Gategroup builds foundation for growth and improved profitability based on new strategic plan – stable HY results before restructuring costs and adjustments

ZURICH, September 3, 2015 - gategroup is taking significant actions toward a more profitable future. The hallmark of this focus - and underpinning the lean organization and management structure already under way to simplify the business - is Gateway 2020. This is the new strategic direction for the Group with a measured turnaround plan, for which provisions have been recognized in the first half of 2015 to create a leaner, more focused and simpler organization.

First half 2015 results

At constant currency, gategroup reported total revenue for the first half of 2015 of CHF 1,455.1 million compared to CHF 1,423.7 million for 2014 representing a net top line growth of 2.2%. On a reported basis, the Group had total revenue for the first six months of 2015 of CHF 1,415.1 million.

At constant currency and excluding adjustments, gategroup achieved an EBITDA of CHF 60.4 million (4.2% EBITDA margin) for the first half of 2015 compared to CHF 60.6 million (4.3% EBITDA margin) in 2014. On a reported basis including adjustments, EBITDA was CHF 29.8 million (2.1% EBITDA margin). In addition to currency effects of CHF 4.4 million, adjustments of CHF 26.2 million include a provision for the newly ratified U.S. labor agreement, a charge associated with addressing shareholding activism, as well as other provisions. The total currency effects and adjustments affecting EBITDA in the first half of the year amount to CHF 30.6 million.

Total revenue for the second quarter of 2015 was CHF 745.2 million compared to CHF 757.4 million for the second quarter of 2014. On a reported basis, EBITDA for the second quarter is CHF 18.9 million, compared to EBITDA of CHF 42.6 million for the same period in 2014. At constant currency and excluding adjustments, EBITDA for the second quarter is CHF 40.9 million. Currency effects of CHF 2.6 million and adjustments of CHF 19.4 million resulted in a total effect on EBITDA in the amount of CHF 22.0 million.

Consistent with the first quarter, the Group's underlying organic volume growth for the full half year of 4.8% was offset by a net win/loss ratio (-1.9%) and deconsolidation (-0.7%), as well as currency movements against the Swiss Franc (-2.8%). At constant currencies, total revenue grew by 2.2%.

gategroup reported a CHF 87.5 million loss for the first six months of the year, compared to a CHF 6.5 million loss for the same period in 2014. Foreign exchange losses (majority unrealized) of CHF 21.5 million as of June 30, 2015, in combination with restructuring charges and the aforementioned adjustments, were the primary factors driving this difference, masking additional contribution through modest revenue gains and cost savings. The foreign exchange losses, the overall effect of which is principally a translation (accounting) effect with no influence on the cash generation of the Group, were mainly caused by the Swiss National Bank removing the currency ceiling against the Euro. This resulted in a significant strengthening of the Swiss Franc against most major currencies in which the Group operates. The majority of foreign exchange losses (CHF 18.0 million) occurred in the first quarter 2015, as the Group substantially reduced its foreign exchange exposure in the second quarter of the year by significantly reducing open intercompany balances held in foreign currencies.

Cash flow statement and balance sheet

The Group generated CHF 19.3 million from operations during the first six months of 2015, compared to CHF 20.9 million during the same period in 2014.

gategroup's balance sheet as at June 30, 2015, shows total shareholders' equity and non-controlling interests of CHF 208.7 million, compared to CHF 257.8 million as at June 30, 2014.

Net financial debt as at June 30, 2015, was CHF 248.1 million, significantly lower compared to net debt of CHF 305.9 million as at June 30, 2014.

Segment reporting

In June 2015, the Group realigned its business. Airline Solutions and Network and Product Solutions have been integrated into a regional structure focused on operating excellence and standardization. gategroup is now reporting performance by four regional segments: EMEA (Europe, Middle East, Africa and the Commonwealth of Independent States), North America, Latin America and Asia Pacific. Information below is reported consistently, readjusting 2014 accordingly with corporate overhead being allocated proportionately.

In the first half of 2015, EMEA reported total revenue of CHF 671.8 million, compared to total revenue of CHF 723.2 million for the same period in 2014, the reduction being largely due to the termination of the retail contract with Norwegian Airlines in 2014. EBITDA for the segment is CHF 20.5 million (3.1% of revenue), compared to CHF 35.0 million for the first six months of 2014. Excluding adjustments of CHF 7.2 million, EMEA reported EBITDA of CHF 27.7 million.

The North America region reported total revenue of CHF 494.0 million for the period under review, compared to total revenue of CHF 443.6 million in 2014, an increase of 11.4%. EBITDA is CHF -3.2 million (-0.6% of revenue), compared to CHF 10.9 million (2.5% of revenue) for the same period in 2014. Excluding adjustments of CHF 15.4 million of which CHF 10.3 million is attributable to the newly ratified U.S. labor agreement, EBITDA was at CHF 12.2 million.

The Latin America region reported total revenue of CHF 107.6 million for the first half of 2015, compared to total revenue of CHF 99.4 million for 2014, an increase of 8.2%. EBITDA is CHF 8.3 million (7.7% of revenue), compared to CHF 9.7 million (9.8% of revenue) for the first six months of 2014. Excluding adjustments of CHF 2.1 million, EBITDA was at CHF 10.4 million.

The Asia Pacific segment had total revenue of CHF 147.3 million for the first half of 2015, compared to total revenue of CHF 162.4 million for the same period in the prior year. EBITDA for the first six months of the year was CHF 4.2 million (2.9% of revenue), in line with EBITDA of CHF 5.0 million (3.1% of revenue) for the comparative period in 2014. Excluding adjustments of CHF 2.3 million, EBITDA was at CHF 6.6 million.

