SSP Group, a leading operator of food and beverage outlets in travel locations worldwide, announces its financial results for the year ended 30 September 2021. SSP has delivered a resilient performance in a very challenging market, materially strengthening its balance sheet and continuing to demonstrate tight control over its operating costs and cash usage, and is in a strong position to benefit from the expected recovery of the travel market over the medium term.
- Revenue of £834.2m: down 41.8% vs 2020 and 70.1% vs 2019.
- Operating loss of £309.2m on a reported basis under IFRS 16, including credit for non-underlying net operating costs of £14.1m (2020: £363.9m operating loss including charge for non-underlying items of £48.5m). On a pre-IFRS16 basis3, the underlying operating loss4 was £209.0m (2020: £211.7m loss).
- Loss before tax of £411.2m on a reported basis under IFRS 16 (2020: £425.8m loss). On a pre-IFRS 16 basis3, the underlying loss before tax4 was £251.0m (2020: £239.6m loss).
- Basic loss per share of 51.3 pence on a reported basis under IFRS 16 (2020: basic loss per share of 66.2 pence). On a pre-IFRS 16 basis3, underlying basic loss per share4 of 31.9 pence (2020: underlying basic loss per share of 39.5 pence).5
- Net debt was £1,480.4m, which includes lease liabilities of £1,172.8m (2020: £2,040.6m, including lease liabilities of £1,349.3m). On a pre-IFRS 16 basis3, net debt was £308.0m, down from £692.0m at 30 September 2020.
- Financial position strengthened significantly following the Rights Issue in April 2021, including the extension of our main bank facilities until January 2024 and the waiver and amendment of covenants for both the main bank facilities and US private placement notes.
- Liquidity position strong, with cash and undrawn committed facilities of approximately £935m at the end of September 2021 (including £300m from the Covid Corporate Financing Facility (“CCFF”) due to be repaid in February 2022).
- Steadily improving revenue trends over the summer and autumn. Revenue averaged 66% of 2019 in the first 9 weeks of the new financial year.
- A further c. 800 units reopened since the beginning of June 2021 as demand has returned, taking the total to c. 1,950 units or c. 72% of the estate.
- Strong second half performance, with revenue recovering from 21% of 2019 levels at the end of H1 to 53% of 2019 by the end of H2, led by a recovery in domestic and short-haul leisure traffic.
- Positive underlying EBITDA (on a pre-IFRS 16 basis) of £2.0m and free cash flow of £82.8m generated in H2, compared with a free cash outflow of £140.9m in H1.
- Underlying operating profit conversion (on a pre-IFRS 16 basis) on the reduced sales vs 2019 of 22% for H2, in line with H1, and ahead expectations of c. 25% for H2.
- Positive and unchanged medium term outlook, with like-for-like revenues1 2 and EBITDA margins (on a pre-IFRS 16 basis) expected to return to around pre-Covid levels by 2024.
- Growing pipeline of new business to mobilise, comprising approximately 200 units, which is expected to add a further 15% to revenue by 2024, and many new business opportunities emerging. Significant new business development success, including recently announced joint venture with ADP for Paris Charles De Gaulle and Orly Airports in France and Suvarnabhumi Airport in Thailand, and we are today announcing an important new contract in Malaysia.
- Sustainability being further embedded into the business, with new and strengthened targets set, including commitments to achieve net zero carbon emissions by 2040 and to publish interim Science Based Targets in line with a 1.5 degree scenario for reduction of scope 1, 2 and 3 carbon emissions within 12 months.
Appointment of Group CEO
On 25th November 2021, SSP announced the appointment of Patrick Coveney to the role of Group CEO, effective 31st March 2022, following the announcement that Simon Smith is to leave the business in December 2021. Patrick will join SSP from Greencore Group plc, a leading producer of convenience foods in the UK and Ireland, which is a member of the FTSE 250. Jonathan Davies, in his role as Deputy CEO and CFO, will lead the Group Executive Committee and oversee day-to-day business prior to Patrick joining.
Recent Trading and Outlook
Passenger numbers increased steadily over the second half of the financial year and, consequently, sales strengthened from a very low level at the end of H1 (approximately 21% of 2019) to reach 53% of 2019 by the end of H2. The improvement was led initially by North America, and more recently by Continental Europe and the UK, and was driven principally by increasing domestic and short-haul leisure travel. In Continental Europe, passenger numbers increased steadily over the summer following the successful introduction of the EU Covid passport, and in the UK by the ending of lockdown restrictions from late July, followed by the government’s relaxation of testing and quarantine rules in response to a greater proportion of the population having been double-vaccinated.
