- Full year guidance increased in September
- Recovery in travel expected to continue into 2023
- Resilient business gives flexibility to manage inflation
When travel food and beverage operator SSP (SSPG) reports results for the year to 30 September on 6 December, investors will be keen to see if the strong recovery in travel seen in 2022 has continued into the new trading year and what impact recent train strikes have had on the business.
At September’s pre-close trading update the company increased its full year guidance so revenues are forecast to jump to £2.17 billion from £834 million and EBITDA (earnings before interest, tax, depreciation, and amortisation) is seen at £140 million compared with a £108 million prior-year loss.
The company, which operates the Upper Crust and Ritazza franchises as well as running sites for third parties like Burger King and Starbucks, said the strong second-half recovery was aided by ‘ongoing management of inflationary cost pressures through productivity and pricing initiatives.’
Strong cash-flow performance is expected to result in year-end net debt of £340 million, representing a net debt to EBITDA ratio of 2.4 times.
FULL RECOVERY BY 2024
Travel and leisure analyst Gregg Johnson at Shore Capital expects EBITDA to rebound further to £250 million in 2023 before regaining pre-pandemic levels in 2024 in line with SSP’s guidance.
With fourth quarter sales at 91% of 2019 levels and volumes in the mid to low 70% range Johnson believes the continued recovery will drive like-for-like volume towards 85% to 90% in 2023 and reach the mid-90% range in 2024.
Recent data shows US passenger volumes around 90% of pre-Covid levels with UK rail at 80% to 90% and airports at 80%.
Johnson added: ‘Given broader cost of living pressures a key area of focus at the results will likely be capture rates.
‘We see SSP as well positioned to manage ongoing cost inflation, where price elasticity is typically lower than the high street, and an increasingly international business emerging.
‘Furthermore, we see numerous mitigation measures including technology and menu management.’
Looking further ahead, SSP’s management is planning to ‘further mobilise’ its pipeline of new outlets from 2023 onwards with the goal of generating £500 million of additional revenues by 2025 compared to 2019 when it recorded sales of £2.79 billion.
