SSP Group plc

Okay, listen, we'll get going. Good morning, everybody, and thank you for joining us here at Nomura in London and on our live webcast this morning. I'm Patrick Coveney, I'm the Group CEO of SSP, and I'm joined this morning by Geert Verheerlen, our new CFO, and by Satya Maynard, who joined us in October of last year as the CEO of our Continental European Region. Our board's Senior Independent Director, Karen Bradley, is also with us this morning. In a moment, Hirt will take you through the 2025 financials, and I'll then set out the operational, commercial and strategic drivers of that performance, and importantly, our focus 2026 actions. During that review, Satya will join me to set out our specific plan to build and accelerate returns from our European business. We'll then together share our outlook and here Satya and I will finish by taking questions both from the room and on the webcast. So let me start by briefly sharing my perspective on the year. I set out to ensure that FY25 would be a year of execution against the specific performance priorities that we outlined a year ago. We, and I specifically, didn't nail all of them. However, that's not to say that we didn't progress. Revenues were up 8%, operating profit up 13%, margin accreted by 30 basis points, and EPS rose by 25% to 12 and a half P, all of those metrics on a constant currency basis. And our reset teams drove strong trading performance in three of our four regions. Importantly, we pivoted to positive free cashflow, delivering 80 million of cash pre-dividend with leverage now at the lower end of our guided range. That put us in a position to initiate a 100 million share buyback in October. We've tightened our capital expenditure and we've built returns on recent investments. And as a result, our return on capital employed metric rose by 100 basis points to 18.7%. We created and delivered a 30 million corporate and regional overhead reduction plan that we actioned rapidly in the second half. However, we didn't deliver to plan in continental Europe and I'm frustrated and disappointed about that. But we have now reset and embedded our team under Satya's leadership, changed our model and cleared up our balance sheet consistent with these actions. We have granular plans that underpin an increase in operating margin from the 2.1% that we delivered in 25 to at least 3% in 26 and towards our 5% medium target. 2026 has started positively, like-for-like sales growth across the group for the first two months of the new year, tracked at about 4%, and the combination of this early trading momentum and the improvements being actioned across the business give us the confidence to nudge up our EPS guidance. But let me be clear on my view of where the business is today. We're not satisfied with where we are. there's more that we can do to deliver profits, cash flows, and returns, the returns, profits, and cash flows that SSP is capable of, and 2026 is about showing that. Of course, there are market challenges and uncertainties ahead, but we're focused on the opportunities that are within our control, and there are a great many of those, and we're executing against them and at pace. More broadly, and let me be crystal clear here, we're focused on surfacing and delivering whatever actions are necessary to drive shareholder value from here. So with that, let me spend a moment on our priorities for FY26. This summer, as a board, we broadened the scope of our financial and strategic planning to identify, debate, and embed sustainable value-driving actions. This process assessed a number of areas, further cost reduction opportunities, improved cashflow conversion opportunities, portfolio optimization, our strategy and related shareholding for India, options to accelerate returns on capital and the level and timing of share buybacks and other options. As a result of this work, our actions for the year include an operational plan that we internally call Focus 26 to drive profit, cash and returns. We will drive profitable organic growth with strong market and contract retention, deepening our positions in high growth, high return food travel markets. We will execute our recovery plan for continental Europe, permanently building the margins and returns in these businesses. We will embed the 30 million corporate and regional overhead savings that we delivered this summer and action further cost efficiencies. We will build returns on the recent investments that we've made and tighten our FY26 capital investment to no more than 200 million in the year. And we will strengthen free cash flow to over 100 million through both profit growth and disciplined capital allocation. We're executing against this plan, and as I said already, we're off to a good start. We now expect to deliver earnings per share towards the upper end of the expectations we set in October. We expect to deliver free cashflow of more than 100 million and to build returns on capital employed towards 20%. However, as we focus on driving additional shareholder value, this operational plan will be complemented by two further initiatives. First, a wide ranging review of our continental European rail business. And second, a board review of options to realize value for SSP shareholders in line with delivery of the TFS free vote requirements. I will come back to both of these initiatives in more detail later in the presentation. But for now, let me hand over to Hirt to take you through the FY25 financials.

