14th Jul 2022 15:43
(Alliance News) - If your flight is cancelled or the train is delayed, you may as well buy a sandwich.
Enough UK travellers have done exactly that this summer to lift the sales of food kiosk operator SSP back toward pre-pandemic levels.
The owner of the Upper Crust, Camden Food Co and Ritazza chains on Thursday said its revenue continued to strengthen in its financial third quarter, as rail travel bounced back from Covid-19.
For the three months to June 30, SSP said revenue was at 87% of 2019 levels, driven by a recovery in passenger numbers.
But SSP noted that it also benefited from "longer passenger dwell times in some markets", without explaining this further. The UK in recent months has suffered both train strikes and flight cancellations and delays, leaving passengers stuck in airports and train stations.
SSP said recovery has been led by domestic and leisure travel in both the air and rail sectors. Further, rail commuter travel continued to recover well, albeit at a slower pace than leisure travel, SSP said.
Looking ahead, SSP said its medium-term expectation for a recovery of the like-for-like business to 2019 levels of profitability remains unchanged. It also expects to deliver sales in the region of GBP2.1 billion and an earnings before interest, tax, depreciation and amortisation margin of around 6%, which is at the upper end of the previous full-year guidance range.
SSP added that if current currency trends continue, in particular for the dollar and euro, it expects a negative full-year effect of around 1.6%.
Despite the mostly upbeat trading statement, SSP shares were under pressure on Thursday. The stock was down 3.3% at 229.20 pence in afternoon trade, while the wider FTSE 250 was down just 1.4%. SSP is down 9.4% over the past 12 months.
"SSP did its best to fly the flag and say its prospects were improving. It is still prone to disruption in the travel sector, but current year sales guidance is now at the upper end of its previous range. But again, investors didn't like the news, preferring to focus on the negatives, including foreign exchange headwinds and a steer that inflationary pressures won't let up until at least next year," said Danni Hewson, financial analyst at AJ Bell.
Shore Capital was more positive, retaining its 'buy' recommendation and 237p price target. The broker expects SSP earnings to return to pre-Covid levels by financial 2024.
"We see today's update as highly reassuring, confirming the ongoing recovery trends and that a larger business could emerge when global travel trends recover," said analyst Greg Johnson.
By Tom Waite; [email protected]
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