gategroup confirms outlook on improved Q2 results
•Total revenue at constant currency up by 2.6% to CHF 799.7 million for Q2 and 2.7% up to CHF 1,505.6 million for HY1•Negative currency impact on revenue of -5.3% for Q2 and -5.4% for HY1•EBITDA margin of 5.6% for Q2 (5.7% at constant currency) compared to 5.3% in the previous year and 4.3% for HY1 (4.4% at constant currency), unchanged compared to the previous year•Solid operational performance in all markets driven by volume acceleration through Q2 2014•Net loss reported for the period of CHF 6.5 million, substantially lower than the previous year (CHF 12.7 million net loss)•Full year 2014 outlook confirmed with an EBITDA margin of 5.6% to 6.2%
ZURICH, August 21, 2014 ? gategroup reported total revenue of CHF 757.4 million for Q2 and CHF 1,423.7 million for HY1, a decrease of 2.8%, respectively, compared to the prior year periods. At constant currency total revenues grew by 2.6% to CHF 799.7 million for Q2 and 2.7% for HY1 to CHF 1,505.6 million during the first six months in 2014. This growth is primarily attributable to the anticipated volume acceleration at the back-end of Q2 2014.
Segment EBITDA (EBITDA) was CHF 42.6 million (5.6% EBITDA margin) in Q2 and CHF 45.4 million at constant currency (5.7% EBITDA margin) compared to an EBITDA of CHF 41.5 million in Q2 2013. Overall, gategroup reported EBITDA of CHF 60.6 million (4.3% EBITDA margin) in the first half of 2014 compared to CHF 62.6 million (4.3% EBITDA margin) in the first half of the previous year. At constant currency, EBITDA was CHF 66.3 million, representing growth of 5.9% and exceeding that of revenue, thus resulting in the higher EBITDA margin of 4.4% compared to 4.3% in the previous year. The overall EBITDA development was primarily driven by the ongoing stronger contribution from the Product and Supply Chain Solutions business and solid performance in the Airline Solutions business. The Airline Solutions business result was particularly strengthened by profitability improvements in Europe following the implementation of the restructuring program.
The loss for the reporting period was CHF 6.5 million, substantially lower than the loss of CHF 12.7 million in the same period in the previous year. This was mainly due to a positive foreign exchange result, partially offset by a higher tax expense.
Cash flow statement and balance sheet
During the first six months of 2014 gategroup generated CHF 20.9 million of cash from operations, compared to CHF 36.7 million during the same period last year. This decrease was largely driven by the absorption of approximately CHF 10 million reported in Q1, driven by weaker performance of the North American region, and timing on receivables and payables. In the second quarter there was a one-time impact of approximately CHF 5 million due to the termination of the retail services contract with Norwegian Airlines (as previously disclosed) where Gate Retail Onboard was the merchant of record.
gategroup's balance sheet as per June 30, 2014, shows total shareholders' equity and non-controlling interests of CHF 257.8 million, compared to CHF 272.6 million as per June 30, 2013 and CHF 294.4 million as per December 31, 2013. Net financial debt as per June 30, 2014, was CHF 305.9 million compared to CHF 270.8 million for June 30, 2013 and CHF 261.0 million at December 31, 2013.
Revenues for Airline Solutions decreased by 4.3% from CHF 673.6 million to CHF 644.8 million in Q2 2014 and decreased by 4.5% from CHF 1,274.9 million to CHF 1,217.8 million for the first half of 2014. EBITDA reached CHF 39.7 million (6.2% of revenues) in Q2 2014 compared to CHF 40.9 million (6.1% of revenues) during the same period in 2013, and CHF 58.0 million (4.8% of revenues) in the first half of 2014 compared to CHF 62.4 million (4.9% of revenues) during the same period in the previous year. On a constant currency basis, revenues increased by 1.6% in Q2 2014 and 1.5% in the first half of 2014 with EBITDA margins of 6.2% in Q2 2014 and 4.9% in the first half of 2014. Lower revenues in Europe are in line with expectations and primarily follow from the disposal of the Brussels facility and the discontinuation of the Norwegian short-haul contract. Revenues in North America and Emerging Markets continue to be hit by adverse foreign exchange impacts. EBITDA benefited from a strong profitability uplift in Europe and ongoing contribution from Emerging Markets, offset by weaker profitability in North America following adverse conditions during Q1 2014.
The Product and Supply Chain Solutions (P&SCS) business reported an 8.4% increase in revenues in Q2 to CHF 168.1 million from CHF 155.1 million in the same period in the prior year and a 6.4% increase in revenues to CHF 299.0 million for the first half of 2014 from CHF 280.9 million for the same period in 2013. P&SCS also reported an EBITDA of CHF 11.2 million (6.7% of revenues) in Q2 2014 compared to an EBITDA of CHF 9.3 million (6.0% of revenues) in Q2 2013 and CHF 17.6 million (5.9% of revenues) in the first half 2014 compared to CHF 16.4 million (5.8% of revenues) in the previous reporting period. On a constant currency basis, revenues increased by 10.7% in Q2 2014 and the EBITDA margin was 6.9% compared to 8.5% revenue increase or the first half of 2014 with an EBITDA margin of 6.1%. The increase in EBITDA was mainly driven by higher revenues.