Thank you, Patrick, and good morning, everyone. I'm Geert Verhellen. I joined SSP earlier this year and took over as CFO in June. I'm delighted to be here and share with you our results for FY25. As usual, I will start with the key highlights of this past year. And as you know, in prior years also, we present our metrics before the impact of IFRS 16. We grew revenues by 8% to 3.6 billion sterling and increased our underlying operating profit by 13%, with operating margin expanding by 30 basis points. This, in combination with higher income from associates and lower minorities, resulted in an increase of earnings per share of 25%. Better operating profit, lower capital expenditure, and stronger working capital resulted in free cash flow pre-dividend of 80 million sterling compared to a substantial outflow last year. This led to a reduction in net debt to EBITDA to 1.6 times, and that leverage level facilitated the start of our share buyback program, which we launched on the day of our trading update in early October and has been running since then. Consistent with our dividend policy, we propose a full-year dividend of 4.2p per share, which is an increase of about 20% versus last year. Now, let us get into some of the details and let's start with sales. Full year sales growth was 8%, as you can see on the slide, including 4% like-for-like growth, supported by strong performances in the UK and our Asia-Pac and EME regions. Net contract gains added 4% to sales growth again, as we prioritized investment in our Asia-Pac and EME and North America regions. The negative 2% you see in the column other to the right of the slide represents the impact of the exit of our German motorway services business and the transfer of our Mumbai lounge business into a new JV. To the right on the slide, you also see that we've had a good start to the new fiscal and financial year, FY26, with all regions in positive revenue growth, and the group posting 6% total growth in the first eight weeks since October 1st. In those first eight weeks, we've also seen the group post like-for-like growth of 4%. And this revenue growth is supported by solid like-for-like growth in all regions, including in America, which has recovered from negative like-for-likes in the second half of last year to 2% positive, despite the recent shutdowns in the US. This is all very encouraging to us and Patrick will explain the drivers of this later on. We delivered underlying operating profit growth of 13% to 223 million sterling. This increase was supported by good growth in all regions with an increase in the underlying operating margin by 30 basis points at constant exchange rates. In continental Europe, underlying operating profit growth increased, but margins fell short of our own expectations. Patrick already alluded to that. Driving margin in the continental European region is a key focus for me, and I'm working closely with Satya to improve performance. Satya will go through the detail on performance and his plans in a moment. Turning to the UK and the Ireland region, underlying operating profit improved despite the disruption caused by the M&S cyber incident earlier this year. In the APAC and EME region, we benefited from profitable growth in Australia, Malaysia and Egypt, although this was partially offset by the effect of the transfer of some of our business and our units in India into JVs. Excluding the impact of this transfer, margin in the region would have been unchanged. As a reminder, upon deconsolidation or transfer into JVs, SSP share in the benefits or in the profit of these units is reported in associates and continues to contribute to the earnings per share metric. Our group earnings per share increased 19 percent at actual exchange rates compared to last year. As you can see on this slide this is mainly due to higher underlying operating profit higher income from associates and lower minorities partially offset by higher finance costs that are mainly the result of last year including a foreign exchange benefit. As you can also see on the slide, our effective tax rate for the year is in line with prior year and at approximately 19.4% reflective of the recognition of deferred tax assets in the U.S. as our business strengthens further there. Looking forward, we would expect the underlying effective tax rate for the group to gradually return to 22-23%. You heard me say earlier that in FY25, we saw a smaller part of our profits be attributed to minorities. And this table shows the components of the minority interest. In relation to the FY25 underlying operating profit of 223 million sterling that I mentioned earlier, we have reflected a minority share of 60 million pound down from last year. Over time, we expect this share to go down further, both as a result of structural changes to our operations in North America, as well as due to the fact that growth in our Indian business is increasingly coming from JVs and as a result is presented in the associates line. As you will have seen, our reported operating profit was roughly 86 million sterling, reflecting about 183 million of non-underlying items. Approximately 40 million of those non-underlying were cash in the year. Impairment charges of 117 million are primarily related to our business in France and Germany, which were contracts entered mostly pre-COVID. Satya will share with you his views and plan on this in a bit. We're not satisfied with this performance, as we've mentioned earlier, and we have to reflect the structural challenges that we face in these markets in