SSP Group: 2023 Full Year Results Announcement

London / UK. (ssp) British SSP Group PLC, a leading operator of restaurants, bars, cafes and other food and beverage outlets in travel locations across 36 countries, announced in December 2023 its financial results for the year ended 30 September 2023.

FY-2023 FY-2022 Change at actual FX rates Change at constant FX rates
Underlying Pre-IFRS 16
Revenue GBP 3,010m GBP 2,185m 37.7% 37.9%
Ebitda GBP 280m GBP 142m 97.3% 103.5%
Operating profit GBP 164m GBP 30m 440.3% 495.2%
Operating profit margin 5.4% 1.4% +400bp +440bp
Earnings/(loss) per share 7.1p (4.5)p +11.6p
Dividend per share 2.5p +2.5p
Free cash flow GBP (125)m GBP 52m GBP (177)m
Net debt GBP (392)m GBP (297)m GBP (95)m
Statutory
Operating profit GBP 167m GBP 92m +82.3%
Profit before tax GBP 88m GBP 25m +249.6%
Earnings/(loss) per share 1.0p (1.3)p +2.3p
Net debt GBP (1,421)m GBP (1,151)m GBP (270)m

Performance Highlights: (Underlying pre-IFRS16)

  • Significant further recovery in Group performance with full-year revenue of GBP 3.0bn, up 38 percent compared to last year and ahead of pre Covid-19 levels throughout the year
  • H2 revenue growth of 25 percent on a constant currency basis comprising: like-for-like growth of 19 percent driven by a further recovery in passenger numbers, with North America (at 24 percent) and APAC and EEME (at 44 percent) the principal contributors; net gains of 6 percent from the mobilisation of our new contract pipeline
  • Trading momentum sustained into new financial year with Group revenues in first 8 weeks up 22 percent on a constant currency basis
  • Ebitda of GBP 280m, up from GBP 142m last year, driven by strong revenue growth and profit conversion; Ebitda outturn at top end of Preliminary Results 2022 planning assumptions despite significant strengthening of Sterling over the last twelve months
  • Operating profit margin up 400 bps year-on-year to 5.4 percent, driven by operating leverage as volumes have recovered, alongside our extensive efficiency programme and pricing action, which has mitigated the impact of the high levels of inflation across most of our cost base
  • Strong contributions to profitability delivered by the North America and APAC and EEME regions, reflecting the faster recovery in demand in these markets and strong profit conversion, as margins increased in line with revenue growth
  • Profit growth in UK and Continental Europe impacted by the relatively slower revenue recovery in the rail channel and significant disruption caused by strikes and civil protests
  • Underlying pre-IFRS 16 EPS of 7.1p per share compared with a loss of 4.5p per share in the prior year. Reported EPS of 1.0p per share compared with a loss of 1.3p per share in the period year.
  • The strong recovery in profitability and earnings gives the Group the confidence to propose a resumption of ordinary dividend payments with final dividend of 2.5p reflecting a payout ratio of 35 percent on full-year underlying earnings
  • Free cash usage limited to GBP 125m after funding higher capital investment of GBP 220m (compared with GBP 149m in the prior year), acquisitions of GBP 41m and a small use of working capital as a result of the unwind of payment deferrals of c.GBP 50m
  • Net Debt of GBP 392m at the end of September 2023, and leverage (Net Debt: Ebitda) improving from 2.1x to 1.4x. Under IFRS 16, net debt increased from GBP 1,151m to GBP 1,421m
  • Refinancing completed in July 2023, extending our maturity profile and maintaining a high level of liquidity
  • The secured pipeline of contracts yet to open (at the end of September 2023) now represents estimated annualised revenues of c.GBP 450m, once fully mobilised; in 2024 we expect organic net gains of c. 5 percent (excluding the full year of the Midfield concessions acquisition, which will add a further c. 2 percent to sales), all of which should be delivered from the secured pipeline. In the medium-term net gains in the region of 3 percent-5 percent on average are anticipated, underpinned by our secured pipeline and current momentum in new business success.
  • Continued to make good progress against our strategic priorities: pivoting to higher growth markets approximately two thirds of the sales from the secured new business pipeline is planned to come from North America and APAC; enhanced business capabilities – in particular, strengthened portfolio of partner brands, including new partnerships BrewDog in the UK and Europe, Breakfast Club in the UK and Jones the Grocer in Singapore and existing partners, including Pret, Hard Rock Café, Popeyes and Starbucks
  • Contract retention levels have remained consistent with long-run historical levels, underpinned by the strength of our operational performance, client relationships and brand portfolio
  • We have a clear and consistent compounding growth and returns strategy to further strengthen our market-leading positions in food travel markets globally, based on our key priorities: Pivoting to high growth markets, enhancing business capabilities and delivering operational efficiencies

Recent Trading and Outlook

Strong trading momentum continues into new financial year.

