SSP Group full-year results underline strength of travel market recovery

UK/INTERNATIONAL. Travel food specialist SSP Group today revealed results for the 12 months ended 30 September, which underline the strength of the recovery in key travel markets.

The group posted revenue of £2,185.4 million, up by +162% year-on-year, or 78% of 2019 levels. Crucially, business recovery accelerated in recent months. In the first half, revenue reached 64% of 2019 levels, hitting 90% of 2019 levels in H2.

This further strengthened in the first eight weeks of the new financial year to 104% of 2019 levels. The recovery in passenger numbers has been led by strong leisure travel demand over the summer holiday season, which has continued well into the autumn, noted SSP.

The revenue performance includes the benefit from net contract gains and price increases compared to the same period in 2019. In North America, revenues are now at 131%, reflecting the ongoing recovery in domestic air travel and the strength of net gains.

In Continental Europe, revenues are at 108%, with most markets performing strongly, boosted by an extended holiday season which has helped both the Air and Rail sectors. In the Rest of the World, revenues are at 106% and continuing to recover well, with strong performances in India, Australia, Thailand and Egypt partially offset by the impact of low passenger numbers in China and Hong Kong. In the UK, sales are at 84% reflecting the higher rail to air mix of business, with the rail sector recovering more slowly.

The SSP contract pipeline includes 18 F&B and convenience store outlets at Stockholm Arlanda and Gothenburg Landvetter airports, recently announced

Underlying EBITDA of £142 million compared to an underlying EBITDA loss of £108.3 million last year, with operating profit on a reported basis of £91.5 million (under IFRS 16) compared to a £309.2 million loss a year ago. Pre-tax profit reached £25.2 million (IFRS 16) compared to a £411.2 million loss in 2021.

The company attributed the recovery to “a rapid recovery in passenger demand through the year and disciplined cost management”.

On the outlook, SSP said: “While we continue to face into a high level of macroeconomic uncertainty and ongoing cost inflation and labour availability challenges, we believe that the travel food & beverage sector will remain structurally resilient to pressures on consumer spending and that our flexible business model will enable us to actively manage and mitigate these impacts and to deliver further improvements in profitability as the travel sector recovers.”

SSP Group key financials; click to enlarge all tables

Based on the current pace of the recovery, SSP said it is planning for passenger numbers to reach between 85% and 90% of 2019 levels in 2023, and between 90% and 95% in 2024.

Revenues are expected to include the effect of accumulated inflation between 2019 and 2023 of around 12% and between 2019 and 2024 of around 14%. In addition to this, SSP expects a benefit from net new contracts. The overall pipeline of secured net contract gains is currently expected to add around £550 million to annualised revenue by 2025 (compared with 2019), when fully mobilised. The pipeline will contribute cumulative net contract gains of about £200 million in 2023 and £350-400 million in 2024 (compared with 2019).

In total, SSP is planning for revenues to be about £2.9-3 billion in 2023 and £3.2-3.4 billion in 2024, with a corresponding EBITDA (pre-IFRS 16) of £250-£280 million in 2023 and £325-£375 million in 2024.

The recent North America market performance has surged past 2019 levels (New York JFK T4 pictured)

SSP Group CEO Patrick Coveney said: “This has been a year of strong recovery for SSP, with momentum building strongly through the second half and into our new financial year. Group revenues are now tracking at 104% of 2019 levels, and as revenues have recovered we have delivered good profits and robust cash flows.

“SSP is a fabulous business with strong foundations on which to build. The global air and rail travel sectors are set up for long-term structural growth, consumer demand for quality food offerings in travel locations remains strong, and we have significant head room for growth in multiple markets across the world. In particular, we see significant potential for further expansion in North America – a US$6 billion market in which we currently only have a 10% market share.

“North America is central to our growth plans, and we envisage it becoming a much bigger part of the Group over the next few years. We are also rapidly building our presence in selected Asia Pacific markets and continue to expand in a targeted way in the UK, Europe and the Middle East.”

Regional performance: North America

Revenue of £455.4 million increased by +134.5% compared to 2021 and averaged 85% of 2019 levels for the year.

Following a strong Q1 and softer Q2 due to Omicron, recovery in North America gathered pace, with third quarter sales averaging 91% of 2019 levels and the fourth quarter strengthening to 98%. This was driven by a sustained recovery in domestic air travel, despite labour availability remaining a challenge in this market for much of the summer.During the early weeks of the new financial year trading has continued to improve, and sales are currently running at 131% of 2019 levels and 109% of 2020.

Regional performance: Continental Europe

Revenue of £867.9 million increased by +140.7% compared to 2021 and averaged 84% of 2019 levels.

While the impact of the Omicron variant hit sales in Q2 in particular, business recovered strongly from Q3, with sales in that period reaching 93% of 2019 levels. These were initially boosted by very strong trading in Spanish airports during the Easter holiday period and thereafter by a sustained recovery in leisure travel across the entire region.In the fourth quarter, sales averaged 95% of 2019 levels, driven by increasing numbers of both air and rail passengers over the summer holiday season. Since year-end, trading in the Continental Europe region has made good further progress, with sales currently running at 108% of 2019 levels and 101% of 2020.

Regional performance: UK & Ireland

Revenue of £614.9 million increased by +223.6% compared to 2021 and averaged 73% of 2019 levels.

As with other regions, second-half performance led growth. UK trading in both Air and Rail continued to strengthen, with the third quarter running at 82% of 2019 levels and the fourth quarter improving to 85%, despite the impact of the industrial action in the rail network over the summer.Since year-end trading in the UK has remained at similar levels to the fourth quarter of last year, with further impacts from industrial action in the rail network, leaving sales currently running at 84% of 2019 levels and 80% of 2020.

Regional performance: Rest of the World

Revenue of £247.2 million increased by +176.2% compared to 2021 and averaged 64% of 2019 levels.

While sales in the first half were just 43% of 2019 levels, the second half of the year sales recovered strongly in most markets, with the third quarter running at 75% of 2019 levels and the fourth quarter improving to 88%.Sales in China and Hong Kong have remained at low levels throughout the second half, reflecting the ongoing lockdowns and travel restrictions in those markets.

Since year-end SSP said that trading in the Rest of the World region is making further progress, with sales currently running at 106% of 2019 levels and 104% of 2020.

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