the carrying value of the assets we carry on our balance sheet in these markets. We've also fully reflected the consequences of our exit from Italy. The 33 million that you see on the slide relates to the application of new accounting regulations and our investments or with regard to our investments in IT that we already raised in the half year. In short, technical guidance requires companies to no longer capitalize IT assets related to the configuration of cloud-based software solutions. And instead of keeping them as assets on the balance sheet, these investments now have to be expensed. So just to be clear, we're not writing off these investments as bad investments. We're merely in line with the accounting guidance, classifying them in a different way and have to run them through the income statement now. The restructuring cost of £12 million that you see here relates to the overhead reduction program that we actioned in the second half of the year. And Patrick will get back to that later on. Site and contract exit costs of £14 million relate primarily to our exit from Italy and the continued unwind of our operations in the German motorway business. Let's turn to cash flow now and how this impacted our net debt and leverage. Net debt decreased from five hundred and seventy four million sterling at the beginning of the year. Sorry that that decreased to five seven four which represents one point six times net debt over EBITDA which is a reduction from the one point seven times that we had at the beginning of the year. Free cash flow before dividends amounted to 80 million, approximately 280 million better than in the previous year, reflecting an increase in EBITDA, as well as the positive impact of working capital initiatives like supply chain financing and lower capital expenditures. While we're obviously encouraged to see this improvement, there's plenty of opportunity for us to go after. This brings me to a couple of reflections that I wanted to share with you, my take on SSP, if you will, since I started. First of all, I believe that we compete in a great industry with tremendous potential for growth, and in markets and channels that are weighted to long-term positive travel trends. We're exposed to a great number of markets, each with their own state of maturity, their own spending power, exciting regional strategies and tailored business models. Most importantly, I also believe that we have a results-driven team that is passionate about food and about the customer. Since the start of my induction, I've listened to many shareholders about what you see as imperative for us as a company, and here's what I heard. You want to see us grow profits faster than sales, increase the returns of the assets we already have, and generate meaningfully higher cash flow with healthy cash returns to shareholders. Those messages have been received loud and clear. As an organization now, we have to pivot from a growth phase into a returns first and cash focused phase and mentality. And we're doing that. And let me give you a couple of ideas of how we're doing that. So first of all, I see an opportunity to streamline our finance processes to bring more insights and simplify the flow of information. That's number one. Also, performance management in an organization starts with a clear and transparent way of engaging with each other at every level of the organization. And Patrick and I are working hard to instill that mentality at all levels and in all parts of the organization. Second, while I do believe that we have a robust methodology to assess capital investments, I'm challenging us to prioritize more and be more selective. The mere fact that a business case hurdles does not guarantee automatic approval. We're linking up the strategic choices made in capital allocation to the individual discussions on discrete business cases. Questions like, does this contribute to EBIT and margin fast enough? And importantly, why would we invest in this case instead of the next one that also hurdles, are now all linked up in the same conversation with the regions. In other words, Patrick and I are being more selective. My philosophy is that in business, everything is a choice. One just needs to be comfortable with the consequences of the choices made. Another area of opportunity that I see is an increased focus on cash generation. The importance of cash needs to be reinforced throughout the organization. That is why we have identified a number of focus areas that will drive that message and must result in better cash generation. And let's look at these in a little more detail. The first and most important element here is flawless execution at store and restaurant level. Disciplined operating standards, waste and loss management, menu and recipe reengineering, et cetera. Many years working in retail, and at Walmart in particular, taught me that without focus on how you operate in the field every day, every time of day, nothing else matters. We've identified several opportunities that are included in our plans for FY26, and Patrick and I are on this every week and every month with our regional and market leadership. The second area is working capital. I already mentioned it. We see an opportunity to optimize the timing of our rent payments, switching from cash deposits to bank guarantees, reviewing the timing of payments to and from our suppliers, just to name a couple of examples. In FY25, we already saw the positive impact of supply chain financing already, which in turn resulted in lower borrowing cost. We