Business development and major business wins
In June, gategroup extended its ongoing contract with Virgin Australia for all domestic and short-haul international flights. The existing agreement, which was set to expire in 2017, has been extended by two years to 2019. Under the agreement, gategroup subsidiary Gate Gourmet will provide food assembly, flight assembly and handling services for all domestic and short-haul international flights departing from the locations in Australia where Gate Gourmet has a presence. The total value of the contract for the four years to 2019 is approximately CHF 300 million. On an annual basis, Gate Gourmet provides services for the airline for more than 125,000 flights.
In July, gategroup and China Aviation Investment Co., Ltd. (CAIC), an affiliate of the Air China Group, have optimized the shareholding structure of the joint venture operation Shanghai Pudong International Airport Gate Gourmet Air Catering Co., Ltd., thereby executing a key element of the Letter of Intent signed by the two parties in 2012. Through this transaction, gategroup has reduced its participating interest to 29%. The airline catering facility will be co-branded. It is also anticipated that the new joint venture will integrate the activities of the Shanghai Airport International Catering Co., Ltd., establishing a presence in both major airports serving Shanghai (Pudong and Hongqiao).
Core Group-wide initiatives of procurement, operations performance and technology program implementation continue to gain momentum. Based on the work to date, the Group has a solid foundation to accelerate these programs and associated benefits over the next 18 months to support delivery of the mid-term plan targets for 2016 and 2017. Additionally, gategroup continues to streamline and adjust its organization. Several changes are being implemented to ensure capture of the growth opportunities targeted in the mid-term plan, enhance the network solutions service lines, and increase the focus on respective markets in the global portfolio. All actions are expected to accelerate and support the delivery of the financial objectives of the Group.
gategroup confirms its 2014 full year outlook. Thus, gategroup maintains an expectation of flat revenue development with an EBITDA margin of 5.6% to 6.2% for the full year. gategroup's continuous focus on the streamlining of operations and prior acquisitions, together with the additional activities referred to above, will bolster the financial performance in the second half of 2014 through 2015 to ensure delivery of the Group's mid-term plan objectives of an EBITDA margin of 7.0% to 8.0% by 2016 and an EBITDA range of 7.5% to 8.5% by 2017, with a commensurate improvement in cash flow.
Please visit our website www.gategroup.com and for more information on our half-year report at: http://www.gategroup.com/investors/financial-reports-and-presentations
Overview of Key Figures in millions of CHF
Invitation to analysts, investors and journalists
April - June
at constant FX
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Operating profit margin
Profit/(Loss) for the period
Cash generated from operations
January - June
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Loss for the period
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gategroup CEO Andrew Gibson
and CFO Thomas Bucher
would like to invite analysts, investors and journalists to participate in a telephone conference call regarding the 2014 first half year results.
The presentation can be accessed via webcast and dial-in teleconference at 14:00 CET
on Thursday, August 21, 2014
To listen to the live presentation via teleconference, call the dial-in number approximately 15 minutes before the start time. Once dialed in, please follow the instructions given over the phone.Direct dial-in numbers:Switzerland
(toll): +41 225 802 991United Kingdom
(toll): +44 203 043 2469United States
(toll-free): +1 866 305 6290
To link to the live webcast of the presentation, please follow this link:http://www.media-server.com/m/p/wpgmejmrContactsOverview of gategroup
gategroup is the leading independent global provider of products, services and solutions related to a passenger's onboard experience. gategroup comprises the following brands: deSter, eGate Solutions, Gate Aviation
, Gate Gourmet, Gate Retail Onboard
, Gate Safe, Harmony, Performa, Pourshins and Supplair.Forward-Looking Statements
This publication contains forward-looking statements and other statements that are not historical facts. The words "believe", "anticipate", "plan", "expect", "project", "estimate", "predict", "intend", "target", "assume", "may", "will" "could" and similar expression are intended to identify such forward-looking statements. Such statements are made on the basis of assumptions and expectations that we believe to be reasonable as of the date of this publication but may prove to be erroneous and are subject to a variety of significant uncertainties that could cause actual results to differ materially from those expressed in forward-looking statements. Among these factors are changes in overall economic conditions, changes in demand for our products, changes in the demand for, or price of, oil, risk of terrorism, war, geopolitical or other exogenous shocks to the airline sector, risks of increased competition, manufacturing and product development risks, loss of key customers, changes in government regulations, foreign and domestic political and legislative risks, risks associated with foreign operations and foreign currency exchange rates and controls, strikes, embargoes, weather-related risks and other risks and uncertainties. We therefore caution investors and prospective investors against relying on any of these forward-looking statements. We assume no obligation to update forward-looking statements or to update the reasons for which actual results could differ materially from those anticipated in such forward-looking statements, except as required by law.Press Release (PDF)