During the new financial year, sales trends have continued to improve, with air passenger numbers in the UK and Continental Europe boosted by an extended European summer holiday season, and rail passenger numbers continuing to benefit from commuters returning to offices in greater numbers. Conversely, the recovery has been slower in the Asia Pacific region, principally due to the slower roll-out of vaccines, which has held back the return of domestic travel, and the loss of long-haul air travel.
Revenues in the first nine weeks of the new financial year are currently averaging approximately 66% of 2019 levels. Whilst there remains some uncertainty in the immediate outlook over the winter months, particularly over the potential impact of the Omicron variant on travel restrictions, we are confident in our ability to manage any near term volatility. Our medium term expectations remain unchanged, which are for a return to like for like revenue at broadly similar levels to 2019 by 2024.
As previously indicated, for the 2022 financial year we anticipate the drop through to operating profit (on a pre-IFRS 16 basis) on lost sales compared to 2019 to be at the upper end of a range of 25-30%. The final outturn will be impacted by a number of external factors including the trajectory of the recovery, higher input cost inflation, and lower levels of government cost support compared to 2021. Over the medium-term our expectation for a recovery in pre-IFRS 16 basis EBITDA margins to broadly pre Covid levels remains unchanged.
SSP has an important role to play in providing food and beverage services to the travelling public, and we will continue to re-open units in response to demand, maximising the profitability of the re-opening programme and rigorously controlling costs and cash. We firmly believe that demand for travel will return to pre-Covid levels in the medium term and the actions we have taken during the pandemic will ensure that SSP is well positioned to capitalise on future market opportunities.
Commenting on the results, Jonathan Davies, Deputy CEO and CFO of SSP Group, said:
“Though still in the recovery phase, SSP has made strong progress, particularly during the second half of the year, when we delivered positive underlying EBITDA and strong free cash flow generation. The Group has continued to re-open units in line with passenger demand, with 72% of units currently open, and has delivered revenues of 66% of 2019 levels in the first nine weeks of the new financial year. Our teams around the world have demonstrated great resilience during this challenging period and, most importantly, have continued to deliver great service to our customers every day. I would like to thank them for their professionalism, dedication and commitment to SSP.
Against the backdrop of volatility and disruption in the travel sector, we’ve maintained strong operational controls and disciplined management of operating costs and cash flow, as has been evident from the financial performance of the business. In addition, as a result of the successful Rights Issue and the extension of our bank facilities completed in April 2021, we have a very strong balance sheet, with significant liquidity of £935m (including the £300m CCFF due to be repaid in February 2022).
Over the past year, we’ve continued to re-invest in and strengthen important areas of the business which we believe will underpin our long-term growth, including our customer offer, our people strategy and our technology platforms, and we’ve made real progress in further embedding sustainability into our business.
Looking ahead, the medium-term outlook remains unchanged, which is for a return to broadly pre-Covid levels of like-for-like revenue and EBITDA margins by 2024. We are now starting to mobilise the pipeline of around 200 new outlets that have already been secured and we anticipate delivering approximately 15% of additional net contract gains over the medium term. Furthermore, we expect to utilise our significant financial capacity and competitive strength to accelerate our new business growth and to capitalise fully on the recovery in the travel sector.”
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1 Constant currency is based on average 2020 exchange rates weighted over the financial year by 2020 results.
2 Like-for-like sales represent revenues generated in an equivalent period in each financial period in outlets which have been open for a minimum of 12 months. Units temporarily closed as a result of Covid-19 have not been excluded for the purposes of the like-for-like calculation. Like-for-like sales are presented on a constant currency basis.
3 The Group adopted IFRS 16 ‘Leases’ on 1 October 2019 using the modified retrospective approach to transition. Following the year of transition, we have decided to maintain the reporting of our profit and other financial measures like net debt and leverage on a pre-IFRS 16 basis (note that pre-IFRS 16 basis was referred to as ‘Pro forma IAS 17’ in the Annual Report and Accounts 2020). Pre-IFRS 16 profit numbers exclude the impact of IFRS 16 by removing the depreciation on right-of-use (ROU) assets and interest arising on unwinding of discount on lease liabilities, offset by the impact of adding back in charges for fixed rent. This is further explained in the section on Alternative Performance Measures (APMs) on pages 23-27.
4 Stated on an underlying basis, which excludes non-underlying items as further explained in the section on Alternative Performance Measures (APMs) on pages 23-27.
5 2020 EPS has been restated to reflect the impact of the 2021 Rights Issue
6 Net debt reported under IFRS 16 includes leases liabilities whereas on a pre-IFRS 16 basis lease liabilities are excluded. Refer to ‘Net debt’ section of the ‘Financial review’ for reconciliation of net debt.