have also started a global benchmarking exercise to uncover further working capital benefits. For FY26, we see a further decrease in capex to no more than 200 million as total spend, a significant decrease from prior years. Beyond the absolute spend levels, we're also being more selective and we're creating more competition and more tension in the process, more competition for that capital. We're also challenging our build and construction teams to review specifications, ensuring we can get more for less. The fourth area in optimizing is the way we go to market with our partners, and in short, making sure we manage closely the profit and hence the cash coming back to SSP shareholders. Lastly, we're focusing our teams on cash by bringing it front and center into the monthly regional performance reviews, and we're also increasing accountability for the leadership teams when it comes to cash generation. Turning now to CAPEX in more detail. In FY25, we further decreased our capital investments to 212 million. The biggest part of that FY25 CAPEX went to a still elevated level of contract renewals and maintenance CAPEX, followed by growth and expansion CAPEX, and lastly, technology. For FY26, we expect to spend no more than $200 million. Roughly 50% of that number will go to renewal, rebrand, and maintenance capex, with roughly one-third going towards supporting the 2% net gains that we have on the slide. Going forward, based on current planning, return objectives, and what I just said about making choices, we expect capex to be in and around $200 million. Before I hand it back to Patrick let me summarize how we see our capital allocation policies or priorities. First is our aim to maintain a sustainable balance sheet. This business operates operates best through cycles with leverage somewhere between one and a half and two times net debt over EBITDA. And of course considering seasonal fluctuations in a business like ours. Second is to continue to fund profitable organic growth. You heard us say that we're not in the market for M&A at this time, and we're firmly focused on generating, improving the returns out of the existing assets and locations. Organic growth, most particularly in markets and airports where we already have a strong presence, creates the best platform for us from which we can improve our cash conversion. We continue to target a dividend payout ratio of between 30 and 40%. And you've already seen that for FY25, we post a 20% increase in our dividend to 4.2 P this morning. Lastly, we're in the market now with a share buyback program of 100 million, and up to last week we had executed approximately 13 million sterling and repurchased slightly more than 8 million shares so far. To conclude, I'm both resolved and excited about the year ahead. We've got a good model, we've got great teams, and we've put together a plan that is based on focus and making choices. We're delivering that plan, and the first weeks of the new year look promising, and it feels like we're off to a great start. So with that, I'll turn it back to Patrick.

Thanks, Geert. This is my third full year as CEO of SSP, and it's been a very different one. In 2023 and 2024, we expanded our business rapidly, prioritising building our presence, our capability and our relationships in higher growth and higher returning air channel markets across the world, defending long-held market positions and renewing and extending profitable contracts throughout strongly building our client, our customer and our culinary propositions. But while these investments created a strong platform, we were not converting that platform into value for shareholders. So in December last year, we tightened our business agenda to build profitability and returns on this platform. And we actioned the five priorities that are on this slide. So a year later, how have we done? My answer is partial delivery. We have driven sustainable growth across the world. We have progressed our profit recovery plan in continental Europe, but I must acknowledge that at a 2.1% margin level and with the scale of the necessary balance sheet reset that Geert just described, it leaves us short of the expectations that we had at the start of the year. We rapidly actioned a 30 million overhead savings program in the second half, and we've built returns on the recent investments while also tightening levels of new capital expenditure in the year. And taken together, these initiatives strengthened our operating and free cash flows and enabled us to initiate the 100 million share buyback program in October, which was an aspiration we had when we gave the presentation this time last year. Finally, we set out to highlight the value of our investment in India through the successful IPO of TFS on the 14th of July and its subsequent strong momentum, both in trading terms and as a listed business. So to dig into our progress against this plan, I'm now going to describe the operational, financial and strategic progress in our four regions. Let's start with America. We're building a great business there. However, after a period of significant contract wins and complimentary M&A activity to gain access to multiple new airports, indeed stepping up from 37 airports three years ago to almost 60 today, this year we focused on extending our restaurant footprint within the airports that we now serve. Particular examples, include materially stepping up our presence in JFK at terminals 5 and 6, and at Denver Airport, these being two of the busiest airports in the country. From March of this