gategroup Reports Solid 2011 First Half Results

ZURICH, Aug. 11, 2011 /PRNewswire/ --

• gategroup reported solid first half 2011 results in the face of continuing global economic uncertainty

• Revenue of CHF 1,318.7 million, up 0.1% reported, up 14.0% in constant currencies

• EBITDA of CHF 88.4 million, down 4.7% reported, up 9.7% in constant currencies

• EBITDA margin of 6.7%, down 0.3 percentage point reported, down 0.2 percentage point in constant currencies

• Operating profit of CHF 49.1 million, up 24.3% reported, up 44.6% in constant currencies

• Profit for the period of CHF 20.1 million, up 116.1%

• Balance sheet strengthened by capital increase in 2010 second half; net debt reduced by CHF 271.1 million to CHF 157.1 million compared to June 2010, a decrease of 63.3%

• Successful mitigation of raw material cost increases; recovery from Japan crisis; continued recovery of assets from isolated fraud event

• Andrew Gibson named Chief Executive Officer

gategroup, the leading independent global provider of onboard products, services and solutions, reported gains in profitability measures for the first six months of 2011 on stable revenue despite global economic challenges.

gategroup has seen year-over-year growth for the airline industry, its largest customer base, despite concerns that emerged earlier in the year. These included a sharp spike in oil prices; the triple earthquake/tsunami/nuclear disasters in Japan; smaller natural disasters in Australia and New Zealand; civil uprisings in the Middle East and flight disruptions due to volcanic activity in Europe and South America.

"gategroup continues to deliver to expectations despite these challenging, but transient, conditions," said Chief Executive Officer Andrew Gibson, who was named to the position on July 28 after serving in an interim capacity since April. "Historically our business is stronger in the second half, and we are optimistic the effects we have seen in the first half will be further mitigated as the year unfolds."

The CHF 20.1 million reported profit for the period was up 116.1% over last year's CHF 9.3 million. The earnings came on revenue of CHF 1,318.7 million, which was up slightly on a reported basis. However, adjusting for foreign exchange differences against the Swiss Franc, gategroup's reporting currency, revenue was CHF 1,501.8 million, a strong increase of 14.0%.

Operating profit, meanwhile, was CHF 49.1 million, a 44.6% gain when adjusted for currency fluctuations. Earnings before interest, taxes, depreciation and amortization (EBITDA) were CHF 88.4 million, up 9.7% in constant currencies, resulting in an EBITDA margin of 6.7% on a reported basis and 6.8% in constant currencies. The change in margin is less than a percentage point lower on both a reported and constant currency basis compared to 2010's margin of 7.0%.

Chief Financial Officer Thomas Bucher said operating profit was positively impacted in 2011 by a reduction in share-based payments compared to 2010. EBITDA, meanwhile, was negatively affected by several factors, he added. These included the disruptions in Japan and higher raw material costs.

The acquisitions in Canada and India are important additions to gategroup's geographic portfolio. Their integration is progressing and they continue to be within the Group's  target margins within 24 months.

gategroup's commercial approach of building strong long-term relationships as a strategic partner; a focus on key customers; and cross selling the comprehensive products and services of the company's 11 brands continues to bear fruit.

This is evidenced by a first half retention rate for existing business of 87%, which includes agreements with Iberia, Scandinavian Airlines (SAS), Jetstar domestic and United Airlines in Sydney. The success rate of winning new business was 33%. This included adding Delta Air Lines as the fourth customer of the new Gate Gourmet unit at Tokyo Haneda and a system-wide agreement to manage Brazil low-cost carrier GOL's onboard retail program.

In February, gategroup self disclosed a fraud event involving a Danish subsidiary that amounted to approximately DKK 138 million, or approximately CHF 27 million based on historical exchange rates applicable at the time the fraud occurred (approximately CHF 22 million at year-end 2010 exchange rates). An investigation by independent external forensic accounting experts concluded that the fraud was an isolated case. The event resulted in a restatement of financial results for prior periods. In the meantime, efforts to recover assets continues.

As a reflection of gategroup's solid economic performance in the beginning of 2011, Standard & Poor's upgraded its rating to BB- and stable outlook.

"gategroup continues to demonstrate its ability to manage a difficult environment with its resilient business model," Gibson said.  "Looking ahead to the second half of the year, we remain cautiously optimistic."

Barring any unforeseen events, gategroup targets full-year revenue in 2011 of approximately CHF 3.0 billion on a 2010 constant currency basis. Actual reported results will be dependent on, amongst other things, the development of the foreign exchange environment. "Given these first half results combined with the expected market developments in the second half of the year, our target remains unchanged for an EBITDA margin of 8.0-8.5%, with our expectation for the margin remaining at the lower end of that range," Gibson said.

For more detailed information, please see gategroup's Half Year Report 2011, which can be found on line at the following link: http://www.gategroupmember.com/index.php?option=com_content&view=article&id=455&Itemid=228

About gategroup:

gategroup is the leading independent global provider of onboard products, services and solutions to companies that serve people on the move. gategroup comprises 11 member brands, which are deSter, eGate Solutions, Elan, Gate Aviation, Gate Gourmet, Gate Safe, Harmony, Performa, potmstudios, Pourshins and Supplair.

The Group's world-class capabilities are focused in catering and hospitality; provisioning and logistics; and onboard solutions. Our customers include top airlines and railroads around the world that rely on our expertise and solutions tailored to their guests, service offerings and geographic regions.

Shares of Zurich-based gategroup are traded on the SIX Swiss Exchange under the symbol GATE. Please visit www.gategroup.com.

IMPORTANT NOTICE

This publication may contain specific forward-looking statements, e.g., statements including terms like "believe", "assume", "expect" or similar expressions. Such forward-looking statements are subject to known and unknown risks, uncertainties and other factors which may result in a substantial divergence between the actual results, financial situation, development or performance of the company and those explicitly or implicitly presumed in these statements. Against the background of these uncertainties readers should not rely on forward-looking statements. The company assumes no responsibility to update or revise any of these forward-looking statements or to adapt them whether to reflect new information, future events, developments or circumstances or otherwise.

INVITATION TO MEDIA

gategroup CEO Andrew Gibson and CFO Thomas Bucher invite media representatives to participate in a telephone conference call regarding First Half 2011 Results.

The call will be held at 09:00-09:45 CET on Thursday, Aug. 11, 2011.

To participate, please 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:

INVITATION TO ANALYSTS AND INVESTORS

gategroup CEO Andrew Gibson and CFO Thomas Bucher invite analysts and investors to participate in a telephone conference call regarding First Half 2011 Results.

The presentation can be accessed via webcast and dial-in teleconference at 13:30 CET on Thursday, Aug. 11, 2011.

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:

Please note that this Q&A session is for analysts and investors only.

SOURCE gategroup