GATEGROUP HOLDING AG gategroup drives revenue growth of 14.1% and delivers substantial profitability and cash flow growth
- Revenue at constant currency up 14.1% year over year to CHF 2,547.9 million for first nine months 2016, with organic volume growth at 6.2%.
- Significant acceleration in first nine months EBITDA, from CHF 98.4 million last year to CHF 156.8 million at constant currency.
- Net profit increased by CHF 110.2 million to CHF 55.1 million. Free cash flow improved by CHF 29.2 million year over year.
- HNA filed request for cancellation of outstanding publicly held gategroup Shares. gategroup will apply for delisting and suspension of listing obligations post-settlement in accordance with SIX Swiss Exchange regulations.
ZURICH, November 17, 2016 - gategroup Holding AG continues to deliver in line with targets. In the first nine months of 2016, the Group reported substantially higher revenue and margins year over year, with growth in net profit and improved free cash flow.
With the continued emphasis on its Gateway 2020 strategy, gategroup takes a two wing approach, with growth and innovation on one side, and efficiencies and cash flow on the other.
Growth and Innovation
gategroup is delivering on strategy with extended and expanded contracts; the introduction of new and innovative products and services; and geographic expansion, including the following highlights:
More than CHF 550 million revenue per annum in renewals
The total value of gategroup's contract renewals in the first nine months of 2016 amounts to more than CHF 550 million on an annual basis, with a retention rate of 96%.
In September, easyJet extended its contract with gategroup through 2022, an additional three years beyond the original expiration date. gategroup will continue managing easyJet's end-to-end retail program and provisioning crew catering across the airline's entire network.
Also in September, airberlin extended and expanded its existing partnership with gategroup for four years until the end of 2020. gategroup continues to provide catering and provisioning for the airline's onboard service, and has extended its scope to include the retail of food, beverages and duty free items. Further, gategroup has expanded its long-haul catering business to serve all airberlin flights inbound to Germany from the US.
Introducing uqonic - next generation of retail on board
In September, gategroup introduced uqonic, a total retail solution with four differentiating factors:
Business Insights - using data comprising purchasing preferences of millions of passengers worldwide to help enhance traveler satisfaction, track crew performance, boost sales and maximize profits.
House of Brands - offering clients an infinite pipeline of key developments designed and manufactured with top suppliers and brand members.
5-Star Hospitality - developing, formalizing and implementing the necessary skill sets through an industry-validated, in-flight retail certification program.
360° Tech Platform - combining cutting-edge data tools with a proprietary integrated solution - from pre-order to wastage and shrinkage management, and from data-driven personalized offerings and smart trolleys, to duty and tax management.
Geographic Expansionin Latin America and Europe
In August, gategroup increased its presence in Latin America through the acquisition of 51% of Gate Gourmet Bolivia.
Also in the third quarter, gategroup acquired 51% of Airfood S.r.l., a manufacturer of bakery products for rail and catering companies. With this acquisition, the Group established a presence in Italy and continues to improve its synergies in Europe.
Efficiencies and Cash Flow
Divestment in non-strategic assets
In October, Inflight Service Group (IFS) signed an agreement to sell its EuroShop duty free stores at airports and ferries in Poland and Estonia to Lagardère Travel Retail. gategroup is divesting its small airport retail operation in line with the focus on core business under its Gateway 2020 strategy. The transaction covering the Polish assets is subject to regulatory approval.
gategroup is making considerable headway as it drives standardization and efficiencies, combined with improvements in operating performance and cash flow. The Group's Zero Based Budgeting program continues to gain traction with savings of CHF 50-60 million per year expected by 2017. The targeted reduction of 300 managerial positions is on track to deliver 100% by the end of 2016, leading to CHF 20 million run-rate savings per annum.
Solid growth in 3rd quarter: At constant currency, increase of 15.8% in revenue and adjusted EBITDA margin to 8.7% versus 8.4% in the prior year
The Group achieved accelerated growth in the third quarter of 2016, with revenues increasing by 15.8% to CHF 947.7 million at constant currency, compared to the same period in 2015. EBITDA grew to CHF 77.2 million or by 12.5% over EBITDA of CHF 68.6 million in the third quarter of 2015. At constant currency, EBITDA increased to CHF 78.9 million or by 15.0%, which translates to an EBITDA margin of 8.3%. Excluding one-off costs related to the takeover by HNA Group, EBITDA grew to CHF 82.7 million at constant currency reaching the EBITDA margin of 8.7%, an increase by 30 basis points over 2015 Adjusted EBITDA for the same period last year.
