SSP Group: Pre-Close Trading Update 2023

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, in September issued a Pre-Close Trading Update in advance of the financial year-end on 30 September 2023. Strong underlying trading momentum is expected to continue through to the end of the financial year, leaving SSP well-positioned to deliver results at the upper end of the ranges previously indicated for both revenue and Ebitda (underlying pre-IFRS 16).

Revenue performance

Revenue for the last 16 weeks of the year (from 12 June to 30 September) is expected to be at c.116 percent of 2019 levels, on a constant currency basis. This represents an underlying improvement in trading since our statement on 21 June (covering the 10-week period from 1 April to 11 June), where trading was at 112 percent of 2019 levels on a constant currency basis. Our revenue performance is being driven by the continued recovery in passenger numbers, particularly in the air sector, as well as our stronger customer offer and digital proposition. In addition, revenues have benefitted from price increases and further net contract gains.

North America, which now accounts for approximately a quarter of Group revenue, continues to be a key driver of our performance. Over the last 16 weeks of the financial year, revenues are expected to strengthen to c.127 percent of 2019 levels, 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 Concession business, with the transfer of six of the seven airports completed. In Continental Europe, revenues are expected to be at c.115 percent of 2019 levels, on a constant currency basis, driven by strong summer air travel volume and despite the impact of protests and travel disruption in France. In the Rest of the World, revenues are expected to rise to c.132 percent on a constant currency basis, as we saw further improvements in passenger numbers across the Asia Pacific region, with particularly strong performances in India and Egypt. In the UK and Ireland, sales are expected to strengthen to c.100 percent, reflecting both the improving performance and the higher mix of the air channel, despite the rail sector continuing to be impacted by ongoing industrial action.

For the second half as a whole, Group revenues are expected to rise by 22 percent vs last year (at actual exchange rates), reflecting the strength of our like-for-like performance in addition to further net gains. In the full year, Group revenues are expected to be c.GBP 3.0bn vs GBP 2.2bn in the prior year (at actual exchange rates), representing growth of c.37 percent year-on-year.

New business activity

The strong organic growth momentum has been maintained throughout the second half. The pipeline of secured net contract gains is now expected to add over GBP 700m to overall revenues compared to 2019, on an annualised basis, representing at least an additional GBP 75m to the GBP 625m reported at our Interim results in May 2023. We expect these units to open over the next two years, with the normal level of pre-opening costs and maturity profile.

FY2023 expectations

Our expectations for FY2023 remain for revenue and Ebitda (underlying pre-IFRS 16) to be at the upper end of the planning assumptions provided at our Preliminary results in December 2022. This would represent full year revenue of c.GBP 3.0bn and Ebitda (underlying pre-IFRS 16) of c.GBP 280m with a corresponding EPS (underlying pre-IFRS 16) towards the lower end of the previously indicated range of 7.0-7.5p. We expect to deliver these results despite the significant strengthening of Sterling against most of our major currencies during the year. This performance reflects a strong recovery in the Ebitda margin compared to last year notwithstanding the ongoing inflationary pressures on operating costs, which we continue to manage successfully through productivity and pricing initiatives.

Medium-term outlook

While we continue to face into macroeconomic uncertainty and sustained elevated levels of inflation, we believe that demand for travel will remain resilient to pressures on consumer spending and is well set for near and long-term structural growth. Our strong expected performance in FY2023 underpins our confidence in the delivery of our FY2024 planning assumptions (set out in December 2022 at the prevailing FX rates), including for Ebitda (underlying pre-IFRS 16) to be in the range of GBP 325m – GBP 375m. We note that, reflecting the strengthening of Sterling against most of our major currencies since December 2022, at current FX rates the translation impact would be to reduce FY2024 Ebitda (underlying pre-IFRS 16) by approximately 6 percent or c.GBP 20m. Reflecting the strong momentum in the pipeline and the timing of openings, we are now planning for capital expenditure to be in the region of GBP 250m-GBP 300m in the 2024 financial year.

Chief Executive’s Commentary

Commenting on the performance, Group Chief Executive Patrick Coveney said: «We are enjoying a good finish to the year, and there is real momentum across the business as we enter FY2024. Our focus on higher growth markets such as North America and Asia Pacific, as well as our ongoing efforts to enhance our capabilities and increase efficiencies, is delivering strong results. Looking ahead, we continue to see significant opportunities for SSP to drive growth and returns.»

Sustainability update

In recent months, we have achieved two key sustainability milestones. Firstly, this month, the Science-Based Targets initiative (SBTi) verified our target to reach net-zero greenhouse gas emissions across our value chain (Scopes 1, 2 and 3) by FY2040, from a FY2019 base year. This includes our near- and long-term targets which were found to meet the SBTi’s criteria in terms of timeframe, emissions coverage and ambition. Secondly, following our significant progress in sustainability reporting and the continued delivery against our strategy, in June 2023, we achieved an MSCI ESG Rating of A, an improvement from our previous rating.

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