Results for six month period ended 31 March 2023
Strong performance in a recovering market; significant opportunity to drive long-term growth and returns
SSP Group, a leading operator of restaurants, bars, cafes and other food and beverage outlets in travel locations across 36 countries, announces its financial results for the first half of its 2023 financial year, covering the six months ended 31 March 2023. We have delivered a strong performance, as the global travel market has continued to recover. We are making good progress on our strategic priorities, putting us in an even stronger position to benefit from the long-term structural growth in the industry.
- Revenue of £1,318.4m (2022: £803.2m), up 64.1% vs last year and at 104% of 2019 levels, underpinned by the continued recovery in passenger travel volumes
- Underlying1 EBITDA2 of £90.5m, on a pre-IFRS 16 basis3 (2022: £14.7m). Underlying operating profit1 of £34.4m, on a pre-IFRS 16 basis3 (2022: loss of £36.4m)
- On a reported basis (under IFRS 16) operating profit of £48.6m, including charge for non-underlying items of £3.8m (2022: £26.0m profit, including credit for non-underlying items of £78.6m)
- Profit before tax of £15.8m, on a reported basis under IFRS 16 (2022: loss of £2.3m). On a pre-IFRS 16 basis3, underlying profit1 before tax of £22.8m (2022: loss of £55.3m)
- Basic loss per share of 1.3 pence on a reported basis under IFRS 16 (2022: 1 pence). On a pre-IFRS 16 basis3, underlying basic loss per share1 of 0.8 pence (2022: 8.4 pence)
- Free cash outflow of £118.1m (2022: outflow of £30.9m), after £94.3m capital investment to support contract renewals and the mobilisation of the new unit pipeline4
- Net debt5 of £1,200.8m, which includes lease liabilities of £808.7m. On a pre-IFRS 16 basis3, net debt5 of £392.1m, up from £296.5m at 30 September 2022 with leverage (Net debt: LTM EBITDA, on a pre-IFRS 16 basis) of 1.8x
- Liquidity position strong, with cash and undrawn committed facilities of £516.7m6 at the end of March 2023
- First half revenue at 104% of 2019 levels, underpinned by the continued recovery in passenger numbers
- In the first six weeks of H2, sales have continued to strengthen to 111% of 2019 levels including a strong Easter period, with increasing levels of holiday and leisure travel as we approach the summer
- Tight control of our cost base, including the management of significant and ongoing inflationary pressures, has enabled us to achieve a strong recovery in first half EBITDA margin to 6.9% (compared with 1.8% last year), in line with the margin recovery set out in our planning assumptions (in our 2022 Full Year Results)
- EBITDA of £90.5m (on a pre-IFRS 16 basis) driven by very strong performances in our North American and Rest of the World divisions
- High level of contract renewal activity and net new business wins running ahead of pre-Covid levels; returns on invested capital planned to be in line with pre-Covid levels
- Notable wins in H1 at airports in Calgary, Ontario, New York (JFK), Kuala Lumpur and at Rome rail station, with Italy becoming our 37th market
- Pipeline of net new business strengthened, with approximately £75m net new business won since the preliminary results in December 2022, increasing the expected annual sales value of net gains since 2019 from c.£550m to c.£625m, once fully mobilised by 2026
- Free cash usage of £118.1m, including capital investment of £94.3m as we accelerate the mobilisation of our new unit pipeline and contract renewal programme
- Good progress on our strategic priorities:
- Accelerated growth in North America and Asia Pacific being underpinned by an increasing pipeline of net gains, with two thirds within North America and Rest of the World
- The acquisition of the concessions business of Midfield Concession Enterprises Inc. in North America will add 40 new units across seven airports, four of which are new locations to SSP
- Ongoing strengthening of our business capabilities including our customer proposition, our digital technology platform, and our sustainability and people programme
Recent trading and outlook
Continued momentum in recent trading
The continued improvement in our trading performance in recent months has been encouraging and has been driven by a further recovery in passenger numbers. The recovery is being led by domestic and leisure travel across both the Air and Rail sectors, with business and commuter travel also recovering, albeit more slowly.
The second half of the financial year has started well with sales strengthening further to an average of 111% of 2019 levels in the first six weeks (c.34% above 2022 levels). This revenue performance includes the benefit from net contract gains as we accelerate the mobilisation of our significant pipeline, in addition to price increases compared to the same period in 2019.
The strongest performing region is North America, where revenues are now at 124% of 2019 levels, reflecting the growth of domestic air travel and the scale of net gains in the region. In Continental Europe, revenues are at 116%, driven by a strong performance across our Air business and despite being held back by industrial action which mainly impacted our Rail business. In the Rest of the World, revenues rose to 112% as we saw further improvements in passenger numbers in Asia, most notably in India, Thailand and Australia, all led by domestic Air travel. In the UK and Ireland, sales strengthened materially to 94% reflecting strong Air sales over the Easter period.
