SSP outlook cautious as latest-week sales run at 50% of 2019

Food travel outlet owner SSP Group on Wednesday said sales in the latest week were half of pre-pandemic levels, as it remained cautious on the pace of the recovery.

The Upper Crust and Ritazza coffee chain owner said it was assuming a slightly slower recovery in sales during the 2022 financial year due to uncertainty in the pace of post pandemic recovery. Revenue in the latest week of the year was 53% of 2019 levels.

“Whilst we anticipate a return to EBITDA profitability in 2022, 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,” the company said on Wednesday.

Domestic and leisure travel, which account for around 60% of SSP’s revenue were recovering more rapidly than international and business travel, SSP said, adding that fourth quarter recovery had enabled the group to re-open 60% of its outlets, up from 30% at the end of the first half of 2021.

Trading has been led by Continental Europe and North America. In Continental Europe revenue in the fourth quarter is expected to be 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 half of 2019 levels reflecting the ongoing recovery in domestic air travel. In the UK, sales continued to strengthen as lockdown restrictions were eased in July, led by the rail sector, and are expected to be 43% of 2019 levels in the fourth quarter.

Rest of the World sales were still hit by lockdowns in some markets, including Australia and Thailand due to a slower vaccine roll-out. Sales in the fourth quarter are expected to be around a third of 2019 levels.

“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%,” SSP said.

AJ Bell investment director Russ Mould said SSP was still in the middle of its recovery phase while "so many companies now have Covid in the rear-view mirror and are pressing ahead with expansion plans".

"Even though progress is being made, it might be a long time before its profits are back to pre-pandemic levels."

"There is strong demand from domestic travellers rather than international and business. That makes sense given the ongoing travel restrictions between many countries and, for the latter, the fact that businesses are questioning the need to spend as much on travel as pre-Covid given the efficiency of meetings via Zoom or Teams."