REG - SSP Group PLC - Pre-Close Trading Update

SSPAnnouncement

03/10/2024 07:00

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RNS Number : 7378G  SSP Group PLC  03 October 2024

 

  LEI:213800QGNIWTXFMENJ24

3 October 2024

Q4 Trading Update

"GOOD TRADING MOMENTUM IN Q4"

 

SSP Group plc ("SSP" or "the Group"), a leading operator of restaurants, bars,
cafes and other food and beverage outlets in travel locations across 37
countries, issues a Trading Update for the final quarter of the year ending 30
September 2024 ("Q4").

Good underlying trading momentum has continued through to the end of the
financial year, leaving SSP well-positioned to deliver full year results
within our previously published planning assumptions(1).

Performance headlines(2)

·    Strong Q4 revenue growth of c.15% YoY (on a constant currency basis),
including LFL sales of 6%

·    H2 revenue growth of c.15% YoY, with expected H2 operating profit
growth of more than 30% and operating margin enhancement of c.100 bps, and
strong performances in North America, UK and APAC & EEME (all on a
constant currency basis)

·    FY revenue of c.£3.5bn, up c.17% YoY, with FY operating profit
expected to be c.£210-220m, up c.30% YoY, with operating margin of c.6%, up
c.50bps (all on a constant currency basis)

·    FY EPS expected to be c.10p (at actual FX rates), with operating
profit within our planning assumption ranges, and including a benefit in
interest and tax charges in the year

·    Strong focus on cash, with year-end net debt expected to be in the
range of c.£610-630m; Year-end leverage anticipated to be approximately 1.8x
(at actual FX rates), down from 2.1x at the half year, and returning to within
our medium-term target leverage range of 1.5-2.0x

·    Programme of actions in place to build profitability and margins in
Continental Europe

·    Focus on generating strong returns from the extensive capital
investment programme of the last two years and on the integration of recent
acquisitions

 

Commenting on the performance, Patrick Coveney, CEO of SSP Group, said:

"There has been good trading momentum across our business throughout Q4. Our
North America, Asia Pac & EEME regions have continued to perform ahead of,
or in line with, our plan and we have seen a material improvement in the
performance of our UK business. We have had challenges in some parts of our
Continental European business, which we are addressing through a series of
actions that will build margins. Overall, this year, we expect the Group to
deliver a significant increase in year-on-year profitability and margins. Our
focus is now on optimising the performance of our business, building returns
on the high level of recent investment, and the delivery of sustainable and
compounding growth and returns in the years to come."

Q4 revenue performance

We have seen a strong sales performance through the peak summer period. Group
sales in Q4 (1 July to 30 September 2024) were up 15% year-on-year, on a
constant currency basis, with like-for-like sales growth of 6%, net contract
gains of 5%, and a contribution from acquisitions of 4%.

 Q4                   vs Last Year                                 vs Last Year (actual FX rates)

                      (constant FX rates)
 Region               LFL     Net Gains  Acquisitions  Total       Total
 N.America            4%      9%         7%            20%         16%
 C.Europe             3%      4%         -             7%          5%
 UK & I               9%      3%         -             12%         12%
 APAC & EEME          9%      2%         19%           30%         24%
 Group                6%      5%         4%            15%         12%

 

In North America, on a constant currency basis, sales grew by 20%
year-on-year, including a 9% contribution from net gains. Acquisitions
contributed 7% to sales, comprising the outlets at Denver International
Airport, transferred under the Midfield Concessions Enterprise acquisition,
and the acquisitions of Mack II in Atlanta and ECG in Western Canada.

In Continental Europe, sales growth of 7% was largely driven by the high level
of new unit openings. Our LFL sales performance, at 3%, whilst strong in Spain
and the other Mediterranean holiday destinations, was behind our expectations,
primarily in France, where demand was negatively impacted by the Paris
Olympics, but also in Germany, where we saw weak trading in our motorway
service business over the peak summer season.

In the UK, sales increased by 12%, with like-for-like performance at 9%,
driven by high demand in the Air sector, a lower level of disruption in rail
compared to last year and strong operational execution throughout the peak
summer period.

In APAC & EEME, sales grew by 30%, with strong like-for-like sales growth
of 9%, driven mainly by Australia, Hong Kong and Egypt. The 19% contribution
from acquisitions reflected the completion of the ARE deal in Australia in
May.

Second half 2024 expectations(2)

In the second half of the year, on a constant currency basis, revenue was
c.£2bn, with expected operating profit of c.£170-180m. This material step
forward in performance would represent a year-on-year increase in revenue of
c.15% (including 6% LFL), an operating profit increase of more than 30% and a
c.100bps improvement in operating margin.

Full year 2024 expectations(2)

For the full year, on a constant currency basis, group revenue was c.£3.5bn,
up 17% year-on-year, comprising like-for-like sales growth of c.9%, net
contract gains of c.4% and a contribution from acquisitions of c.4%. On a
constant currency basis, we expect to deliver EBITDA in the range of
c.£350-360m and operating profit in the range of c.£210-220m, up c.30%
year-on-year, with a corresponding margin of c.6%, up c.50bps.

Full year EPS, at approximately 10p (at actual FX rates), is expected to be
broadly in line with expectations, including a benefit from lower interest and
tax charges in the year.

