SSP shares surge as Q3 sales rise on strong travel recovery

Shares in SSP Group surged by 11% on Wednesday as the airport and train station food outlet operator held annual guidance after third quarter sales rose 16%, driven by increasing demand for leisure travel.

The company, which owns the Upper Crust and Ritazza coffee chains, said it still expects revenue of £3.4-£3.5bn, underlying core earnings of £345-£375m and underlying operating profit in a range of £210-£235m. Like-for-like revenue was up 6%.

North America sales grew 27% year-on-year on a constant currency basis, including a 14% benefit from the acquisitions of Midfield Concessions and Mack II in the US and ECG in Canada, the company said in a trading update.

Continental Europe sales were up 7% and 12% in the UK, with like-for-like performance up 8%, reflecting good passenger numbers in the air sector and fewer rail strikes compared with last year.

In Asia-Pacific and EEME, sales rose by 33%, driven by increasing passenger numbers, and a benefit from the ARE acquisition in Australia, which completed in early May this year.

The company also said it would work with the rail watchdog on recommendations contained in a report on its the retail market inside train stations, where SSP has a dominant presence.

Britain's rail regulator last month recommended that catering outlets with leases due to expire should be put to competitive tender with simpler and standardised contracts introduced for new entrants, but stopped short of referring the industry to competition authorities.

Most railway station catering space is leased to London-listed SSP Group which owns the Upper Crust, Ritazza and the Camden Food Co, while it also operates franchises for Burger King, Greggs, Starbucks and M&S Food, the ORR said in its initial findings last year.

SSP was found to own 20-30% of all outlets, bringing in 30-40% of all rents paid by station catering companies with a 40-50% share of all passenger spending.

Its share of all outlets is larger than that of the next six largest players combined. Costa Coffee and WH Smith are the next largest players, the ORR report said, with one competitor saying SSP's position was "verging on monopoly in many locations".

Reporting by Frank Prenesti for Sharecast.com