City snapshot: SSP expands in North America with Midfield acquisition

Top story

Travel food retail specialist SSP Group has grown its business in North America with the acquisition of the concessions business of Midfield Concession Enterprise.

SSP said the move represented “an important step” in its strategy to grow in the region and would give it a presence in over 30 of the 80 largest airports in the US.

The deal will add 40 new units in seven airports including giving it a presence for the first time at Detroit Metropolitan Wayne County, Denver International, Philadelphia International and Cleveland Hopkins International.

The deal will also expand SSP’s existing presence at Minneapolis St Paul International, San Francisco International and Newark Liberty International.

In total, it is expected to contribute an additional $100m to revenues in its North America business, on an annualised basis.

The acquisition is expected to complete in late summer, subject to all necessary approvals.

Founded in 2002, MCE is an award-winning concessions company, operating a portfolio of brands consistent with SSP’s focus in North America on bringing local restaurants to the airport. The deal also includes a collection of boutique brands developed by MCE, which address a specific set of passenger needs, as well as featuring national and international brands.

Patrick Coveney, group CEO of SSP Group, said: “We are delighted to be expanding our presence in North America with entry into four new airports and expansion in a further three through this acquisition. The Midfield business is a strong strategic fit for SSP and is highly complementary to our existing business given the make-up of the brand portfolio and its focus on enhancing the passenger experience. We look forward to welcoming the team and their clients to SSP.”

Michael Svagdis, CEO of SSP America, added: “SSP America is well positioned to pursue ongoing strategic growth, given our investment in developing a talented team of food travel experts who are passionate about bringing a ‘taste of place’ to airports. This acquisition is the latest step in our efforts to expand our presence at a diverse mix of airports across North America.”

Andrea Hachem, CEO of MCE, commented: “Since our founding at Detroit Metropolitan Wayne County International Airport in 2002, we have remained focused on steady growth, a ‘wow’ customer service programme, and a commitment to operational excellence. Our success would not have been possible without the dedication of our employees who shared our belief that if we welcomed passengers into our restaurants like we were welcoming them into our home, we would succeed.

“The SSP America team has been a great partner throughout this process, and we’re pleased the two companies understand how important it is to bring a regional flavour to the airport in order to achieve a world-class passenger experience.”

Morning update

Virgin Wines has cut its full year sales guidance after customers cut back amid heavy supermarket discounting.

The group said its third quarter trading continued to be negatively affected by a reduction in order frequency through the key WineBank customer membership, as customers continued to build their balances rather than spend.

It noted that an increasingly competitive environment arose during Q3 as retailers discounted at aggressive levels to liquidate high stock holdings.

However, more encouragingly, it said cancellation and conversion rates had started to improve since the end of the first half, whilst the trade rate has also recovered from its low point in November 2022. Additionally, the total customer deposit balance in WineBank continues to build.

This improvement should see Q4 revenue in line with the corresponding period in 2022 after marginally positive growth in April and improved order frequency.

It also said it was making “good progress” on its targeting of profitable growth, with a reduction in cost per recruit of 12.5%, the introduction of a number of commercial partnerships with the potential for scale and an increase of over 200bps gross margin through DTC sales channels.

However, in light of recent trading, it now expects sales to be slightly lower than market expectations, at circa £60m, Underlying profit before tax will be in the region of £0.5m-£1m, with a profitable and cash generative fourth quarter.

Thereafter, the board expects double-digit sales growth in 2024, alongside EBITDA margin of circa 4%-5%, as inflationary pressures particularly on freight and glass start to ease.

This will be supported by the elimination of the previously reported one-off factors that negatively affected this year’s performance, alongside the development of the group’s new strategic initiatives and a return to operational efficiency.

CEO Jay Wright said: “’This financial year has seen an unprecedented range of external and internal challenges impact the business. We anticipated that trading would take some time to settle following our substantial growth during the Covid period, but despite the challenges of the trading environment over the last year, we are proud to have built a business that is circa 50% larger in revenue terms than it was moving into FY20.

