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Travel retail player SSP Group has continued to rebuild revenues after Covid, with third quarter sales back up to 87% of pre-pandemic levels.
At the group’s Interim Results on 24 May, it reported that revenue had averaged 83% of 2019 levels for the first six weeks of the third quarter.
Since then, revenue has continued to strengthen, running at 89% of 2019 levels in the following seven weeks, leaving revenues at 87% of 2019 levels for the third quarter as a whole.
It said its revenues rebound has been driven by an ongoing recovery in passenger numbers and has also benefitted from longer passenger dwell times in some markets.
The recovery has been led by domestic and leisure travel in both air and rail. Rail commuter travel continues to recover, albeit at a slower pace than leisure travel.
Geographically, the group said it had seen a strong recovery across all divisions, led by Continental Europe, where sales in the third quarter averaged 93% (of 2019 levels), and North America, averaging 91%.
In the UK, sales averaged 82% for the quarter, driven by a further strengthening of sales in air, whereas trading in rail was impacted by the recent industrial action.
It also saw a good recovery in the Rest of the World, where sales averaged 75%, with strong performances in India, Australia and Thailand. In China and Hong Kong, passenger travel remains at very low levels, reflecting the ongoing travel restrictions.
For the nine-month period from 1 October 2021 to 30 June 2022, total group revenues averaged 72% of 2019 levels.
SSP said that, while there remains “considerable uncertainty” in the macroeconomic and geopolitical backdrop, it remains well positioned to benefit from the continued recovery of the travel sector, albeit it will continue to face challenges from airport disruption, labour shortages and industrial action across certain air and rail markets.
However, it continues to face widespread and increasing inflationary pressures impacting its supply chain, labour and energy costs, and these are anticipated to persist well into next year.
“We are confident in our ability to manage these pressures through productivity and pricing initiatives and expect to mitigate the impact on profit, whilst sustaining the positive momentum in consumer demand,” it stated.
Its medium-term expectation for a recovery of the LFL business to 2019 levels of profitability remains unchanged.
By 2025 its pipeline of new contracts is expected to add approximately £500m to revenues compared to 2019. The anticipated EBITDA contribution from new unit openings will, as normal, include the impact of pre-opening costs.
For the current year, it now expects to post sales in the region of £2.1bn and EBITDA margin in the region of 6%, which is at the upper end of previous guidance range.
SSP Group shares have fallen 5.6% so far this mornign back to 223.7p.
Morning update
Struggling household goods manufacturer McBride has issued a full year trading update for the year ended 30 June.
It noted that the group has experienced both exceptional input cost inflation and supply chain disruptions, most recently further exacerbated by the Ukraine war.
These impacts have been predominantly offset through pricing actions.
As a result, following first half revenue declines of 6.6% on a constant currency basis, revenue grew by 13.4% in the second half to produce group revenue growth of 2.9% at constant currency for the full year.
The group anticipates that adjusted operating profit will be in line with current market consensus.
However, net debt rose to £168 from £118.4m, driven by working capital increases directly resulting from the effects of inflation rolled up in net working capital as well as in-year losses.
McBride said it continues to explore and assess all avenues to maintain liquidity and create additional funding for the benefit of all stakeholders.
“We are fully appreciative of the ongoing support that the banking group have and are continuing to give the Group through this period of uncertainty caused by macroeconomic factors which have resulted in rapid and unprecedented rises in input costs and ongoing global supply chain challenges,” it stated.
The group expects to announce year-end results on 29 September 2022.
Poundland owner Pepco has posted third quarter results for the three months to 30 June, with group revenues up 17.1% in the quarter.
Total revenues for the quarter were €1.2bn, bringing year-to-date revenues to €3.6bn, which represents revenue growth of 17.4% on a constant currency basis and 4.9% on a like for like basis.
Growth was maintained at 17.1% on a constant currency basis in the third quarter, led by Pepco delivering 28.5% growth with a particularly strong performance in PEPCO Hungary, Czechia and Serbia in the quarter.
Pepco saw like for like growth of 7.3%.
Poundland saw revenues growth 3.8% to €507m, representing like for like growth of 2%.
The group said new store openings continue across all brands with 350 new stores added so far this year (excluding the closure of 59 Fultons stores) and 115 added in the quarter.
Pepco saw 109 net new store openings in Q3, including 40 in the Western European markets of Austria, Italy, Spain and Germany.
It also completed 82 store renewals in Q3, making a total of 668 year to date.
In March 2022, it launched a trial in Spain offering the full range of Pepco clothing, Pepco GM and FMCG across selected stores. The trial has gone “exceptionally well”, and it has therefore decided that this destination format is the best way forward for customers in the Spanish market, meaning it will be converting existing Dealz stores in Spain to Pepco stores and adding the FMCG offering where space allows.
The group said that, with inflationary pressures continuing across the wider market, the it remains committed to investing in its price proposition and maintaining its market-leading variety discount offering.
It said its continued focus on reducing the cost of operations is enabling it to maintain price leadership.
“Furthermore, against this backdrop, we are encouraged that the discount market across Europe is now much larger than at the time of the previous financial crisis in 2007-08 which means that a much larger customer base is more familiar with and more frequently shops across this channel,” it stated.
“Whilst trading conditions continue to be challenging, we are confident in our continued progress and in the absence of any further significant deterioration in the macro trading environment, we remain on track for another good year which will meet guidance.”
Trevor Masters, CEO of Pepco Group, added: “The Group has delivered another quarter of good progress and a resilient trading performance, driven by its successful and proven strategy. We are excited about our expansion plans in Spain as they are the first step on the journey to make the best of the Group’s offering available to more customers than ever before. It means we can leverage the benefits of our broader offering across the Group, making us even more efficient and effective.
“Despite the challenging market environment, Pepco continues to accelerate and deliver against its successful growth strategy based around our four key pillars: bigger, better, simpler and cheaper. We remain confident in the strength of our customer proposition, market positioning and in our ability to drive long-term value creation.”
On the markets this morning, the FTSE 100 has opened a further 0.5% down at 7,124.4pts.
Early risers include Just Eat Takeaway.com, up 2% to 1,233.2p, THG, up 2% to 74.6p and Bakkavor, up 1.2% to 85.4p.
Fallers, as well as SSPG, include Nichols, down 2.1% to 1,185p, Ocado, down 1.6% to 800p and Kerry Group, down 1% to €94.62.
Yesterday in the City
The FTSE 100 dropped 0.7% yesterday after five days of modest gains to close at 7,156.3pts.
Fallers included Bakkavor, down 7.4% to 84.4p, McBride, down 6.1% to 16.6p, Just Eat Takeaway.com. down 5.6% to 1,208.6p, Deliveroo, down 5.2% to 90p, THG, down 4.5% to 73.1p, DS Smith, dow 3.6% to 277.1p, Premier Foods, down 2.8% to 105p and Domino’s Pizza Group, down 2.5% to 282.8p.
Risers included Nichols, up 1.5% to 1,120p, Devro, up 1.1% to 185.4p, Diageo, up 0.7% to 3,621.5p, PZ Cussons, up 0.5% to 202p and Associated British Foods, up 0.4% to 1,594.5p.
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