GATEGROUP HOLDING AG gategroup delivers strong operational, commercial and financial performance in 2015
- Gateway 2020 strategy to focus on top-line growth in combination with efficiency gains delivers margin expansion in first year of five-year plan
- Revenue for full year 2015 of CHF 3,107.7 million at constant exchange rates, 3.3% over prior year
- Adjusted 2015 EBITDA at CHF 180.8 million, a 7.2% increase versus prior year resulting in margin of 5.8% over 5.6% in 2014, boosted by fourth quarter 2015 EBITDA increase of 17.3% at constant currency
- Solid cash generation from operations at CHF 116.1 million. Dividend of CHF 0.30 per share proposed
ZURICH, March 10, 2016 - gategroup Holding AG reported a solid performance for 2015 on the basis of significant operational and commercial progress during a year of change. The results demonstrate that the Board of Directors, senior management and the entire gategroup team are on track to deliver on the five-year Gateway 2020 strategy.
Acceleration of Strategy: Delivering growth and efficiencies
In the first year of the five-year strategy, gategroup made considerable headway and is delivering to plan. The team simplified the business and engaged in turnaround measures to drive growth. These efforts are evident from the milestones reached in 2015 under the four pillars of Gateway 2020, including the following highlights:
Focus on the core - CHF 540 million revenues per annum renewed
In 2015, gategroup reached strategic contract renewals with Delta Air Lines, Air Canada and SAS, followed in early 2016 with United Airlines and American Airlines. The total value of these strategic contract renewals and expanded business is about CHF 2.4 billion, or more than 540 million on an annual basis. Additionally, gategroup is working towards the disposal of non-core assets and activities.
Commercial Innovation - Added CHF 250 million per year with IFS, accretive in 2016
gategroup expanded its retail on board offering through the acquisition of Inflight Service Group ("IFS"), which the Group announced in late 2015. The transaction was completed in February 2016 and will increase gategroup's revenue by CHF 250 million and EBITDA by CHF 13.4 million annually pre-synergies. The deal is expected to be cash accretive to Earnings Per Share in its first year. The acquisition further expands gategroup's leadership position in retail on board in terms of size, number of customers, business intelligence (with data comprising purchasing preferences of more than 175 million passengers worldwide), and onboard technology. The deal was complemented with new business agreed with TUI Group for retail on board services.
The Group also established Centres of Excellence in Culinary, Retail on Board, Technology and Innovation to support customers around the globe in creating a progressive, consumer-centric offering. A clear focus has been set to improve the full travel experience for the passenger.
Standardization and Efficiency - 300 positions identified - CHF 20m+ in savings
By the end of 2015, gategroup had achieved almost half of its overhead reduction target of about 300 managerial positions, which is as planned to be complete by the end of 2016 and will deliver run-rate savings of about CHF 20 million per annum.
Standardization and Efficiency - ZBB savings identification completed. Conversion of savings targets ongoing
Zero Based Budgeting ("ZBB") is integrated in the business, and savings opportunities for sustainable cost containment and efficiency improvements were incorporated into operating budgets for 2016. The savings for the wide range of initiatives are expected to be at the midpoint of 10-25% of the addressable operational spend of CHF 400 million.
Implementation of these initiatives will take about 18 months, with the full impact expected by year-end 2017.
Standardization and Efficiency - Operational Efficiencies and Procurement
gategroup is restructuring underperforming operations while reinforcing the global procurement function to drive cost improvements.
The cost savings from these three key initiatives within the Standardization and Efficiency pillar will compensate for already planned cost increases, especially in the US, as well as portfolio adjustments and on the net basis will contribute to EBITDA margin expansion of +25-50 basis points per annum over the next five years, including 2016.
Geographic Expansion - Established presence in Kazakhstan
gategroup established its presence at Astana International Airport in Kazakhstan through a partnership with the Airport Management Group, the operator of all state-owned airports in Kazakhstan. This cooperation provides gategroup with an immediate foothold in an attractive and growing market and offers airlines operating at Astana access to gategroup's comprehensive range of services.
Cash Flow Generation Improvements - Full debt refinancing
In 2015 gategroup entered into a new five-year EUR 240 million Revolving Credit Facility ("RCF"), replacing the EUR 100 million RCF. In addition gategroup refinanced its EUR 350 million 6.75% coupon bearing senior notes and signed a new five-year EUR 250 million unsecured Term Loan. The new financing structure of gategroup now consists of the EUR 240 million RCF and the new EUR 250 million Term Loan, with total annual interest costs below 3% - or about CHF 10 million at year-end utilization level versus previous annual costs of about CHF 26 million.
Clearly, gategroup's work under its new 5-year strategy is paying off. This is evidenced with delivery through year-end 2015 and accelerating into 2016. With the continued advancement of Gateway 2020 to plan, results will build year over year as targeted.
