INTERNATIONAL. Inflight services specialist gategroup today reported first-half revenues of CHF 1,596.6 million (US$1.62 billion), up by +12.8% year-on-year or +13.1% on a constant currency basis. The company also noted some key contract renewals in the half, including a key retail extension with Wizz Air (see below).
Reported EBITDA was CHF76.2 million (US$77.3 million) for the half (4.8% EBITDA margin), up by +155.7% on the same period in 2015. At constant currency, EBITDA for the first half of the year was CHF77.9 million, representing a +161.4% increase.
The group saw organic volume growth of +6.7% supported by acquisitions (including Inflight Service) of +7.3%, marginally offset by a net win/loss ratio of -0.9% and negative currency movements against the Swiss Franc of -0.3%.
gategroup reported a net profit of CHF18.3 million (US$18.5 million) compared to a CHF88.3 million loss for the same period in 2015. This was mainly due to improved EBITDA, lower finance costs and the absence of 2015 restructuring costs and adjustments.
gategroup said the performance marked “an extraordinary turnaround” and cited a strong programme of contract renewals in the half.
The total value of its contract renewals in the period amounts to more than CHF280 million on an annual basis, it noted.
A key travel retail contract renewal came during the half with Wizz Air. There, gategroup has extended its contract by seven years beyond the original expiration date at the end of 2016 and gategroup continues as the preferred partner to manage the airline’s end-to-end retail programme. The total value of the business is expected to be CHF40 million in annual revenue.
gategroup said it had also “energised” its offering by introducing a number of innovative products and services. The group launched a diversified range of onboard trolleys allowing airlines to feature well-known food and beverages inflight while its new onboard concept Absolutely ONE provides a restaurant-like dining style, it claimed.
New development in retail technology includes the recently introduced ‘InSeat Ordering’ solution, which gives passengers access to a flight’s entire menu of available sales items via their smart device.
The integration of Inflight Service continues to progress, it noted, “with functional areas as well as procurement and other protocols being unified under the combined leadership of the Retail on Board team. Through integration of support functions and Cost of Goods Sold efficiencies, the team will achieve the long-term cost synergies initially estimated”.
HNA acquisition
As reported in April, Chinese conglomerate HNA Group announced an all cash offer to acquire gategroup that found unanimous support among gategroup’s board of directors.
In May, a subsidiary of HNA Group published the offer prospectus on the public tender offer for all publicly held shares of gategroup Holding AG. Up to the expiration of the offer in July, 95.32% of all listed gategroup shares had been tendered into the offer.
At an extraordinary general meeting on 29 July, shareholders elected a new board of directors of gategroup: Adam Tan as Chairman, Di Xin, Frank Nang, Stewart Gordon Smith and Xavier Rossinyol (all new) and Frederick W. Reid who was already a member of the board. The newly elected board is to assume office when the offer is settled, which is currently expected at the end of the third quarter/beginning of the fourth quarter of 2016.
After the settlement HNA will submit an application to the SIX Swiss Exchange for the de-listing of gategroup shares.
gategroup CEO Xavier Rossinyol said: “These results show we are delivering as expected with noteworthy outcomes: This is the fourth quarter that we have improved on all metrics since announcing our new strategy last year.
“With continued investment in innovation, culinary, retail and technology, we have further differentiated our service. Our people are designing and delivering more innovative products and service concepts, establishing new business partnerships, and growing our dynamic retail offering. We have strengthened relationships with some of the leading airlines in the world, including Wizz Air, which has one of the most successful Retail on Board programmes in the industry.
“Our plan is on track. As we consider our anticipated future with gategroup as an autonomous company within HNA’s portfolio, we look forward to accelerating on our delivery.”