FY 2023 sales and EBITDA out-turn now anticipated to be at the upper end of our planning assumptions
Whilst we continue to face macroeconomic uncertainty, we believe that the travel food and beverage sector will remain structurally resilient to pressures on consumer spending and that our global footprint, with increasing exposure to the North American and Asia Pacific regions, will enable us to deliver sustained growth. Progress in the first half of the year has been encouraging as we have maintained revenue momentum and have actively mitigated inflationary pressures to deliver a strong conversion of sales to profitability.
As we look ahead to the second half, driven by the pace of recovery of passenger numbers, we are now planning for revenue and EBITDA (underlying pre-IFRS 16) to be at the upper end of our previous expectation of £2.9-£3.0bn and £250-£280m respectively for the 2023 financial year. Performance in the year is expected to be particularly strong in our North America and Rest of the World regions, where we typically operate with joint venture partners. The corresponding earnings per share (underlying pre-IFRS 16) for the 2023 financial year are expected to be in the range of 7.0-7.5p.
Our longer term plans include a benefit from our pipeline of secured net contract gains which is now expected to add c.£625m to annualised revenue by 2026 (compared with 2019), when fully mobilised. Based on our planned opening programme, the pipeline will contribute cumulative net contract gains of c.£200m in 2023, £350-400m in 2024 and £550-600m in 2025 (compared with 2019). The additional revenues from our secured pipeline are planned to contribute incremental EBITDA, albeit the planned contribution initially will include, as normal, the impact of maturity and pre-opening costs.
Furthermore, as a consequence of the strong trading trajectory, we have an increased level of confidence in the delivery of our planning assumptions for FY2024, namely revenues in the region of £3.2-3.4bn, with a corresponding EBITDA (underlying pre-IFRS 16) in the region of £325-£375m.
Our priorities for the use of capital and the delivery of returns to shareholders remain unchanged. We focus on organic investment opportunities, where we can deliver high returns on investment, typically with three to four year discounted paybacks, and value creating infill acquisition opportunities. As our revenues and profits recover, we expect to reduce balance sheet leverage, benefitting from the normal cash generative nature of our business model. We are committed to a medium-term leverage target range of 1.5 – 2.0x (Net Debt: LTM EBITDA, on a pre-IFRS 16 basis). The Board recognises the importance of dividends and other capital returns to shareholders and, given current expectations, would anticipate the resumption of ordinary dividend payments, beginning with a final dividend payment in respect of the 2023 financial year.
Commenting on the results, Patrick Coveney, CEO of SSP Group, said:
“This has been a strong first half for SSP, and the ongoing revenue momentum across the business means that we are now expecting our performance for 2023 to be at the upper end of our previous assumptions.
We are continuing to deliver against our strategic priorities. Firstly, we are increasing our focus on the higher growth markets of North America and Asia Pacific. North America is our strongest performing region with revenues in the first half at 127% of 2019 levels, and we were delighted to announce the acquisition of 40 units across seven airports in the USA from Midfield Concessions earlier this month. Secondly, the ongoing enhancement of our capabilities across our customer proposition, digital technology, people and sustainability is driving like-for-like revenue growth and helping us to win more new business. Thirdly, we are revitalising our efficiency programme to support profit conversion.
As ever, I would like to thank our clients and brand partners and not least our outstanding teams around the world for their contribution to this performance. Their ability to provide compelling food propositions for both clients and customers across the world is what sets this business apart. This deeply ingrained skill set, along with the long-term structural growth trends in the travel markets that underpin our business model, means that we continue to look to the future with confidence.”
Investor and analyst event: SSP America
We are hosting an event for investors and analysts to showcase our North American business on Tuesday 20 and Wednesday 21 June 2023 in New York. The event will give attendees the opportunity to learn more about our Group and North America strategy with a particular focus on the growth opportunities and drivers of performance. In addition, attendees will have the opportunity to spend time with Patrick Coveney (Group CEO), Jonathan Davies (Deputy CEO and Group CFO), Sarah John (Corporate Affairs Director) and Michael Svagdis (CEO North America) in addition to the wider senior leadership teams and a number of our North American clients and partners.
Access to the event is by invitation only, with limited availability remaining. Investors and analysts are able to register their interest by e-mailing InvestorEvent@ssp-intl.com.
1 Stated on an underlying basis, which excludes non-underlying items as further explained in the section on Alternative Performance Measures (APMs) on pages 19-22.
2 Underlying EBITDA (on a pre-IFRS 16 basis) is the underlying pre-IFRS 16 operating profit excluding depreciation and amortisation.
3 We have decided to maintain the reporting of our profit and other key financial measures like net debt and leverage on a pre-IFRS 16 basis. 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 19-22.
4 A reconciliation of Underlying operating loss to Free cashflow is shown on page 17.
5 Net debt reported under IFRS 16 includes lease 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. The comparative information represents the balance as at 31 March 2022.
6 Available liquidity at 31 March 2023 has been computed as £516.7m, comprising cash and cash equivalents of £364.6m, and undrawn credit facilities of £152.1m. The comparative information represents the balance as at 31 March 2022.