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SWITZERLAND. Inflight services provider gategroup today reported a climb of +11.9% in revenue (at constant exchange rates) to CHF749.5 million (US$760 million) in Q1 2016 with organic growth at +5.1% year-on-year. Reported revenue growth was +11% at CHF743.3 million (US$753 million).
Q1 EBITDA accelerated ahead from CHF10.9 million last year to CHF23.8 million (US$24.1 million) at constant currency rates (doubling to CHF22 million on a reported basis), and 3.0% EBITDA margin compared to 1.6% in Q1 2015.
gategroup reported a CHF6.5 million (US$6.6 million) loss attributable to shareholders for the first three months of 2016, compared to a CHF38.0 million loss for the same period in 2015. The improvement of the net results was mainly due to improved EBITDA and lower finance costs together with a modest positive foreign exchange effect, said gategroup.
The company noted that the value of contract renewals in the first quarter amounted to more than CHF170 million on an annual basis. In May, the group struck a five-year extension of catering services with Hong Kong Airlines at the airline’s main hub in Hong Kong. In March, gategroup acquired 75% of Cambodia Air Catering Services (CACS) in the Kingdom of Cambodia.
It also completed the acquisition of Inflight Service Group in February and said that the integration plan is now well under way.
It noted: “Targeted annual run-rate cost synergies of about CHF6 million between gategroup and IFS are based on Cost of Goods Sold efficiencies and integration of support functions and will be realised in the next 18 months during the post-acquisition integration phase.”
Regional breakdown
Region EMEA reported total revenue of CHF368.1 million or CHF366.8 million at constant currency, up +18.6% over the same period in 2015 (up +18.2% at constant currency). The region reported EBITDA of CHF13.7 million (3.7% EBITDA margin), compared to CHF6.7 million for 2015 (2.2% EBITDA margin). The increased results are largely due to strong organic growth, several cost initiatives and the year-over-year positive financial impact of the IFS integration to the business.
The North America region reported increased total revenue for the quarter of CHF248.4 million, or CHF239.8 million at constant currency. Compared to the first quarter of 2015, this is an increase of +6.8% (+3.1% at constant currency). EBITDA increased by CHF4.6 million compared to the same quarter in 2015. The increased results are largely due to strong organic growth with high incremental margins despite previously announced loss of business (e.g., United Airlines in Chicago), several cost and restructuring measures as well as the absence of the 2015 adjustments that were largely due to a US labour agreement.
The Latin America region reported total revenue of CHF52.6 million for the first three months of 2016, a -4.4% decrease over the same period in 2015. At constant currency, the region had a +24.2% jump in revenue to CHF68.3 million. The region achieved the same EBITDA as in Q1 2015 of CHF5.0 million (9.5% EBITDA margin compared to 9.1% EBITDA margin in Q1 2015). EBITDA continued to be heavily impacted by adverse currency movement 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 and strong cost management, said gategroup. At constant currency, EBITDA was up +42.0% year over year at CHF7.1 million (10.4% of EBITDA margin).
The Asia Pacific segment had total revenue for the quarter of CHF77.0 million, up +3.2% from the same period a year earlier. At constant currency, the region had revenue of CHF77.2 million, an increase of +3.5%. EBITDA was at CHF3.3 million (4.3% EBITDA margin), down -13.2% from EBITDA of CHF3.8 million (5.1% EBITDA margin) for the same period in the prior year.
gategroup CEO Xavier Rossinyol said: “gategroup continues to enhance every area of the business with the main focus on our customer. We have deepened customer relationships through significant contract renewals this quarter that in total exceed CHF170 million per year, including the five year renewal with Hong Kong Airlines, and have further expanded our presence in emerging markets by extending our footprint into Cambodia. We have introduced new and innovative products and strengthened our service offering.
“Our business is operating more efficiently and delivering savings while stepping up our consumer-centric focus. We are delivering as planned and in line with our targeted EBITDA margin expansion of 25-50 basis points per annum over the next five years.”
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