 

Full year regional performance expectations(2)

We expect to see strong operating profit growth across three of our regions:
North America, APAC & EEME and the UK. However, in Continental Europe,
operating profit in the year is expected to be lower than last year. As
highlighted in our Interim results, this European performance in part reflects
the impact of the scale and timing of contract renewals and new contract
mobilisation, industrial action and weak trading in the motorway services
business (ahead of our exit in c.18 months).  More recently, European profit
has been impacted by lower than anticipated demand during the Olympics in
Paris.

We are taking action to improve the future profitability of the region,
focusing on driving returns from the investment programme, simplifying the
leadership structure, reducing the cost base, and exiting the German motorway
services business (contractually agreed as of September 2024). We have
recently appointed Satya Menard(3) as the new CEO of Continental Europe to
lead this business.

Full year cash flow and leverage expectations(2)

Net debt is expected to be in a range of c.£610-630m, after capital
investment of c.£280m and payments for acquisitions totalling c.£150m,
leaving leverage at approximately 1.8x net debt/EBITDA (returning to within
our medium-term target range of 1.5-2.0x).

Full year 2025 expectations(2)

Our performance in FY24 gives us confidence that we will see a year of good
revenue and margin progression in FY25. Our expectations are underpinned by
the continued structural growth in travel, optimising the performance and
returns from our extensive recent investment programme and the secured new
contract pipeline, together with planned operating efficiencies. Further
progress will be supported by the set of current and planned actions that we
are taking to drive returns in Continental Europe.

We are planning for a lower level of capital expenditure in the year ahead as
we conclude the backlog of renewals from the Covid period. Furthermore, having
executed a number of important infill acquisitions recently, to accelerate our
growth in strategically important markets, our focus is now on integrating
these operations and delivering the planned returns. We anticipate little, if
any, further new infill M&A activity in the near term.

Currency(2)

Reflecting a recent strengthening of sterling, compared to the average rates
used for 2023, we now expect a currency impact on revenue, EBITDA and
operating profit for FY24 of approximately (2.5)%, (4.3)% and (5.7)%
respectively, up from the impacts of (2.0)%, (3.6)% and (4.6)% expected at the
time of our Q3 Trading statement.

If the current spot rates (as at 30 September 2024) were to continue through
2025, we would expect a negative currency impact on revenue, EBITDA and
operating profit of approximately (2.6)%, (3.8)% and (4.5)% compared to the
average rates used for 2024.

Today's conference call

A conference call with Patrick Coveney, CEO, Jonathan Davies, Deputy CEO and
Group CFO and Sarah John, Director of Corporate Affairs, will be held at
8.00am (UKT) today, and details of how to join can be accessed at
https://webcasts.foodtravelexperts.com/results/tradingupdate2024/vip_connect
(https://webcasts.foodtravelexperts.com/results/tradingupdate2024/vip_connect)
.

2024 full year results announcement

The Group's results for the year ending 30 September 2024 are expected to be
released on 3 December 2024.

 

Notes

1.    Full year expectations vs planning assumptions(2)

                                                 Constant FX rates                            Actual FX rates
                           FY23 Actuals          FY24 Planning Assumptions  FY24              FY24 Planning Assumptions  FY24

                                                                            Expectation                                  Expectation
 Revenue (£bn)             3.0                   c.3.4-3.5                  c.3.5             c.3.3-3.4                  c.3.4
 EBITDA (£m)               280                   c.345-375                  c.350-360         c.330-359                  c.335-345
 Operating profit (£m)     164                   c.210-235                  c.210-220         c.198-222                  c.200-210

 

2.    On an underlying, pre-IFRS 16 basis.

 

3.    Satya Menard joined SSP in September 2024 as CEO of Continental
Europe. Satya has more than 25 years of experience in the service industry,
including extensive experience in the 'food and coffee' business across a
number of European, South and North American countries. Previously, Satya
worked as president of the out-of-home division of coffee company JDE Peet's
and prior to this, he was global CEO of Sodexo's schools and universities
division. He also held a number of leadership positions across various Sodexo
divisions internationally.

 

ENDS

CONTACTS

Investor and analyst enquiries

Sarah John, Corporate Affairs Director, SSP Group plc

Sarah Roff, Group Head of Investor Relations, SSP Group plc

+44 (0) 7736 089218 / +44 (0) 7980 636214

E-mail: sarah.john@ssp-intl.com (mailto:sarah.john@ssp-intl.com) /
sarah.roff@ssp-intl.com

 

Media enquiries

Rob Greening / Russ Lynch

Sodali & Co

+44 (0) 207 250 1446

E-mail: ssp@sodali.com

 

NOTES TO EDITORS

About SSP

SSP is a leading operator of food and beverage outlets in travel locations
worldwide, with c.43,000 colleagues in over 600 locations across 37
countries. We operate sit-down and quick service restaurants, cafes, lounges
and food-led convenience stores, principally in airports and train stations,
with a portfolio of more than 550 international, national and local brands.
These include our own brands (such as Urban Crave, which brought the first
"street eats" concept to airports in the US and Nippon Ramen, a noodle and
dumpling concept in the APAC region) as well as franchise brands (such as
M&S Simply Foods, Starbucks and Burger King).

Our purpose is to be the best part of the journey, and this is underpinned by
our aim to bring leading brands and innovative concepts to our clients and
customers around the world, with an emphasis on great value, taste, quality
and service - using digital technology to boost efficiency.

www.foodtravelexperts.com (http://www.foodtravelexperts.com)

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