SSP warns on job losses as H2 sales plunge 86%
Upper Crust and Caffe Ritazza owner SSP Group warned of “considerable” job losses as it expected second-half sales to plummet by 86% amid the coronavirus pandemic although it lowered forecast cash burn for the period.
The company, which operates in airports and train stations, on Tuesday forecast second-half revenue to be about £1.3bn lower year on year and an operating loss in the middle of a £180m - £250m range as as commuter demand slumped under lockdowns to stymie the spread of Covid-19.
However, it said overall second-half net cash burn was expected to be around £250m - £270m, much lower than the £340m - £440m forecast in June and driven by tight cost management, including agreed rent waivers and deferrals, reduced capital expenditure, government support schemes and the recovery of previously paid corporation taxes in a number of countries.
SSP said it had also retain some of the cash related to the declared final dividend for 2019, through the placing of new shares.
Britain's travel and leisure sector faced another blow as the government imposed new curbs to tackle a second coronavirus outbreak with people told to work from home where possible and restaurants and bars ordered to close early.
SSP said underlying core earnings for the six months to September 30 were still expected to be in the middle of the £120m - £190m range outlined by the company in June.
Current weekly sales were running at approximately 76% below last year, SSP said in a pre-close trading update, driven by a stronger recovery in the French and German travel business in Continental Europe, where weekly sales were around 66% lower.
Sales in the UK, North America and rest of the world were 80 - 85% lower year-on-year, it added.
“It is with regret that the prolonged nature of this crisis has resulted in us having to restructure and make considerable job losses in order to protect the business,” said chief executive Simon Smith.
UK FACES PATCHY RECOVERY
He added that there had been some improvement in passenger demand since the start of the crisis with SSP reopening units "swiftly and profitably in response to this, with over one-third of our units now trading".
The UK reported a recovery in the air sector over the summer predominantly from leisure customers, offset by lower capacity and renewed quarantine restrictions.
In North America, domestic air travel had started to recover, but international travel remained largely closed, SSP said, adding that China domestic air passenger levels had recovered strongly and were are improving in Thailand and India.
SSP said it had now re-opened 1,100 outlets, around a third, ahead of the expectations outlined in June.
“COVID-19 continues to have an unprecedented impact on the travel industry and on SSP's businesses in all geographies,” said chief executive Simon Smith.
“More recently, we have seen some limited improvement in traffic in a number of regions, with sales currently at around 24% of pre-Covid levels. As we head into the winter months, demand may well remain subdued.”
AJ Bell investment director Russ Mould said: “It’s now a case of two steps forward, one step back as it seems likely that earnings could come under new pressure, at least for the UK operations. Fortunately SSP also generates revenue from other parts of the world where the pandemic is at different stages of being, or not being, under control and this diversification of earnings could be to its advantage."
“To its credit, SSP says cash burn in the second half has been lower than previously guided, meaning it still has plenty of liquidity to see it through a prolonged crisis. Companies like SSP must simply accept that the recovery is not going to be a smooth ride.”