operate. Our commitments and progress throughout the past year are outlined on pages 24 to 27 of this report. Our employees and stakeholders The strength of the Group is principally due to the skills, experience and dedication of the 37,000 colleagues we employ across the world. On behalf of the Board, I would like to thank them all for their contribution to our success during the year. Outlook Looking forward, we have secured some important new business wins, and the longer term pipeline is encouraging. Increasing passenger numbers around the world, both in the airport and railway station sectors, provide significant structural growth opportunities. I am confident that the Group will continue to benefit from these trends and deliver sustainable value creation for shareholders. With this in mind, the Board anticipates another good performance in the year ahead. Vagn Sørensen Chairman 20 November 2018 03 SSP Group plc Annual Report and Accounts 2018 Strategic report Corporate governance Financial statements CHIEF EXECUTIVE’S STATEMENT Overview The Group delivered a strong performance in the year, driven by robust like-for-like sales growth, strong new contract openings across the world and the further implementation of our programme of strategic initiatives. We are continuing to invest in the growth and development of the business and to bring new brands and concepts to our clients and customers. We have made further good progress in the development of the business in North America, and we have seen strong growth from TFS, our joint venture in India. We have delivered another year of margin improvement, driven by like-for-like sales growth and the ongoing roll out of our operational efficiency programmes. Cash flow has been strong, funding another record year of investment in the business. The increase in the ordinary dividend, which again represents a pay-out ratio of 40%, and the proposed c. £150m special dividend reflect our confidence in the business and our desire to maintain an efficient balance sheet. Financial results The Group delivered a strong financial performance in 2018, with underlying operating profit increasing by 22.7% (on a constant currency basis) to £195.2m. Total revenue increased by Another year of strong 9.5% on a constant currency basis, including like-for-like sales growth of 2.8%, net contract gains of 5.1% and revenue from acquisitions of 1.6%. performance with Like-for-like sales growth has remained at a broadly similar level throughout the year and was in line with the expectations we set at the start of the year of between 2.0% and 3.0%. a further c. £150m Like-for-like sales growth has been driven by increased passenger numbers in the air sector, whilst trading in the rail sector has remained softer, in line with recent trends. planned cash return Net contract gains in the year were 5.1% benefitting from the full year effect of some significant contracts which opened in the second half of 2017, including new openings at Chicago Midway to shareholders. and JFK T7 Airports in North America. We also saw a number of important new openings during this year, including at airports in North America at Newark, Seattle, LaGuardia, San Francisco and Toronto, in the Rest of the World at Shenyang in China, and Delhi in India, and in Continental Europe at Marseille, Nice, Frankfurt and Barcelona. We continue to focus on retaining profitable contracts and our contract renewal rate in 2018 was in line with historical levels. During the year, we won a number of important new contracts, including some significant contracts in Continental Europe, most notably at Montparnasse station in Paris, a portfolio of 29 Starbucks in railway stations across the Netherlands, and 22 motorway service areas across Germany.