Since our year-end, trading has remained strong in all key markets, with total revenue during the first eight weeks (from 1 October to 26 November) up 22 percent on FY2023 levels on a constant currency basis. Our revenue performance is being driven by passenger recovery, a strong customer proposition and robust operational execution. In addition, revenues are benefitting from net gains as we mobilise our secured pipeline.

In North America, sales grew by 33 percent year-on-year on a constant currency basis, driven by robust domestic air passenger numbers and strong like-for-like performance. Our performance includes a sales benefit from the acquisition of the Midfield concessions business, with the transfer of units at all seven airports now complete. In Continental Europe, revenues grew by 14 percent year-on-year, on a constant currency basis, benefitting from an extended holiday season into the Autumn. In the UK, sales increased by 22 percent, reflecting a strong performance in our Air business and an ongoing improvement in rail passenger volumes as commuters continue to return to working in offices. In APAC and EEME, revenues rose by 29 percent on a constant currency basis, as we saw further improvements in passenger numbers across the Asia Pacific region.

SSP in strong position to benefit from long-term structural growth in the industry

FY-2024 expectations

While we face into macroeconomic and political uncertainty, we believe that demand for travel will remain resilient and is well set for near and long-term structural growth.

In 2024, we are planning for like-for-like sales growth of between 6 percent and 10 percent, reflecting the expectation of an ongoing recovery in passenger demand as well as increased spend per passenger including year on year price increases. We expect net contract gains to be in the region of 5 percent, as we mobilise our pipeline of secured new contracts, with a further contribution of c.2 percent from the acquisition of the concessions business of Midfield Concession Enterprises, Inc in North America.

In total we are planning for revenue to be in the region of GBP 3.4-3.5bn in 2024 with a corresponding underlying pre-IFRS 16 Ebitda within the range of GBP 345-GBP 375m and an underlying pre-IFRS 16 operating profit within the range of GBP 210-235m, all stated on a constant currency basis.

Our expected performance would represent a further strong recovery in profitability despite the ongoing inflationary pressures on operating costs, which we continue to manage successfully through productivity and pricing initiatives.

Reflecting the strong momentum in the pipeline and the timing of openings, we are planning for capital expenditure to be in the region of GBP 280m in the 2024 financial year (which includes cGBP 30m deferred from FY2023) comprising: capital to fund our renewals and maintenance programme of c.GBP 140m; expansion capital for new contracts of c.GBP 80m and c.GBP 60m reflecting the deferral of renewal and maintenance capital expenditure from the Covid-19 period. Our capital investment programme is expected to deliver in-year organic net contract gains of c.5 percent in 2024, with returns in line with historical levels (typically a 3-4 year discounted payback).

Medium-term outlook

Our compounding shareholder growth and returns model, aligned to our medium-term financial framework is set to deliver:

  • Sales growth ahead of pre-Covid levels, including net gains of between 3 percent and 5 percent p.a., resulting from our pivot to higher growth markets (principally the North America and APAC regions) which offer higher levels of structural demand and infrastructure growth, and where we have strong businesses with relatively low market shares and significant momentum.
  • Sustainable operating margin enhancement benefitting from operating leverage (driven by revenue growth), greater use of technology and automation and our wide-ranging efficiency programme, all of which will enable us to mitigate the impact of rising rent levels and inflationary cost increases.
  • Sustainable medium-term earnings growth driven by strong operating profit growth, with minority interest continuing to grow in line with revenue growth in countries with joint venture partnerships.
  • Capital investment funded from operating cashflow, underpinned by high returns on capital projects, with 3-4 year discounted cashflow paybacks, in line with historical performance; we expect contract renewal and maintenance capex to be on average c. 4 percent of Group sales and expansionary capex to be c.2-3 percent of Group sales, both in line with historical levels.
  • Balance sheet deleveraging, the pace of which will be determined by the scale of new business investment and value creating infill M+amp;A.
  • Payment of the ordinary dividend with a target payout ratio of c.30-40 percent and surplus cash returned to shareholders in line with our capital allocation framework.

Chief Executive’s Commentary

Commenting on the performance, Group Chief Executive Patrick Coveney said: «This has been a year of strong financial, operational and strategic progress for SSP. We are continuing to lay the foundations for accelerated expansion in key growth markets such as North America and Asia Pacific. We are also making clear strides in enhancing our customer proposition, our digital capabilities and our sustainability initiatives. Our ongoing focus on these areas has led to SSP delivering strong like-for-like growth, high levels of new business, a robust margin recovery, and even closer relationships with our clients and brand partners. We are very pleased to be taking the important step today of proposing to reinstate the ordinary dividend.

SSP is in very good shape, and we are excited by the opportunities in front of us. We are building strong momentum across all areas of the business thanks to the efforts of our outstanding colleagues across the world, as well as the ongoing support of our clients and brand partners. The commitment of our people, the structural growth in travel demand and the strength of our business model mean we are well placed to deliver compounding growth and returns in the years to come.»

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