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SSP Group PLC (SSPG)

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Wednesday 23 September, 2020

SSP Group PLC

Pre Close Trading Update

RNS Number : 7954Z
SSP Group PLC
23 September 2020
 

 

 

 

 

 

LEI:213800QGNIWTXFMENJ24

23 September 2020

 

SSP GROUP PLC

Pre Close Trading Update

 

SSP Group plc ("SSP" or "the Group"), a leading operator of food and beverage outlets in travel locations worldwide, issues a Pre Close Trading Update for the second half of the financial year ending 30 September 2020, covering the period from 1 April to 30 September 2020.

 

Extensive action to reduce the cost base and preserve cash is expected to result in a materially lower cash usage than anticipated at the Interim results and an underlying EBITDA and operating loss broadly in the middle of the range indicated. This performance is despite the continued impact of Covid-19 on sales which are expected to be at the lower end of the range, approximately 86% down year-on-year.

 

Simon Smith, CEO of SSP Group plc, said:

 

"Covid-19 continues to have an unprecedented impact on the travel industry and on SSP's businesses in all geographies. Our first priority throughout this crisis has been the health, safety and welfare of our people and our customers. We have taken rapid and decisive action to reduce cost, preserve cash and to substantially strengthen the Group's financial position. 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. These are always extremely difficult decisions, and we are supporting our colleagues throughout this process.

 

"We have seen some improvement in passenger demand since the start of the crisis and we have reopened units swiftly and profitably in response to this, with over one third of our units now trading. Our model is flexible and we will continue to align unit openings with demand, meeting the needs of our customers whilst managing operating costs and cash flow tightly.

 

"In the medium-term we expect to see the gradual return of passenger travel to more normalised levels. The actions we are taking to rebuild the business will enable us to emerge fitter and stronger, positioning us to capitalise on future opportunities and delivering long term sustainable growth for the benefit of all our stakeholders."

 

Current trading

 

Current weekly sales are running at approximately 76% below last year, representing an improvement from the third quarter when sales were approximately 95% lower in April and May and 90% lower in June.

 

The sales improvement has been driven by a stronger recovery in Continental Europe, where weekly sales are approximately 66% lower year-on-year, compared with the UK, North America and the Rest of the World, where weekly sales remain around 80-85% lower year-on-year. 

 

Sales in Continental Europe have benefitted from the stronger performance of the rail business, notably in Germany and France, and some recovery in regional air travel over the summer.

 

In the UK, there has also been a recovery in the air sector over the summer predominantly from leisure customers, albeit considerably lower capacity and renewed quarantine restrictions reduced activity. The rail sector remained very weak during the third quarter, but more recently we have seen a slow recovery, driven by a gradual return in commuter travel as people return to the office.

 

In North America, domestic air travel is starting to recover, but international travel remains largely closed. In the Rest of the World division, whilst domestic air passenger levels have recovered strongly in China and are improving in Thailand and India, international traffic remains low.

 

Across the Group, we have now re-opened just over a third, approximately 1,100, of our units, which is ahead of the expectations we set at the Interim results in June. Our approach to unit openings continues to be systematic, with units and sites only being opened selectively and where they will achieve break-even levels of sales, even at low levels of passenger activity.

 

Expected outturn for H2 2020

 

Overall sales in the second half of the year are expected to be approximately 86% lower year-on-year, resulting in a reduction in revenue of around £1.3bn compared to H2 2019. Encouragingly, the extensive management action to reduce the cost base, notably rent, overhead and labour, means that despite the weaker sales the underlying EBITDA and operating loss (on an IAS 17 basis) are expected to fall broadly in the middle of the ranges set out in the Interim results in June (-£120m to £190m EBITDA and -£180m to £250m operating loss) for the second half of the year. Whilst the decision to implement redundancies across the Group is extremely regrettable, it has been a necessary step to protect the business and preserve cash in the near term.

 

Overall net cash usage in H2 is expected to be in the region of £250m to £270m, a considerably better outcome than that anticipated at the Interim results in June of £340m to £440m. This performance reflects tight management of working capital, including agreed rent waivers and deferrals with many of our clients, reduced capital expenditure, as well as the benefit of government support schemes and the recovery of previously paid corporation taxes in a number of countries. We were also able to retain some of the cash related to the declared final dividend for 2019, through the placing of new shares.

 

On a pro forma basis, adjusting the Group's reported liquidity position at the end of March to include new facilities secured in early April (including the Bank of England CCFF), Group cash and undrawn available facilities totalled approximately £750m. We anticipate cash usage in H2 to be approximately £250m to £270m which would leave the Group's liquidity headroom at the end of the current financial year to 30th September 2020 at £480m to £500m. The current operating cash burn is in the region of £25m per month.

 

Conclusion and Outlook

 

Throughout this crisis, our focus has been and continues to be the health and safety of our people and our customers. SSP has taken decisive and significant action to protect the business and reduce costs. Proactive liquidity management has enabled us to keep our cash usage to a minimum during this period.

 

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. However, we have an important role, providing food and beverage services to the travelling public, and we will continue to re-open units dynamically where we see demand, maximising the profitability of the reopening programme and rigorously controlling costs and cash.

 

Looking further out, we firmly believe that demand for travel will return and the actions we have taken since February, together with the evolving market backdrop, will ensure SSP emerges as a fitter, stronger leader in the sector.

 

 

ENDS

 

CONTACTS

Investor and analyst enquiries

Sarah John, Corporate Affairs Director, SSP Group plc

+44 (0) 203 714 5251; E-mail: [email protected]

 

Media enquiries

Peter Ogden / Lisa Kavanagh, Powerscourt

+44 (0) 207 250 1446; E-mail: [email protected]

 

NOTES TO EDITORS

About SSP

SSP is a leading operator of food and beverage concessions in travel locations, operating restaurants, bars, cafés, food courts, lounges and convenience stores in airports, train stations, motorway service stations and other leisure locations. Prior to the onset of Covid-19, during 2019 SSP Group employed c 40,000 colleagues (on average) around the world, serving around one and a half million customers every day at approximately 180 airports and 300 rail stations in 36 countries around the world and operated more than 550 international, national and local brands across our c. 2,800 units. 

Impact of COVID-19

 

Covid-19 has had an unprecedented impact on the travel sector. Our response has been to take rapid and decisive management action to protect our colleagues and customers and to preserve cash and liquidity for the duration of the many government restrictions worldwide. These actions have included the following:

 

· New health and safety protocols created and cascaded to colleagues 

· Offices closed and colleagues supported to work from home

·  Temporary closure of units; colleagues furloughed where schemes available

· March equity placing completed and access to the Bank of England's CCFF confirmed, considerably strengthening our balance sheet. Approximately £750m liquidity in place leaving us well positioned to operate throughout even our most pessimistic trading scenario

· Waivers of existing covenant tests until September 2021

· Salary reductions across senior management, Executive Committee and Board 

· Discretionary spend and capital investment reduced to a minimum

· Share buyback programme suspended

· No Interim dividend declared

·A placing allowing shareholders to reinvest their 2019 dividend payment into new SSP shares and retain cash in the business

www.foodtravelexperts.com

 

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