“We have a number of exciting new initiatives in the pipeline aimed at delivering incremental growth, and our fundamental customer proposition and business model remains strong. With a record number of WineBank members, deposits at all-time highs, and cancellation and conversion rates trending positively, we are in a good position to benefit from ongoing improvements in the macroeconomic environment, and are optimistic as we look to FY24 and FY25.”

Elsewhere, Domino’s Pizza Group has posted double-digit growth in the first quarter on a like-for-like basis amid continued order growth.

Excluding the impact of the increase in the VAT rate, like-for-like system sales, excluding splits, grew by 10.7% in the quarter.

The group also said it has made an encouraging start to Q2 with like-for-like system sales up 10.9% despite the challenging consumer and inflationary environment.

Total system sales in the quarter were up 5.6% to £386.6m, with like-for-like system sales, excluding splits, up 4.4%, reflecting the lower rate of VAT in the comparative quarter.

Total orders grew 2.8% to 18.0m despite a strong comparative quarter, where orders grew 5.5%.

Collections were up 23% in the period, while delivery was down 4.9% in the quarter but that represented an improvement on the previous three quarters.

Orders generated through the group’s app grew 27.7%, while the quarter was its first of enjoying the benefit of being fully rolled out on the Just Eat platform.

It has also rebuilt its new store opening pipeline with franchise partners and have opened 15 new stores in 2023 with nine different franchise partners, compared with nine new stores in the same period in 2022. Its pipeline is 75% larger than the comparable pipeline in 2022, with more than 30 different franchisees having stores in development.

Meanwhile, the group’s strong momentum means it is undertaking a new £20m share buyback programme with immediate effect.

Interim CEO Elias Diaz Sese said: “We have delivered record first quarter sales and orders thanks to the immense hard work of our franchise partners and colleagues in executing our strategy and our relentless focus on giving customers the best possible quality, value and service.

“Whilst this year has started well for Domino’s, there continues to be uncertainty in the economic environment with household budgets likely to remain under increasing pressure. However, we continue to be excited about the many opportunities we see for Domino’s in 2023 and beyond as we continue to work towards our purpose of delivering a better future through food people love.

“We are well placed to succeed as we accelerate the execution of our strategy. We are focused on improving our franchise partners’ profitability and we have made good progress in investing in the business and driving operational efficiencies. Combined with the benefit of new store openings, the Just Eat platform rollout and further product innovation, we remain confident that our resilient, asset-light business model will deliver market share gains, further financial and strategic progress, and increased returns for our shareholders.”

On the markets this morning, the FTSE 100 is down 0.3% to 7,766.5pts.

Early fallers include Virgin Wines, down 9% to 35.5p, THG, down 1.9% to 114p and Ocado, down 1.5% to 480p.

Risers include Bakkavor, up 4.1% to 99.6p, Hotel Chocolat, up 2.9% to 175p and Domino’s Pizza Group, up 1.4% to 306p. 

Yesterday in the City

The FTSE 100 closed yesterday up 0.2% to 7,788.3pts.

The day’s risers included Nichols, up 1.9% to 1,050p, Deliveroo, up 1.8% to 110.6p, Hilton Food Group, up 1.7% to 724p, WH Smith, up 1.4% to 1,615p, Coca-Cola Europacific Partners, up 1.3% to €59.25 and Britvic, up 1.3% to 933p.

Haleon was amongst the fallers, dropping 3.4% to 340.9p after releasing its Q1 results.

Other fallers included Glanbia, down 3.7% to €13.34, Hotel Chocolat, down another 2.9% to 170p, Ocado, down 1.6% to 487.3p, Associated British Foods, down 1.6% to 1,925.5p, PZ Cussons, down 1.5% to 202p and Marks & Spencer, down 0.7% to 163.4p.