SWITZERLAND/INTERNATIONAL. Inflight services company gategroup has announced a robust +35% increase in revenue to CHF4.6 billion (US$4.88 billion), a +50% rise in EBITDA and a +161% surge in net profit, in 2017.
Onboard retail revenues have doubled over the past two years reaching CHF628.4 million (US$667 million) in 2017 thanks to contract extensions and new business with hybrid and low-cost carriers. Combined catering and retail revenues increased to CHF2.79 billion (US$2.96 billion), up from CHF2 billion (US$2.12 billion) in 2016.
The results underline gategroup’s progress towards its Gateway 2020 strategy targets, the company said.
EBITDA reached CHF300 million (US$318.5 million) in 2017 versus CHF200 million (US$212 million) in 2016. Net profit more than doubled to CHF85.2 million (US$90.5 million) last year, while EBITDA margin improved by 60 bps to 6.6%.
Improved cash generation from operations stood at CHF210.2 million (US$223 million), increasing +48.4% from CHF141.6million (US$150.3 million) the previous year.
Investment and acquisition activity in 2017 aims to set the group up for future growth. As at 31 December 2017, gategroup’s assets amounted to CHF3.02 billion (US$3.21 billion). Equity reached CHF443.9 million (US$471.3 million), compared to CHF306.9 million (US$325.8 million) the previous year.
Net debt at the end of 2017 was CHF712.4 million (US$756.3 million) resulting in a leverage of 2.4x, an increase from 1.7x at the end of 2016.
Strong regional growth
In Europe and Middle East revenues increased by +3.5% to CHF1.78 billion (US$1.89 billion). North American revenue jumped +4.5% to CHF1.14 billion (US$1.21 billion), and Asia Pacific surged +10.5% to CHF345.2 million. gategroup’s Latin America revenue swelled +30.5% to CHF330 million (US$366.5 million). The newly formed South Europe and Africa region achieved revenues of CHF982.2 million (US$1.04 billion). Organic growth in 2017 performed at +7.2% (2016: +5.5%).
Since 2015, gategroup has focused on the implementation and delivery of its Gateway 2020 strategy. Its four pillars are: focus on the core; geographical expansion; commercial innovation and standardisation and efficiencies.
The company said it now has a much more diversified business platform for sustained growth and margin expansion which has allowed it to deliver strong results in 2016 and 2017.
Focus on the core – high retention rate
gategroup’s aims to become the industry leader in food and hospitality are focused on airline catering and food & beverage sales onboard. To emphasise this focus, gategroup exited non-core assets such as airport security and selected airport retail activities. The group sustained its average contract retention rate of over 90% in 2017.
Geographic expansion – focus on emerging markets
In 2017, gategroup continued its expansion into strategic and emerging markets such as Asia Pacific, where a 30-year strategic joint venture with Asiana Airlines at South Korea’s Incheon International Airport was announced last month. The integration of Servair (see more below) has created the company’s new Southern Europe and Africa region, which comprises Servair’s business in France, French territories, Italy, and Africa.
Commercial innovation – increase of speed to market
gategroup’s four Centres of Excellence (Innovation, Retail, Culinary and Technology) aim to drive industry innovations and enhance the onboard passenger experience in partnership with its customers. Such initiatives have resulted in a doubling of retail onboard revenues over the past two years, reaching CHF628.4 million (US$667 million) in 2017.
Standardisation and efficiency – simplified organisation
gategroup has consolidated its brands and divisions into an organisational structure by region with clear P&L responsibility and central control to improve efficiency, cost discipline and operational standardisation.
The group said it has made progress in competitive pricing and operational leverage. This focus on commercial innovation combined with greater financial discipline has allowed gategroup to increase its speed to market and lower the cost base resulting in higher EBITDA margins, according to the company.
Our passion for commercial innovation and obsession with operational excellence have made gategroup the largest and fastest-growing network in the airline catering industry today.– gategroup CEO Xavier Rossinyol
Gategroup CEO Xavier Rossinyol said: “Our robust 2017 financial results are a direct result of the successful new strategy we began implementing in 2015. Today, gategroup is the clear number one airline caterer and we recognise that the only way to succeed in the long term is to deliver continuous value to our customers. Our passion for commercial innovation and obsession with operational excellence have made gategroup the largest and fastest-growing network in the airline catering industry today.
“The integration of Servair provides us with a highly complementary presence in key markets where gategroup was not previously present, such as France and Africa. Servair also contributes substantially to gategroup’s ambition for culinary excellence. Geographical expansion, particularly in emerging markets and growth in food and beverage retail, has diversified the portfolio of gategroup.
“Our Gateway 2020 strategy, which set ambitious but realistic plans to transform gategroup, is nearing the midpoint. I would like to thank all employees of gategroup, our customers, suppliers as well as our shareholders for their respective contributions and support which led to this remarkable performance” Rossinyol said.
Servair – key milestone
On 1 January 2017, gategroup acquired the controlling stake in Servair SA from Air France. The company reported a smooth integration with budget targets exceeded. Joint projects to improve operational excellence and to optimise hub operations and logistics are under way. The move has allowed gategroup to increase its presence to 60 locations, expand its footprint in Latin America and Asia Pacific and achieve market leadership in France and Africa. Servair has further enhanced gategroup’s culinary offering through its culinary innovation “think tank,” Studio Culinaire.
Relationship with HNA
gategroup was acquired by Chinese conglomerate HNA Group in 2016. Rossinyol added: “Our global market leadership is built on a trusted, professional relationship between management, the Board of Directors and the shareholder. Although gategroup is independently managed and financed, it is a very important company within HNA’s Travel and Tourism division.
“HNA leadership fully endorses our Gateway 2020 strategy and our leadership team, while it offers new opportunities to develop in the Asia Pacific region, leveraging its strong footprint in the airline and hospitality industries.”
