Kate Swann: “Given the positive momentum, we are today raising our expectations for net gains in the second half of the year.”

UK. Leading travel restaurateur SSP Group today reported first-half revenue (to 31 March) of £1,261.6 million, a rise of 7.1% year-on-year at actual exchange rates or 6.8% on a constant currency basis.

The 6.8% rise included like-for-like sales growth of 2.0%, net contract gains of 4.1% and the impact of acquisitions of 0.7%. Revenue in the first half of the group’s financial year is typically lower than in the second half, as a significant part of the business serves the leisure sector, which is more active during the northern hemisphere summer.

Reported operating profit increased 13.7% to £61.6 million, with profit before tax up by 6.2% to £51.4 million.

SSP CEO Kate Swann said: “SSP has delivered another good performance in the first half of 2019, driven by strong sales growth, significant new contract openings across the world and our programme of operational improvements. We have continued to grow our global presence, particularly in North America and Asia, and we have further expanded our operations in Latin America. These are high growth markets for SSP and present us with exciting opportunities. Given this positive momentum, we are today raising our expectations for net gains in the second half of the year.

“Looking forward, the second half has started well and whilst a degree of uncertainty always exists around passenger numbers in the short term, we continue to be well placed to benefit from the structural growth opportunities in our markets and our programme of operational improvements.”

Solid sales and profits growth: The SSP performance in the six months to 31 March 2019. (Click to enlarge.)

Like-for-like sales in the air sector grew more strongly than in rail driven by the continued growth in air passenger numbers, said SSP. Like-for-like sales growth in the second quarter was 1.5%, but was impacted by the timing of Easter, which this year fell into the second half, and by the Gilets Jaunes protests in France.

Excluding these factors, like-for-like sales growth in the second quarter would have been above 2%. Like-for-like sales growth in the UK, North America and the Rest of the World was in line with expectations. In Continental Europe, like-for-like sales were impacted by the protests in France and disruption at some of airports due to redevelopments, most notably Copenhagen and Malaga. With more economic uncertainty and disruption, group expectation for like-for-like sales growth in the full year is around 2%.

The pipeline of openings and contract gains includes Athens International, where SSP is already present.

Network expansion in the first half delivered net contract gains of 4.1% with strong contributions from Continental Europe (+3.1%), North America (+8.7%) and the Rest of the World (+4.2%).

In Continental Europe, net gains were driven by new unit openings at Montparnasse station in Paris, Charleroi and Barcelona Airports, and a new contract for 29 Starbucks units in railway stations in the Netherlands, and at the end of the first half, new motorway service areas across Germany.

Net gains in North America included new openings at LaGuardia, Los Angeles and Seattle Airports. In the Rest of the World, net gains included new unit openings at airports in Hong Kong, Phuket in Thailand and across a number of airports in India including Delhi, Mumbai and Kolkata. In the first half, more openings have been at new sites compared to the first half last year and as a consequence the group incurred higher pre-opening costs.

The food hall at San Francisco Airport: North America performed strongly in the period for SSP.

On openings to come, SSP noted: “We are encouraged by the pipeline of new contracts. In the first half we won a number of significant new airport contracts including in Continental Europe at Alicante, Helsinki and Athens airports, in North America at Oakland, Salt Lake City and Vancouver Airports, and in India at Mumbai and Delhi airports. Following our entry into Latin America, winning contracts at Rio de Janeiro and São Paulo airports in Brazil, we have recently been awarded a further new contract at Salvador Bahia Airport in Brazil. We expect to begin operating these contracts progressively over the next two years.”

The expectations for net gains for the full year has increased from 3% to between 4% and 5%. Acquisitions are expected to add around 0.3% to revenue on a full-year basis.

The UK & Ireland business saw revenue increase by 4.3% on a constant currency basis, comprising like-for-like growth of 1.4% and net contract gains of 2.9%.

Commenting on H1 profits growth, SSP added: “Underlying operating profit increased to £62.5 million, a 14.6% increase on a constant currency basis. The underlying operating margin increased by 30 bps to 5.0% on a constant currency basis, driven by solid like- for-like sales growth and the continued roll-out of our strategic initiatives and was delivered despite the impact of higher preopening costs associated with the significant new contract opening programme.”

“Looking forward to the second half and full year, and with the expectation of lower pre-opening costs in the second half compared to the first half, we now anticipate the overall operating margin to increase by between 30 and 40 bps, up from our previous estimate of 20 bps for the full year.”

Concession fees rose by 80bps, or around 70bps after adjusting for the stronger air sales. The higher increase compared to recent trends was mainly due to the wider scale of the first half opening programme, with many contracts still in their mobilisation phase, said SSP. It said it expected the underlying increase to revert to more normal levels over the full year.

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