Credit facility refinanced

In an important step to increase operational and financial flexibility while maintaining multiple sources of fundings at optimal cost, gategroup in March 2015 refinanced its existing credit facility on more favorable terms. The Group signed a new five-year EUR 240 million unsecured multicurrency revolving credit facility ("RCF"), replacing its EUR 100 million RCF due to mature in June 2016. Subsequently, on April 30, 2015, gategroup redeemed EUR 100 million of its 6.75% coupon bearing EUR 350 million High Yield Bond. In conjunction with this repayment of EUR 100 million, an early repayment fee of CHF 5.3 million was paid and previously capitalized transaction costs of CHF 2.3 million were written off, both being expensed in April 2015. These one-off costs are being compensated by annual interest cost savings of close to CHF 7 million, resulting in total savings of close to CHF 30 million over the term of the instrument.

The successful refinancing reinforces gategroup's capital structure and substantially increases the Group's financial flexibility to fund future growth.

Gateway 2020

gategroup is refocusing its approach to improved customer delivery and driving margins and cash flow. Through its new strategic plan Gateway 2020, the Group is concentrating efforts in four key areas:

Focus on the Core - gategroup is reinforcing and growing its leadership position in airline catering and buy on board leveraging available skills and facilities, with a clear focus on core competencies and a distinct go-to-market approach as 'one gategroup' through the integration of brands geographically.

Commercial Innovation - The Group is highly focused on its global airline customer base and is strengthening its commercial capabilities to expand the business and retail on board turnover through market-leading technology and innovation, supported by data-driven insights. A new global innovation center was created to deliver the most innovative, airline-customized offering tailored to specific passenger needs. Focused investments in technology will help ensure gategroup's more progressive offering for airline customers and their passengers. A clear focus has been set to improve the full travel experience of the passenger.

Geographic Expansion - A renewed focus on emerging markets and up-and-coming carriers operating in this important region are at the core of gategroup's geographic growth plan, largely centered around airport locations in Asia Pacific and the Middle East, as well as Africa and Latin America and airlines based in the emerging markets, playing an increasing role in the global market.

Standardization and Efficiency - gategroup is driving cost optimization through the introduction of zero based budgeting, further streamlining of its internal structure, global standardization of its operating practices, and enhanced global procurement. This will bring about simplification within the organization with greater clarification of roles and responsibilities.

The changes being identified and implemented are a meaningful step beyond the extensive activities that gategroup recently undertook, primarily within its European business. The restructuring initiatives related to Gateway 2020 are doubly designed to deliver sustainable benefits, taking the business to the next level globally. Major projects include streamlining back-office functions and reorganizing corporate centers, as well as realigning operational structures to drive facility standardization based on similar business needs and comparable customer requirements. As previously announced, centralizing global functions will increase efficiencies and cost improvements across the Group through greater transparency and accountability at all levels of the organization.

The turnaround plan is expected to affect some 300 positions over the next six to twelve months. In addition to personnel related measures there will be a comprehensive program to focus on Operational Expenditure reduction. These efforts will go hand in hand with a parallel effort to improve the Company's retail, innovation, technology and business intelligence competencies. gategroup has recognized net charges of CHF 61.1 million in the first half of 2015 of which CHF 34.6 million are for restructuring costs and related personnel obligations. The focus of the initiatives will be on the three main administrative locations in Zurich, Reston and London, as well as on the integration of brands across all geographies. All efforts will be made to ease the effects of the restructuring by using natural turnover and redeployment wherever possible.

Collectively, the Gateway 2020 strategy is set to deliver annual revenue growth of 3-5% and an increase in EBITDA margin of between 0.25 and 0.5 percentage points annually, leading to improved cash generation further supported by tax, finance and working capital initiatives.

New Executive Management Board

To lead the Company in its new strategic direction, the Group simplified its management structure and the composition of its Executive Management Board (EMB). As of June 22, 2015, gategroup's EMB consists of five members, led by Chief Executive Officer Xavier Rossinyol; it includes Chief Financial Officer Christoph Schmitz; Herman Anbeek, President Americas and EMEA; Jann Fisch, President Asia Pacific; and David de la Torre, Chief Commercial Officer - simple and focused.

One gategroup, one vision

"We have taken thoughtful steps in developing and deploying our new strategy and relevant turnaround activities, with a major participation of all levels of management. Our new 2020 vision unifies all of our people in all of our regions acting as one gategroup. We are already taking specific measures to drive Revenues and EBITDA to achieve our goals and grow cash flow. We are increasing our focus on our customers and on the passengers and becoming more commercially and innovation oriented. We will concentrate our attention on fewer targets. We will push for standardization without compromise with a smaller and more focused team and a simpler organization, which should deliver efficiency. I want to thank the team for the major effort to craft this new strategy and the support of our customers of the new vision." said Xavier Rossinyol, gategroup's Chief Executive Officer.

More information on our 2015 interim financial report is available at:
http://www.gategroup.com/investors/financial-reports-and-presentations

Overview of Key Figures (in CHFm)

gategroup Investor Day 2015

gategroup invites interested parties to participate in its Investor Day - From H1 2015 to the Future - via audio and weblink on September 3, 2015, from 2pm-4pm CET. During the presentation, CEO Xavier Rossinyol and CFO Christoph Schmitz will outline gategroup's financial position and strategic direction.

To join the audio portion of the event, please dial in:

Europe: +41 58 310 50 00
UK: +44 203 059 58 62
USA: +1 631 570 5613

Please also follow the presentation via live streaming with the following webcast link: http://78449.choruscall.com/dataconf/productusers/gategroup/mediaframe/12640/indexr.html

For further inquiries, please contact us by email at invest@​gategroup.​com

Contact

Dagmara Robinson

invest@gategroup.com

+41 44 533 7032