Financial Results
Solid growth in 4th quarter: Increase of 5.2% in revenue and 17.3% in EBITDA at constant currency
The Group achieved accelerated growth in the fourth quarter of 2015, with revenues increasing by 5.2% to CHF 795.6 million at constant currency, compared to same period in 2014. EBITDA grew to CHF 44 million, a 10% increase on a reported basis over fourth quarter 2014. At constant currency, EBITDA grew to CHF 46.9 million or by 17.3%, which translates to an EBITDA margin of 5.9%, an increase of 60 basis points year over year.
Strong performance in 2015: EBITDA at CHF 180.8 million at constant currency
On the back of a strong second half of the year, gategroup had total reported revenue for 2015 of CHF 2,996.4 million, or CHF 3,107.7 million at constant currency representing a 3.3% increase year over year. The Group saw organic volume growth of 4.8%, offset by a net win/loss ratio (1.2)% and disposals (0.3)% as well as currency movements against the Swiss Franc (3.7)%.
Reported EBITDA was at CHF 142.4 million in 2015 (4.8% EBITDA margin), down from CHF 168.6 million in the prior year. The reported EBITDA includes adjustments of CHF 27.0 million for a provision for the ratified U.S. labor agreement, a charge associated with addressing shareholding activism, as well as other provisions. Excluding those one-time charges and currency effects, the adjusted EBITDA at constant currencies was at CHF 180.8 million and 5.8% EBITDA margin. This is an improvement to prior year of 7.2% and 0.2 percentage points, respectively.
gategroup reported a CHF 63.4 million loss attributable to shareholders for the financial year, compared to CHF 38.9 million profit for 2014. Foreign exchange losses of CHF 23.8 million, in combination with restructuring charges and the aforementioned adjustments, were the primary factors driving this difference, masking additional contribution through modest revenue gains and cost improvement. As previously reported, the majority of the unrealized foreign exchange losses (CHF 18.0 million) occurred in the first quarter 2015, as the Group substantially reduced its foreign exchange exposure in the second quarter of the year by significantly reducing open intercompany balances held in foreign currencies.
Foreign exchange losses, refinancing early repayment fees and adjustments combined totaled CHF 104.4 million. Without these, gategroup would have reported a profit attributable to shareholders of CHF 41.0 million.
Cash flow statement and balance sheet
Cash generated from operations in 2015 of CHF 116.1 million remained on par with CHF 119.2 million in the previous year due to positive working capital. Additionally, through reduced capex, gategroup reported free cash flow of CHF 67.1 million over CHF 65.8 million in 2014.
gategroup's balance sheet as at December 31, 2015, shows total shareholders' equity and non-controlling interests of CHF 233.3 million, compared to CHF 290.7 million as at December 31, 2014. gategroup managed to substantially reduce borrowings thanks to the new flexible financing and effective cash management.
Net debt was CHF 240.1 million, an improvement by CHF 3.0 million year over year, while the net debt to EBITDA ratio increased to 1.69 times.
Segments
In June 2015, the Group realigned its business into a regional structure focused on operating excellence and standardization, reporting performance by four regional segments: EMEA (Europe, Middle East, Africa and the Commonwealth of Independent States), North America, Latin America and Asia Pacific.
EMEA reported total revenue of CHF 1,447.2 million, or CHF 1,529.3 million at constant currency, stable with total revenue of CHF 1,530.7 million in 2014. The reduction in reported revenue is largely due to optimization of gategroup's contract portfolio in 2014 and foreign exchange effects. The region reported EBITDA of CHF 79.9 million (5.5% of revenue), compared to CHF 96.2 million for 2014 (6.3% of revenue). Excluding adjustments of CHF 7.2 million, EMEA reported EBITDA of CHF 87.1 million (6.0% of revenue).
The North America region reported strong revenue growth, with total revenue for 2015 of CHF 1,045.4 million, or CHF 1,016.2 million at constant currency. Compared to total revenue of CHF 954.8 million in 2014, this is an increase of 9.5% (6.4% at constant currency). EBITDA was at CHF 27.0 million (2.6% of revenue), compared to EBITDA of CHF 36.2 million in 2014 (3.8% of revenue). Excluding adjustments of CHF 15.4 million, of which CHF 10.3 million is attributable to the ratified U.S. labor agreement, EBITDA was at CHF 42.4 million (4.1% of revenue).
The Latin America region reported increased total revenue of CHF 219.1 million for 2015, a 3.2% increase over total revenue of CHF 212.3 million for 2014. At constant currency, the region had a 19.3% jump in revenue at CHF 253.3 million. The region had EBITDA of CHF 20.8 million (9.5% of revenue), compared to CHF 22.8 million for 2014 (10.7% of revenue). EBITDA was heavily impacted by adverse currency movement against the Swiss Franc of over 30% in some of the major countries in the region. This adverse impact was mostly mitigated by new business won, organic volume growth and strong cost management. Excluding adjustments of CHF 2.1 million, EBITDA was at CHF 22.9 million (10.5% of revenue), stable with prior year.