year, as parts of the US airport network experienced lower passenger numbers, we focused firmly on driving initiatives to sustainably step up our like-for-like sales. with initiatives such as Sunday Trading Effectiveness, whereby senior management have reset their personal weekly schedules to be present more often in airports during this peak trading day. Menu optimization, technology and ordering systems, and more consistent merchandising across the business. Encouragingly, we are now seeing the impact of these initiatives with a marked step up in October and November like for like sales growth relative to quarter four. In other words, moving from minus 2% to plus 2% as we transitioned into this quarter, despite lower passenger numbers during the recent government shutdown. Throughout, we've had a concurrent focus on efficiency and productivity, from menu optimization to improve already SSP-leading levels of gross profit, to automated kitchen equipment to reduce staffing levels, to more consistent use of technology and automation to drive down cost and waste. So in 2025, we delivered top-line growth in America of 8% at constant rates, as well as building operating profit margin to just over 11% there this year, by far the strongest level of margin ever delivered by the SSP North American business. As you know, we had work to do to put our home market in the UK onto a strong path. Simply put, our UK business was in a poor place three years ago. In response, we completely reset our team, our culture, and our clients' store and customer propositions. We have found a sustainable sweet spot to deliver better propositions for customers and clients, while at the same time, sustainably improving our financial performance. Our teams have relished this new approach. What do I mean by a sustainable sweet spot? Strengthening our M&S estate is a big part of it. This year, we refurbished a further 15% of our M&S retail estate with these programs generating strong double-digit sales uplifts each time we do them. This trading momentum there enabled us to work our way through the disruption caused by the M&S cyber attack in half two. And more broadly, we stepped up our propositions and built market share in the UK regional air channel with renewals, extensions and wins in Newcastle, in Birmingham, in Liverpool, in Belfast, in London City, if you'd allow me to characterize that as a regional airport, and in Bournemouth, all on long tenures. Importantly, Kari and the UK team have also gone hard after overhead improvement and cost efficiency through the creation and deployment of our best in SSP workforce management scheduling tool, through detailed work on menu optimization, especially in our own brand estate, and through the full participation in the overhead reduction program that I'll describe in a few minutes. These efficiency programs helped us deliver a good step up in profit and operating margin to 8.4% alongside the strong like for like sales, and we're continuing to build on that. In Asia and the Middle East, regions that have some of the fastest growing airport infrastructure in the world, we're investing to build scale within our chosen markets to enhance returns on our now maturing level of recent investment. With our acquisition of ARE in Australia in the spring of 2024, we trebled the size of our business there and became the clear market leader. The Australian portfolio has come together very well with our integration on track in all areas. Indeed, we're not only integrating the two businesses effectively, but we're exciting customers, and we drove like-for-like growth in the year of 11%. In Indonesia, we're building scale and profitability fully in line with our acquisition case. And in Malaysia, which we entered organically in late 2022, we have doubled the number of units in two years and now have a business there that is already nicely profitable. In India, our second largest market in the region in sales terms, and where we hold just over a 50% share in the now listed travel food services, we're driving profitable like-for-like growth. We had an important contract win there in September at the eighth busiest airport in India, Cochin, and we're now also scaling up new operations in TFS's largest joint venture airports in Delhi, Noida, and Navi Mumbai. We also continue to strengthen our regional lounge proposition with an important milestone being the deployment of our own lounge aggregation technology system, what we call EATS, across our Indian lounges in July. this program allows us to capture a materially greater share of margin from credit card and loyalty card lounge users there. The margin profile of our Asian Middle Eastern business has remained strong as we've continued to expand. So to be clear, the change in year and year margin that you see on this slide entirely reflects the deconsolidation effects in India that Hirt described earlier, with profit moving from the EBIT line to the associates line. So moving now to our fourth region, continental Europe. building profitability from the unacceptably low levels in this region is of utmost priority to us. So I've invited Satya Mainyard, the CEO of Continental Europe since October of last year, to join us today to give a deeper analysis of the region, to explain what we've achieved to date, and to describe our plans to accelerate progress from here. If you'll allow me, Satya is an experienced F&B operator, a strong leader, deeply knowledgeable in several of these specific markets, and also a great colleague. Satya, over to you.