Strong year-over-year growth in first nine months: Increase of 14.1% in revenue and 59.3% in EBITDA at constant currency
The Group continued to drive growth, with total reported revenues for the first nine months of 2016 increasing by 13.2% to CHF 2,529.5 million (up by 14.1% to CHF 2,547.9 million at constant currency) compared to CHF 2,233.7 million for the same period in 2015. The Group saw organic volume growth of 6.2% supported by acquisitions of 8.6%, marginally offset by a net win/loss ratio of (0.7)% and negative currency movements against the Swiss Franc of (0.8)%.
EBITDA was at CHF 153.4 million for the first nine months of 2016 (6.1% EBITDA margin), up 55.9% from CHF 98.4 million (4.4% EBITDA margin) for the same period in 2015. At constant currency, EBITDA for the first nine months of the year was CHF 156.8 million, representing a 59.3% increase year over year. This translates to an EBITDA margin of 6.2% at constant currency, or an increase of 1.8 percentage points over the same period last year.
Excluding one-off costs related to the takeover by HNA Group, EBITDA grew to CHF 161.6 million at constant currency, or an EBITDA margin of 6.3%. This is an increase by 70 basis points over Adjusted EBITDA year over year.
gategroup reported a net profit of CHF 55.1 million for the first nine months of 2016, an increase of CHF 110.2 million compared to a CHF 55.1 million loss for the same period in 2015. This improvement of the net result was mainly due to improved EBITDA, lower finance costs and the absence of the 2015 restructuring costs.
Strong free cash flow and deleveraging: Free cash flow grew by CHF 29.2 million
The Group generated CHF 85.6 million cash flow from operations for the first nine months of 2016 compared to CHF 66.8 million for the same period in 2015. Free cash flow reached CHF 18.7 million. This is the result of higher EBITDA and lower interest expense and finance costs due to the various refinancing measures undertaken in 2015, offset by one-off costs related to the HNA transaction.
gategroup's balance sheet as at September 30, 2016, shows total shareholders' equity and non-controlling interests of CHF 263.6 million, compared to CHF 214.6 million as at September 30, 2015.
Net financial debt was CHF 388.8 million, with a net debt to LTM EBITDA of 1.86x, which as previously reported increased compared to year-end (1.7x) due to the IFS acquisition financing in February, still well below the financial covenant of 3.0x.
Segments
For the first nine months of 2016, EMEA reported total revenue of CHF 1,312.0 million or CHF 1,318.0 million at constant currency, up 21.2% over total revenue of CHF 1,082.8 million for the same period in 2015 (up 21.7% at constant currency). The region reported EBITDA of CHF 99.0 million (7.5% EBITDA margin), compared to CHF 60.3 million (5.6% EBITDA margin) in the first nine months of 2015. The results reflect the continued positive financial impact of the IFS integration to the business, cost initiatives, and strong organic growth, including the launch of warehousing and distribution business with SAS.
The North America region reported total revenue of CHF 816.2 million for the period under review, or CHF 796.3 million at constant currency. Compared to total revenue for the first nine months of 2015 of CHF 776.4 million, this is an increase of 5.1% (2.6% at constant currency). EBITDA increased to 22.3 million (2.7% EBITDA margin) compared to CHF 13.5 million (1.7% EBITDA margin) for the same period in 2015. The improved results are largely due to continued organic growth with high incremental margins, several cost and restructuring measures as well as absence of the 2015 adjustments that were largely due to the ratified U.S. labor agreement.
The Latin America region reported total revenue of CHF 180.7 million for the first nine months of 2016, a 10.5% increase over total revenue of CHF 163.6 million for the same period in 2015. At constant currency, the region had a 34.2% jump in revenue to CHF 219.5 million. The region also saw an increase in EBITDA, reporting CHF 19.7 million (10.9% EBITDA margin) compared to 15.3 million (9.4% EBITDA margin) for the first nine months of 2015. EBITDA continued to be impacted by adverse currency movements against the Swiss Franc in some of the major countries in the region. This adverse impact was mostly mitigated by new business won, organic volume growth, cost management, and the contribution from recent acquisitions. At constant currency, EBITDA was up 59.5% year over year at CHF 24.4 million (11.1% EBITDA margin).
