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gategroup, the leading independent global provider of onboard services to companies that serve the travelling passenger, reported a first-half profit for the period of CHF 33.2 million against a backdrop of a worldwide economic recession and the most challenging conditions in recent memory for airlines, its core customer group.
The reported profit for the period was up by 89.3% on a constant currencies basis, primarily due to net foreign exchange gains of CHF 26.3 million. Fully diluted earnings per share were 1.63 CHF for the current period compared to 0.71 CHF in 2008.
“gategroup is maintaining respectable performance in one of the worst-ever industry environments,” said Chief Executive Guy Dubois. “gategroup’s business model is built to withstand the shocks of the cyclical industry it serves, and these results demonstrate that resilience, he said, adding, ”We will continue to work closely with our key accounts as partners to address this economic challenge.”
The results came on total revenue of CHF 1,291.8 million for the half year, a 2.0% drop in constant currencies.
Excluding a one-time charge of CHF 6.6 million, EBITDA was CHF 96.5 million, a 3.5% decline in constant currencies; EBITDA margin was 7.5%, a 0.1 percentage point decline in constant currencies; and operating profit, excluding one-time charges of CHF 14.4 million, was CHF 49.2 million, a 12.1% decline in constant currencies. On an adjusted basis, cash flow from operating activities was CHF 18.5 million, an improvement of CHF 32.6 million.
“Despite the difficult economic environment for airlines, gategroup remains confident in the industry. In line with the group’s growth strategy, we made substantial investments in Scandinavia and Japan, which impacted cash flow in the first half in excess of CHF 40 million,” said Chief Financial Officer Thomas Bucher. “The balance sheet remains solid, and the company sees no current need for an increase in capital,” he said.
In May, gategroup undertook a significant next step in its evolution by listing its shares on the SIX Swiss Exchange under the symbol “GATE”. The listing process ultimately led to a cash outflow of CHF 13.5 million during the first half. gategroup did not issue new shares nor raise capital. “But going public sets the stage for the company’s future by raising visibility and flexibility in the financial marketplace, increasing the pool of potential investors, attracting and retaining key people, and raising awareness of gategroup’s 11 brands,” Bucher said.
Looking ahead, Dubois said the airline industry’s financial condition remains fragile. “In our view the travel industry cycle has not yet reached bottom, and a turnaround will not be simultaneous across the world. We expect the US market to lead the way out, while Europe may see two to four more quarters of prolonged weakness,” he said. “In addition to the continuously weak economic environment, the impact of the H1N1 swine flu pandemic may also have a delaying effect on the recovery,” he added.
Dubois said uncertainty about the potential ongoing impact of the pandemic prevents the company from giving full-year guidance.
“The historic trend for airline passenger volume growth has been decidedly positive – an average annual rate of 4.7% since 1970. History shows that, at the end of past recessions, passenger volume was higher than at the entry point. We look forward to the inevitable upturn,” Dubois said.
Vicky is the co-founder of TravelDailyNews Media Network where she is the Editor-in Chief. She is also responsible for the daily operation and the financial policy. She holds a Bachelor's degree in Tourism Business Administration from the Technical University of Athens and a Master in Business Administration (MBA) from the University of Wales. She has many years of both academic and industrial experience within the travel industry. She has written/edited numerous articles in various tourism magazines.
