UK/INTERNATIONAL. Travel food specialist SSP Group has said that rising passenger traffic in key markets is benefiting business, with Q4 revenue (to the end of September) expected to reach 47% of comparable period levels in 2019. The company today issued a pre-close trading update covering the period from July to September.
The expected Q4 performance contrasts with sales running at 27% of 2019 levels in Q3. In the latest week revenue was around 53% of 2019 numbers.
Domestic travel, which accounts for about 60% of group revenue, and leisure travel, also around 60%, is recovering more rapidly than international and business travel, SSP noted. The recovery in the fourth quarter has enabled the group to re-open around 60% of its outlets, up from 30% at the end of the first half of 2021. It said it continues to open its outlets selectively and in line with the recovery in passenger numbers.
Geographically, trading has been led by Continental Europe and North America. In Continental Europe revenue in the fourth quarter is expected to be about 53% of 2019 levels driven by the ongoing recovery in rail passenger numbers and increased air passenger numbers over the Summer holiday season.
In North America, revenue in the fourth quarter is expected to be around 52% of 2019 levels reflecting the ongoing recovery in domestic air travel. In the UK, sales have continued to strengthen following the easing of lockdown restrictions in July, led by the rail sector, and are expected to be 43% of 2019 levels in the fourth quarter. In the Rest of the World, where the vaccine roll-out has generally been slower, sales continue to be hit by lockdowns in some markets, including Australia and Thailand, and in the fourth quarter are expected to be 29% of 2019 levels.
With sales improving, SSP said it expects to deliver positive EBITDA in the final quarter and broadly break-even EBITDA for the second half of the year (on an underlying, pre-IFRS 16 basis).
It noted: “The second-half performance reflects the disciplined management of the re-opening programme, a simplified operating model with a lower and a more variable cost base, including reduced or waived minimum guaranteed rents, and lower overheads. In addition, the Group has been successful in accessing further, significant, short-term government support in a number of countries in Continental Europe, reflecting the continued impact of the pandemic on the travel sector.”
SSP said it had made further progress on business development in the second half, extending and renewing contracts as well as winning new tenders in the UK, France, India, Malaysia, Thailand, China and Australia.
In the second half of the year, the group expects to generate net free cash flow of around £60 million to £80 million, with available liquidity slightly above £900 million by end September.
Outlook
Looking ahead, SSP said that its current planning assumption is for “a slightly slower recovery in sales during the 2022 financial year. While we anticipate a return to EBITDA profitability in FY2022 (on an underlying, pre-IFRS 16 basis), the out-turn will depend on a number of external factors including the pace of the recovery, higher input cost inflation, the impact of labour availability and the extent of government support schemes. Reflecting this, our expectation for profit conversion on reduced sales in 2022 compared to 2019 continues to be at the upper end of a range of 25-30%.”
It added: “With the travel sector now starting to recover, the group expects to commence the mobilisation of its secured pipeline which is expected to generate an additional 10-15% of net contract gains over the medium term and to utilise its significant financial capacity to drive further business growth and to capitalise on the recovery in the travel sector.”