The Asia Pacific segment had total revenue of CHF 296.6 million for 2015, down from CHF 322.8 million for the prior year reflecting the deconsolidation of Shanghai operations in 2014 as well as foreign exchange impacts. At constant exchange rates, the region had revenue of CHF 320.8 million. EBITDA was at CHF 14.7 million (5.0% of revenue), up from EBITDA of CHF 13.4 million (4.2% of revenue) for the prior year. Excluding adjustments of CHF 2.3 million, EBITDA was at CHF 17.0 million (5.7% of revenue), a significant increase over prior year.
Annual General Meeting 2016
The Annual General Meeting of Shareholders ("AGM") 2016 for gategroup Holding AG is scheduled for April 14, 2016, in Zurich, Switzerland. "Increasing returns to our shareholders remains a key focus, and I am very pleased to report that the Board of Directors is proposing a dividend of CHF 0.30 per registered dividend paying share, in line with the stated dividend policy," said Andreas Schmid, Chairman of the Board of Directors. If approved, the dividend will be funded by a withdrawal from the reserve from capital contributions and paid, free of Swiss withholding tax.
Board + Management + Strategy: Delivering on Gateway 2020
Xavier Rossinyol, Chief Executive Officer, said: "2015 was a year of powerful transformation at gategroup. With the continued trust of our shareholders, customers and business partners, we set our new strategy in motion and undeniably progressed during the first year of our five-year journey. Each step was underpinned by a committed approach by our Board of Directors, our management and the entire gategroup team working together.
Through these joint efforts, gategroup enhanced every area of the business. In just one year, we achieved organic revenue growth of 4.8%, ensured greater concentration on profit, with adjusted EBITDA reaching CHF 180.8 million, and set additional focus on cash flow generation. The last quarter of the year showed continued acceleration, with 5.2% revenue growth and a 17.3% increase in EBITDA at constant currency, over prior year.
We simplified the organization. We energized our commercial strategy with more than CHF 540 million of annual revenue renewed, including extensions with some of the top 10 customers for the Group, based on strengthened commercial capabilities. We launched the most innovative and complete offering in retail on board furthered by the IFS acquisition. We also expanded in emerging markets by establishing a presence in Kazakhstan.
We continue to restructure underperforming operations and introduce greater transparency and accountability at all levels of the organization. We have launched the ZBB program and identified 300 managerial positions toward our targeted headcount reduction, delivering savings in 2015 and into 2016.
In short, we are more efficiently operating the business with a central focus on the customer, while targeting EBITDA margin expansion of 25-50 basis points per annum over the next five years.
Through our singular vision, we are truly becoming one gategroup - through joint efforts at Board and management levels - aligned in our firm commitment to drive our strategy and deliver efficiencies and growth.
We have clearly identified steps toward 2020 and delivered as planned in 2015 and so far in 2016."
Additional information is provided in the Investors and Analysts presentation. This is available on the gategroup website, together with the Annual Report 2015 and further Company information, at the following link: http://www.gategroup.com/investors
Overview of financial key figures
in CHF m | Q4 2015 | Q4 2014 | 2015 | 2015 @CC | 2014 | Change (Q4 2015 vs. Q4 2014) | Change (2015 vs. 2014) | Change (2015 @CC vs. 2014) |
Revenue | 762.7 | 756.6 | 2'996.4 | 3'107.7 | 3'009.2 | 0.8% | (0.4%) | 3.3% |
EBITDA | 44.0 | 40.0 | 142.4 | 154.6 | 168.6 | 10.0% | (15.5%) | (8.3%) |
EBITDA margin | 5.8% | 5.3% | 4.8% | 5.0% | 5.6% | 0.5 pp | (0.8 pp) | (0.6 pp) |
Adjusted EBITDA | 44.0 | 40.0 | 169.4 | 180.8 | 168.6 | 10.0% | 0.5% | 7.2% |
Adjusted EBITDA margin | 5.8% | 5.3% | 5.7% | 5.8% | 5.6% | 0.5 pp | 0.1 pp | 0.2 pp |
Operating profit | 25.8 | 26.5 | 40.0 | 46.7 | 102.8 | (2.6%) | (61.1%) | (54.6%) |
Operating profit margin | 3.4% | 3.5% | 1.3% | 1.5% | 3.4% | (0.1pp) | (2.1 pp) | (1.9pp) |
(Loss)/ Profit attributable to shareholder of the Company | (7.1) | 9.6 | (63.4) | 38.9 | ||||
Cash generated from operations | 49.3 | 47.8 | 116.1 | 119.2 | 3.1% | (2.6%) | ||
Net debt | 240.1 | 243.1 | (1.2%) |
gategroup 2015 full year results presentation
gategroup Chief Executive Officer Xavier Rossinyol and Chief Financial Officer Christoph Schmitz invite analysts and investors, media representatives to participate in a webcast at 14:00 CET on Thursday, March 10, 2016, regarding the 2015 full year results.
Below are the dial-in numbers and link to access the live event.
Switzerland toll: +41 58 310 50 00
UK toll: +44 203 059 58 62
US toll: +1 631 570 5613
Click here to access the webcast
For further inquiries, please contact us by email at invest@gategroup.com
Contact
Dagmara Robinson
Corporate Communication and Investor Relations
invest@gategroup.com
+41 44 533 70 32
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