- Strong fourth quarter revenue growth of circa 15%
- Full year operating profit expected circa £210-220 million
- Like-for-like sales of 9% in UK & Ireland
Shares in SSP (SSPG) were marginally higher at 157p in morning trading as the food travel expert reported ‘good underlying trading momentum’ for the fourth quarter.
The FTSE 250 company said like-for-like sales growth in UK & Ireland was 9% for the year ‘comfortably within the planning assumption range of 6% to 10%’ reflecting strong trading over the summer.
In the UK & Ireland sales were lifted by continued demand at airports and further improvement in rail passenger volumes.
SSP which owns brands including Upper Crust and Le Grand Comptoir said full year revenue is expected of £3.5 billion, up 17% on-year, with operating profit expected to between £210 million and £220 million.
ONGOING CHALLENGES IN EUROPE
The outlook was not so rosy however for continental Europe.
The company faces ongoing challenges due to ‘one-time factors’ according to analysts at HSBC who reduced the share price target for the stock.
SSP cited unfavourable foreign exchange rates for reducing the upper end of its guidance range by 4% on a constant currency basis.
Sales growth in continental Europe was 7% with a robust performance in holiday destinations offset by a weaker performance in France and Germany motorway services.
SSP’s profit in Europe has also been impacted by lower than anticipated demand during the Paris Olympics.
If the current exchange rates were to continue through 2025, the company expects a negative currency impact on revenue, EBITDA (earnings before interest, tax, depreciation, and amortisation) and operating profit of approximately 2.6%, 3.8% and 4.5% respectively.
FOCUS ON LONG-TERM OPPORTUNITY
‘As we have flagged previously, SSP has yet to participate in the summer rally in travel related stocks, reflecting we believe some nervousness in the full year 2024 outturn.
‘We would see today’s update, confirming inline trading (the momentum which should flow into the new financial year), the actions being taken to address the underperformance in Europe and improving balance sheet metrics, as reassuring.
‘Despite the additional FX headwind (which is consistent with what we have previously flagged), we do not believe the current valuation reflects the long-term structural growth opportunities for the group, said Greg Johnson and Clive Black analysts at Shore Capital.’