The Asia Pacific region had total revenue of CHF 229.8 million for the first nine months of 2016, up 4.5% from CHF 219.8 million for the same period last year. At constant currency, the region had revenue of CHF 223.3 million, an increase of 1.6%. EBITDA was at CHF 12.4 million (5.4% EBITDA margin), up 33.3% from EBITDA of CHF 9.3 million (4.2% EBITDA margin) for the same period in the prior year. At constant currency, EBITDA was up 19.4% year over year at CHF 11.1 million (5.0% EBITDA margin). The regional team continues to address challenges in India to further improve operational and financial performance, with the rest of the Asia Pacific's operations performing strongly.
HNA Acquisition Update
On 20 May 2016, HNA Aviation (Hong Kong) Air Catering Holding Co., Ltd., Hong Kong ("Offeror"), a subsidiary of HNA Group Co., Ltd. ("HNA"), published the Offer Prospectus on the public tender offer ("Offer") for all publicly held shares of gategroup Holding AG ("gategroup Shares").
On 20 October 2016, the Offeror filed a request with the Commercial Court of the Canton of Zurich for the cancellation of the outstanding publicly held gategroup Shares in accordance with art. 137 FMIA. The Offeror supplemented the request documentation on 25 October 2016 after 98.06% of the share capital and voting rights of gategroup Holding AG were tendered to HNA.
HNA has confirmed that it intends to settle the tender offer shortly following receipt of final regulatory approvals.
On 16 November 2016, the Board of Directors of gategroup endorsed the application for the delisting of gategroup Holding AG from the SIX Swiss Exchange and for suspension of listing obligations. The application for exemption from certain obligations for maintaining its listing will be filed immediately upon settlement of the tender offer. In light of these developments, no investor and analyst presentation will be held for the third quarter 2016.
After the satisfaction of all offer conditions, the Offeror will (i) inform about the closing of the second trading line for gategroup Shares tendered into the Offer and (ii) announce the settlement date. Settlement of the Offer is expected in the fourth quarter 2016.
Gateway 2020: Achieving ahead of expectations
Xavier Rossinyol, gategroup Chief Executive Officer, said: "gategroup's strategy continues to produce financial and commercial results, with improved metrics in revenues, EBITDA margin, net profit, and free cash flow since launching Gateway 2020 last year.
Revenue for the first nine months at constant currency increased by 14.1% year over year and 6.2% organically, with a spike in net profit for the first nine months to CHF 55.1 million.
The improved financial results are the product of our new organization and our efficiency measures as well as new commercial initiatives and a focus on retail on board. The acquisition strategy to expand our network is also an instrumental step towards achieving our short- and long-term goals.
The entire gategroup team has my thanks for their full commitment to delivering on our strategy and achieving significant gains toward gategroup's ongoing success."
More information on third quarter 2016 results and further Company information are available at the following link: http://www.gategroup.com/investors/financial-reports-and-presentations
Overview of financial key figures January - September 2016
in CHF m | Q3 YTD 2016 | Q3 YTD 2016 @CC | Q3 YTD 2015 | Change (Q3 YTD 2016 vs. Q3 YTD 2015) | Change (Q3 YTD2016 @CC vs.Q3 YTD 2015) | |||
Revenue | 2,529.5 | 2,547.9 | 2,233.7 | 13.2% | 14.1% | |||
EBITDA EBITDA margin | 153.4 6.1% | 156.8 6.2% | 98.4 4.4% | 55.9% 1.7pp | 59.3% 1.8pp | |||
Adjusted EBITDA Adjusted EBITDA margin | 161.6 6.3% | 125.5 5.6% | 28.8% 0.7pp | |||||
Operating profit Operating profit margin | 86.9 3.4% | 90.9 3.6% | 14.2 0.6% | 512.0% 2.8pp | 540.1% 3.0pp | |||
Net profit/(loss) attributable to shareholders of the Company | 53.4 | (56.3) | 109.7 | |||||
Cash generated in operations | 85.6 | 66.8 | 18.8 | |||||
Net debt | 388.8 | 245.3 | 58.5% | |||||
Contact
Dagmara Robinson
Investor Relations and Corporate Communications
invest@gategroup.com
+41 44 533 70 32
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