UK/INTERNATIONAL. Travel restaurateur SSP Group has reported revenues of £1,990.3 million (US$2,488.4 million) for the year ended 30 September, up +5.0% on a constant currency basis and +8.6% at actual exchange rates.

Like-for-like sales were up +3.0%, driven by growth in air passenger travel and retailing initiatives, SSP said.

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Source (all charts): SSP Group

Operating profit of £121.4 million (US$151.8 million) was up +18.2% on a constant currency basis, and +24.6% at actual exchange rates. SSP said the performance was the result of the “good” sales growth as well as “further operational improvements and higher new contract openings”.

Pre-tax profits were up +31.1% to £107.5 million (US$134.4 million). Operating margin was up 70 basis points at constant currency to +6.1%, with strategic initiatives delivering further improvements, according to the company.

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SSP Group CEO Kate Swann

“SSP has delivered another good performance in 2016 and we continue to make progress on our strategic initiatives,” said SSP Group CEO Kate Swann. “We continue to develop our presence across the world, particularly in North America and Asia Pacific.

“The new financial year has started in line with our expectations 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.”

The first half of the financial year saw like-for-like sales growth of +3.3%. This fell to +2.9% in the second half as SSP noted the impact of terrorist incidents in France, Belgium and Egypt and slowing growth in China.

Like-for-like sales in the air sector grew more strongly than in rail, driven by the continued increase in passenger numbers throughout the year. Following the terrorist incidents in France and Belgium in the first half, SSP said trading across its UK and Continental European rail operations was softer, particularly in the major capital cities.

Net contract gains were up +1.7% in the full year, which SSP noted was an “encouraging” increase over +0.6% growth the previous year. “We continue to focus on retaining profitable contracts and our contract renewal rate in 2016 was in line with our plans and slightly ahead of the historical average,” the company said.

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SSP said the new financial year had started in line with its expectations. “The pipeline of new contracts is encouraging, although it is always difficult to predict the precise timing of the opening of these new units,” the company explained. “Looking forward to 2017, with tough like-for-like sales comparatives in the first half of the year and the current level of general economic uncertainty, we anticipate slightly lower like-for-like revenue growth next year.

“However the significant structural growth opportunities and our programme to deliver operational improvements leave us well placed to continue to deliver both for our customers and our shareholders.”

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SSP also noted that it expects its joint venture with Travel Food Services, which will see it enter the Indian travel food & beverage market, to contribute approximately +2.0% to 2017 sales growth.

Regional performance

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In the UK, revenue increased by +2.9% on a constant currency basis, comprising like-for-like growth of +3.1% and net contract losses of -0.5%. The impact of the extra leap year day added +0.3% to the year’s revenue growth. Like-for-like growth was particularly strong in the air sector, driven by continued growth in UK airport passenger numbers and increased spend per passenger.

Underlying operating profit was up +25.8% on a constant currency basis to £66.4 million (US$83.0 million), while underlying operating margin increased by 170 basis points to +8.9%, benefiting from good like-for-like sales growth in the air sector, and from the implementation of strategic initiatives, particularly gross margin optimisation.

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In Continental Europe, revenue increased by +1.4% on a constant currency basis, comprising like-for-like growth of +2.8% and net contract losses of -1.7%. The extra day arising from it being a leap year added +0.3% to the year’s revenue growth. Like-for-like sales were much stronger in air than in rail, with good growth in the air businesses in the Nordic region and in Spain, which has benefited from the transfer of tourism from the Eastern Mediterranean and the Middle East, SSP said.

Underlying operating profit increased +3.9% on a constant currency basis to £60.1 million (US$75.1 million). Profit growth was impacted by the sharp fall in sales following the terrorist incidents in the first half, SSP said. Underlying operating margin increased by 20 basis points on a constant currency basis to +7.5%, benefiting from the ongoing roll-out of strategic initiatives.

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In North America, revenue increased + 20.9% on a constant currency basis, comprising like-for-like growth of +7.5% and net contract gains of +13.1%. The leap year day added +0.3% to revenue growth. Like-for-like growth benefited from positive trends in airport passenger numbers in the North American market, as well as the transfer of additional Delta passengers into Terminal 4 at New York’s JFK airport, the company noted. Net contract gains were driven principally by new outlets at a number of airports, including Houston, Orlando, Montreal and Toronto.

Underlying operating profit increased by £9.0 million to £12.5 million (US$15.6 million). Underlying operating margin increased from +1.7% to +4.8%, driven by the benefit of increased sales and good progress on a number of the group’s productivity initiatives.

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In the Rest of the World, revenue increased by +12.3% on a constant currency basis, with a reduction in like-for-like sales of -2.1% and net contract gains of +14.1%. The leap year impact added +0.3% to revenue. The fall in like-for-like sales reflected the sharp drop in passenger numbers across Egypt following the Sharm-el-Sheikh bombing in late October, SSP said. It also reported a slowing of growth in China, particularly during the second half, which impacted a number of countries across the Asia Pacific region. Net contract gains included new openings in Dubai International Airport, Thailand’s Don Mueang International Airport, and at Beijing Capital International Airport, as well as outlets opened in the prior year at a number of locations across the region.

Underlying operating profit fell -44.5% on a constant currency basis to £8.6 million (US$10.8 million). Underlying operating margin dropped by 480 basis points to +4.7% which was largely the result of the terrorist incident in Egypt, where sales fell by over +50% year-on-year. SSP said the region was also impacted by significant pre-opening costs, particularly in Dubai and Beijing airports during the first half, and by higher depreciation charges associated with new contracts.