INTERNATIONAL. Travel food & beverage company SSP Group has issued an upbeat pre-close trading update for the fourth quarter of its financial year, covering the period from 1 July to 30 September 2022.
SSP revealed that revenues are expected to be around 91% of 2019 levels. The company said this is driven by a continued recovery of passenger numbers, notwithstanding some disruption to the travel sector over the summer.
The revenue performance includes the benefit from net contract gains and price increases compared to the same period in the pre-crisis year.
The recovery is being led by domestic and leisure travel across both the air and rail sectors, with business and commuter travel also recovering, albeit more slowly.
The quarter has seen a recovery in trading across all regions, the F&B company noted. In Continental Europe revenue is expected to be around 95% of 2019 levels, driven by increasing numbers of air passengers over the summer holiday season.
“As we look forward in this challenging macroeconomic environment, we remain confident in the ongoing resilience of the Group’s business model and continue to see significant potential for both near and long-term growth” – SSP Group CEO Patrick Coveney
In North America revenue is also expected to be at 95%, reflecting the ongoing recovery in domestic air travel.
In the UK trading in both air and rail has continued to strengthen, despite the impact of the industrial action in the rail network over the summer, with revenues expected to be about 86% measured against 2019.
In the rest of the world, there has been a resurgence in revenues to 86% of previous levels, with strong performances in India, Australia, Thailand and Egypt. However, SPP observed that passenger numbers remain very low in China and Hong Kong.
The company also noted that it has continued to make further good progress on business development in the second half, extending and renewing contracts as well as winning new tenders to augment an existing strong pipeline.
As a result of the recent trends, SSP said it has confidence in the underlying recovery and the resilience of its business model, and it is now planning to accelerate the mobilisation of its pipeline from 2023 onwards.
By 2025, SSP’s pipeline of new outlets is expected to add approximately £500 million to revenues compared to 2019.
For the current full year, the company said it now expects to deliver sales of approximately £2,170 million and EBITDA of approximately £140 million (on a pre-IFRS 16 basis), slightly ahead of previous full year guidance.
SSP said the strength of its second-half EBITDA performance reflects the benefit of operating leverage, as sales recover, as well as sound ongoing management of inflationary cost pressures through productivity and pricing initiatives.
In the second half of the year, the Group is expected to generate net free cash flow of approximately £70 million, driven primarily by a strong EBITDA performance and a further working capital inflow as sales recover.
Payment deferrals relating largely to rental negotiations during the pandemic are now expected to unwind during the next financial year, SSP noted.
The company anticipates capital expenditure to be broadly in line with its previous guidance of c.£150 millon, increasing to c.£200-£250 million in 2023, reflecting the accelerated mobilisation of the new business pipeline.
As a result of a strong cash flow performance, SSP said it expects net debt to be approximately £340 million at the year-end (at current FX rates), leaving leverage in the region of 2.4x Net Debt vs EBITDA (on a pre-IFRS 16 basis).
Outlook
Looking ahead to the 2023 financial year, SSP said that while there remains considerable uncertainty in the macroeconomic environment, it is confident that its flexible and resilient business model will enable it to continue to offset cost inflation, manage supply chain and labour volatility, and optimise profitability and returns.
The company’s medium-term expectations for the recovery remain unchanged, which are for a return to broadly pre-COVID-19 levels of LFL revenue and EBITDA (on a pre-IFRS 16 basis) by 2024.
Reflecting on the Q4 performance, SSP Group CEO Patrick Coveney said: “Passenger numbers are rebounding across the global travel sector and – thanks to the commitment and hard work of our colleagues and support from our clients and brand partners – our trading has now recovered to near 2019 levels.
“With a strong client and customer proposition, we are winning new business across the world and continue to have a high success rate in renewing contracts.”
He added: “As we look forward in this challenging macroeconomic environment, we remain confident in the ongoing resilience of the Group’s business model and continue to see significant potential for both near and long-term growth.”
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